Innovation and Technology Management-Formatted - Main - Book

INNOVATION AND TECHNOLOGY MANAGEMENT
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SYLLABI-BOOK MAPPING TABLE
Innovation and Technology Management
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Syllabi Mapping in Book
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Technological indicators: Make or buy decisions; Unit 1: Technology
Techno market survey; Technology Assessment and Indicators
Technology evaluation (TA & TE); Methodology of (pages 10-32)
TA;TA imperatives .
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Organisation and management of TA; TE parameters Unit 2: Technology
Assessment
(pages 33-56)
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Financing the technology; Government funding : CSIR, Unit 3: Financing the
IDBI, ICICI, CII and UNDP, DRDO etc. Technology
(pages 57-70)
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Venture capital; Identification of core competence ; Unit 4: Identification of Core
Technology absorption and diffusion-terminology and Competence
Concepts. (Pages 71-96)
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Constraints in technology absorption; Technology Unit 5: Technology
Absorption effort case studies Absorption Effort
(pages 97-107)
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Management of technology absorption; benefits of Unit 6: Management of
Technology absorption, future thrust for technology technology absorption
Absorption. (pages 108-117)
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Importance of diffusion; Diffusion strategies; Case Unit 7: Diffusion Strategies
Studies-Indian Experiences. (pages 118-134)
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Technology marketing issues and strategies-Internal Unit 8: Technology
Transfers, exports etc. Marketing issues and
Strategies
(Pages 135-144)
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CONTENT
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PREFACE
UNIT 1 TECHNOLOGICAL INDICATORS
1.0. Introduction
1.2. Objective
1.3. Make or buy decisions: definition
1.4. Make or buy decisions: a concept
1.5. Aims of make or buy decision
1.6. Industrial issues
1.7. Technology assessment
1.8. TA methods
1.9. Approaches to technology assessment
1.10. Summary
1.11. Exercise
UNIT 2 TECHNOLOGY ASSESSMENT
2.0. Introduction
2.1. Objective
2.3. The role of the expert
2.4. Reception of TA studies
2.5. Technology evaluation
2.6. Information technology assessment and planning services
2.7. Paradox of technology evaluation
2.8. Summary
2.9. Exercise

UNIT 3 FINANCING THE TECHNOLOGY
3.0. Introduction
3.1. Objective
3.2. Government funding
3.2.1. CSIR
3.2.2. ICICI
3.2.3. UNDP
3.2.4. DRDO
3.3. Summary
3.4. Exercise
UNIT 4 IDENTIFICATION OF CORE COMPETENCE
4.0. Introduction
4.1. Objective
4.2. How venture capital funding works
4.3. Technology absorption and diffusion
4.4. Importance of core competence
4.5. Capabilities
4.6. Core competencies
4.7. Criteria of sustainable competitive advantage
4.8. Valuable
4.9. Summary
4.10. Exercise
UNIT 5 TECHNOLOGY ABSORPTION EFFORT
5.0. Introduction
5.1. Objective
5.2. Technology flows take many forms
5.3. Role of internalized technology flows is growing
5.4. Role of MNCs in global economy is growing steadily
5.5. What this means for developing & transition economies
5.6. How to promote supplier linkages with MNCs?
5.7. How can knowledge institutions be made more relevant?
5.8. Case study
5.9. Summary
5.10. Exercise
UNIT 7 DIFFUSION STRATEGIES
7.0. Introduction
7.1. Objective
7.2. Technology Adoption/Diffusion: Two Views
7.3. Adoption/Diffusion Theories
7.4. Comparative Approaches to Technology Adoption And Applications Development
7.5. Need-based Diffusion Strategies
7.6. Challenges to RTD evaluation from policy shifts
7.7. Case Study
7.8. Summary
7.9. Exercise

UNIT 8 TECHNOLOGY MARKETING ISSUES AND STRATEGIES
8.0. Introduction
8.1. Objective
8.2. Technology life cycle
8.3. Technology assets & technology portfolio
8.4. Technology risk
8.5. Forms of technology acquisition & transfer
8.6. Evaluation of the technology subject
8.7. Economic life cycle of technology
8.8. Technology transfer possibility
8.9. Concept & characteristics of technology marketing
8.10. Summary
8.11. Exercise

UNIT 1 TECHNOLOGICAL INDICATORS

STRUCTURE

1.0. Introduction
1.2. Objective
1.3. Make or buy decisions: definition
1.4. Make or buy decisions: a concept
1.5. Aims of make or buy decision
1.8. TA methods
1.10. Summary
1.11. Exercise

1.0. INTRODUCTION
Many of today's products are so complex that no single company has all the necessary
knowledge about either the product or the required processes to completely design and
manufacture them in-house. As a result most companies are dependent on others for
crucial elements of their corporate well-being. Typically, however, companies have some
choice as to whom they become dependent upon and for what sorts of skills and
competences.

That is, although few companies can "do it all," most have significant influence over the
strategic choice of corporate identity and what businesses to be in. What is the range of
choices they face? How are different companies making those choices? Can we make
sense of the variety of decisions we can observe now in different industries or different
parts of the world? What are the skills that companies must retain?

In this unit we address the challenge of making these choices rationally. We give
examples in which similar companies, facing similar choices, select make/buy patterns in
very different ways, resulting in very different patterns of interdependencies along
companies' supply chains. These choices are not restricted to skills related to the product,
but include choices related to key design and manufacturing issues. To make sense of
these differences, we propose a framework that ties together the following engineering
and management concepts into one coherent view:
core competencies
the product development process
systems engineering
product architecture and modularity
supply chain design

1.2. OBJECTIVE
After studying this lesson the students should be able to understand:
Make or buy decisions: definition
Make or buy decisions: a concept
Aims of make or buy decision
Technology assessment
Approaches to technology assessment

1.3. MAKE OR BUY DECISIONS: DEFINITION
Business decision that compares the costs and benefits of manufacturing a product or
product component against purchasing it. If the purchase price is higher than what it
would cost the manufacturer to make it, or if the manufacturer has excess capacity that
could be used for that product, or the manufacturer's suppliers are unreliable, then the
manufacturer may choose to make the product. This assumes the manufacturer has the
skills and equipment necessary, access to raw materials, and the ability to meet its own
product standards. A company who chooses to make rather than buy is at risk of losing
alternative sources, design flexibility, and access to technological innovations.

1.4. MAKE OR BUY DECISIONS: A CONCEPT

The make-or-buy decision is the act of making a strategic choice between producing an
item internally (in-house) or buying it externally (from an outside supplier). The buy side
of the decision also is referred to as outsourcing. Make-or-buy decisions usually arise
when a firm that has developed a product or partor significantly modified a product or
partis having trouble with current suppliers, or has diminishing capacity or changing
demand.
Make-or-buy analysis is conducted at the strategic and operational level. Obviously, the
strategic level is the more long-range of the two. Variables considered at the strategic
level include analysis of the future, as well as the current environment. Issues like
government regulation, competing firms, and market trends all have a strategic impact on
the make-or-buy decision. Of course, firms should make items that reinforce or are in-
line with their core competencies. These are areas in which the firm is strongest and
which give the firm a competitive advantage.
Make-or-buy decisions also occur at the operational level. The main considerations of
make or buy decision are:
Cost considerations (less expensive to make the part)
Desire to integrate plant operations
Productive use of excess plant capacity to help absorb fixed overhead (using
existing idle capacity)
Need to exert direct control over production and/or quality
Better quality control
Design secrecy is required to protect proprietary technology
Unreliable suppliers
No competent suppliers
Desire to maintain a stable workforce (in periods of declining sales)
Quantity too small to interest a supplier
Control of lead time, transportation, and warehousing costs
Greater assurance of continual supply
Provision of a second source
Political, social or environmental reasons (union pressure)
Emotion (e.g., pride)
Factors that may influence firms to buy a part externally include:
Lack of expertise
Suppliers' research and specialized know-how exceeds that of the buyer
cost considerations (less expensive to buy the item)
Small-volume requirements
Limited production facilities or insufficient capacity
Desire to maintain a multiple-source policy
Indirect managerial control considerations
Procurement and inventory considerations
Brand preference
Item not essential to the firm's strategy
The two most important factors to consider in a make-or-buy decision are cost and the
availability of production capacity. Burt, Dobler, and Starling warn that "no other factor
is subject to more varied interpretation and to greater misunderstanding" Cost
considerations should include all relevant costs and be long-term in nature. Obviously,
the buying firm will compare production and purchase costs. Burt, Dobler, and Starling
provide the major elements included in this comparison. Elements of the "make" analysis
include:
Incremental inventory-carrying costs
Direct labor costs
Incremental factory overhead costs
Delivered purchased material costs
Incremental managerial costs
Any follow-on costs stemming from quality and related problems
Incremental purchasing costs
Incremental capital costs
Cost considerations for the "buy" analysis
Purchase price of the part
Transportation costs
Receiving and inspection costs
Incremental purchasing costs
Any follow-on costs related to quality or service
One will note that six of the costs to consider are incremental. By definition, incremental
costs would not be incurred if the part were purchased from an outside source. If a firm
does not currently have the capacity to make the part, incremental costs will include
variable costs plus the full portion of fixed overhead allocable to the part's manufacture.
If the firm has excess capacity that can be used to produce the part in question, only the
variable overhead caused by production of the parts are considered incremental. That is,
fixed costs, under conditions of sufficient idle capacity, are not incremental and should
not be considered as part of the cost to make the part.
While cost is seldom the only criterion used in a make-or-buy decision, simple break-
even analysis can be an effective way to quickly surmise the cost implications within a
decision. Suppose that a firm can purchase equipment for in-house use for $250,000 and
produce the needed parts for $10 each. Alternatively, a supplier could produce and ship
the part for $15 each. Ignoring the cost of negotiating a contract with the supplier, the
simple break-even point could easily be computed:
$250,000 + $10Q = $15Q
$250,000 = $15Q $10Q
$250,000 = $5Q
50,000 = Q
Therefore, it would be more cost effective for a firm to buy the part if demand is less than
50,000 units, and make the part if demand exceeds 50,000 units. However, if the firm had
enough idle capacity to produce the parts, the fixed cost of $250,000 would not be
incurred (meaning it is not an incremental cost), making the prospect of making the part
too cost efficient to ignore.
1.5. AIMS OF MAKE OR BUY DECISION

- buy
decision
develop a decision-making process that can provide managers in manufacturing
industry with a way of addressing the make-or-buy decision more effectively and
with greater consistency and repeatability than existing methods

deciding whether or not to outsource a component or process


The make-or-buy question represents a fundamental decision faced by many companies.
Today's global competition forces manufacturing companies to reevaluate their existing
processes, technologies, manufactured parts and services in order to focus on strategic
activities. However, companies have finite
resources and may not be able to afford to have all activities in-house. This has resulted
in an increasing awareness of the importance of the make-or buy decision, the dilemma
organisations face when deciding between keeping technologies/processes in-house or
purchasing them from an outside supplier. The ability to make such decisions in a a
structured and rational manner is likely to improve a company's overall performance.

1.7. TECHNOLOGY ASSESSMENT

Technology assessment assists an organization in defining its current opportunities and
needs. It is the basis of an organizations technology plan. Below are some key steps
involved in conducting an assessment.

1) Build organizational commitment: Get commitment from the organization to explore
using technology to strengthen your organizing.
2) Develop a committee: Create a small committee of staff and leaders (2-4 people) who
are responsible for carrying out the assessment.
3) Collect information to address the following topics:
a. Describe your basic organizational goals and structure
b. Define areas of work that technology can advance
c. Assess member and staff skills in using technology
d. Conduct equipment inventory

Communication
The result of a technology assessment study must be communicated. The strategies of
communication depend on the particular social groups to be addressed. In a
comprehensive expert study on gene technology, the members of our group have
followed four different paths or tracks of communication:
advice to political groups (government, legislature, political parties);
advice to professional associations, e.g., pharmaceutical societies or farmers
associations;
information to the public, including citizens' movements; and
Information to moral institutions such as the churches.

Technology assessment attempts to provide policy-makers with a rational basis for
their decisions. It does not provide "super expert opinions", but points out areas where
specialists are in general agreement, where controversy exists, what assumptions or fears
lie behind the differences of opinion, and what risks are associated with the various
possible options. It highlights facts that policy-makers can assume to be accepted and the
problems that they have to solve through political decisions or value judgements. By
focusing on political discussion of relevant questions the decision-making process can be
made simpler, more objective and efficient.
Technology assessment provides input for the elaboration of technology policies which
are not oriented exclusively towards technical efficiency and economic rationality but
which also consider the social and ecological consequences of the introduction of specific
technologies.
The classic aim of technology assessment is to identify technology-induced risks early
enough, to analyse in detail the range of possible social, economic, legal, political,
cultural and ecological effects, to process investigation results in a problem-oriented
manner, to present alternative decision-oriented options, and at the same time to point out
the various social interests and value judgements linked with the development and use of
new technologies. New insights into the nature of technological change have stimulated
the further development of this TA concept. It is based on the realisation that technical
developments are ultimately influenced by society and not determined solely by their
own logic. This calls for a wider vision of TA, one which takes account of design-related
factors and forces in the R&D process and their application in a specific technology, and
which also allows social discussion of the objects and options of technological
development. Thus the core analytical functions of TA are supplemented by constructive
design and discussion-provoking functions. They are reflected in the terms
"constructive", "discursive" or "participatory" technology assessment.

1.8. TA methods
"Technology Assessment" (TA) uses an interdisciplinary approach in its systematic and
comprehensive analysis of the possible consequences of the use of particular technologies
(not necessarily "new" ones). On the basis of the information gained in this way options
can be devised for those involved in policy-making and the control of technology.
Particular attention is paid to the analysis of unintended and generally long-term
secondary or tertiary effects.
Because of the nature of the object of research and the interdisciplinary composition of
the research team, a variety of quantitative and qualitative methods are used:
brainstorming, literature research, document analysis, expert consultation, case studies,
cross-impact analysis, cost/benefit analysis, computer simulations, scenario development,
and also certain processes calling for public involvement. The methods must be adapted
to the subject under investigation.
There is no such thing as a "technology assessment method" as such, because it is not a
single method but the variety of methods or method mix and specific procedure that
characterize a successful investigation.
There is, however, a typical routine for the implementation of TA studies. The main
components are as follows:
problem definition
description of the technology
prediction of future technology development
description of society and persons affected
prediction of social developments
identification, analysis and evaluation of consequences
analysis of political options
communication of the results in a generally accessible form

A distinction can be made between project-induced, technology-induced and problem-
induced technology assessment studies.
Project-induced TA studies are investigations into the possible consequences of a
specific project (e.g. power stations, highway engineering, etc.). Where the focus is on
environmental aspects, these studies are also known as "environmental compatibility
studies" (ECS). In these cases a study focusing on one important aspect is favoured over
the global TA approach.
Technology-induced TA studies are concerned with the impact of a specific technology
on society and the natural environment. Examples here include specific information
technology or genetic engineering applications.
In the problem-induced approach the main focus is on identifying the different possible
solutions to an existing or future social problem. Possible political responses can be
suggested through comparative assessment of alternative technological development
paths. Examples here include TA studies into traffic, energy supply and utilisation, or
waste problems.
The scope and depth of analysis in TA studies can vary considerably. Macro-assessments
(comprehensive assessments) are in keeping with the global TA approach and require 10
to 30 man years to complete. Mini-assessments are scaled down to one to three man years
and are used to analyse a limited problem in detail or a broad problem in general terms.
Less detailed micro-assessments can provide policy-makers with information at short
notice and tend to be in the form of literature analysis and extended brainstorming. They
take around three man months.
1.10. SUMMARY

Decision-making is so pervasive that everyone, professionally or personally, is involved
with making a variety of decisions.

In todays fast-moving world, the timing of a decision is of paramount importance in
many decision-making situations. In real life even the perfect decision may not be
optimal if it is made too late.

Information is a vital resource in decision-making. One of the most important
characteristics of successful managers is the ability to make the correct decision when
confronted with imperfect or insufficient information (i.e.) Decision-making under
conditions of uncertainty.

1.11. EXERCISE
Q1. Define the concept of make or buy decisions?
Q2. Explain the technology assessment?
Q3. What are the aims of make or buy decision?
Q4. What are the various approaches to technology assessment?

UNIT 2 TECHNOLOGY ASSESSMENT

STRUCTURE

2.0. Introduction
2.1. Objective
2.3. The role of the expert
2.4. Reception of TA studies
2.5. Technology evaluation
2.6. Information technology assessment and planning services
2.7. Paradox of technology evaluation
2.8. Summary
2.9. Exercise

2.0. INTRODUCTION
The transfer of technology is but one aspect of the evaluation of science and technology.
The complexities of technology generation, transfer, and commercialization processes
have always gravely taxed the way we measure and assess them. Recently government
technology agencies have experienced the exigencies of the GPRA, only to encounter
severe difficulties in the application of metrics that would satisfy the requirements of the
GPRA and their own satisfaction that a solid evaluation is being conducted. This unit
reviews the existing metrics for evaluation of science and technology. Among the
categories of metrics, this paper reviews econometric methods, process methods, and
bibliometric methods. The paper also reviews models of the innovation continuum, in an
effort to link such models to the metrics categories. Based on the review of the state of
the art, the author proposes future directions for the development and the application of
metrics of technology evaluation. Some examples and "best practices" of industrial and
government laboratories are also discussed.

2.1. OBJECTIVE
Technology assessment
The role of the expert
Technology evaluation
Paradox of technology evaluation

2.2. TECHNOLOGY ASSESSMENT

Technology assessment (TA) is part of a wordwide effort to deal systematically with the
question of how we should proceed.
To begin with, there appears to be consent among TA experts on the following six points.
If we want to gain the future we depend on technological progress.
We are aware of the ambivalence of any technological progress.
There are no simple answers with regard to progress in a pluralistic world where
preferences and aims are controversially disputed.
We are as responsible in an ethical sense for what we are doing as we are
responsible for what we are not doing: to act or not to act principle of ethical
equivalence.
Technology assessment is obliged to analyze and evaluate the desirable and the
non-desirable consequences, the chances and the risks, of technologies, new
technologies as well as established technologies. At present the major threats to
the future stem from firmly established technologies such as burning fossil
materials, not from novel technologies.
The motto of TA is that a new technology must be better than the preceding
technology. Otherwise we do not need it. "Better" does not only refer to the
scientific evaluation of a technology but also to the social (socioeconomic) and
environmental dimensions.

2.3. THE ROLE OF THE EXPERT
The prestige of any TA study depends on its scientific substance. We have developed
new strategies beyond the classical Delphi procedures to bundle and focus the original
expert opinions. An iterative sequence of expert statements and workshops eventually
leads to a synopsis which can be considered the present view of the expert community.

The 38 experts we asked for cooperation in the gene technology study belonged to three
different groups:
experts from scientific institutions;
experts from industry and economics; and
experts from sociology and practical philosophy.
The experts from the sciences had to deal with the question: What is possible in gene
technology?
The experts from industry and economic institutions were asked the question:
How much of what is possible in gene technology is likely to become industrially
relevant?
Our colleagues from sociology and practical philosophy were requested to answer the
question: What segments of industrially relevant gene technology are presently desirable
and for what reasons?

2.4. RECEPTION OF TA STUDIES

Clearly, there are problems about the reception of any TA study by different segments of
society. The selective perception or rejection of a TA studyor parts of itby the
different political and social groupings is the rule rather than the exception.

Recently in connection with a public forum on gene technology a politician of the Green
Party stated frankly: "I cannot afford to learn things from you, which I can under no
circumstances communicate to my clients." This means: Whether or not the results of a
TA study will be perceived at all will not primarily depend on its scientific quality but on
the pattern of preprogrammed opinions which the study meets in political circles, in the
media, and in the public. Nevertheless, TA must remain strictly science-based. Adaptive
opportunism is no viable alternative. It is our obligation to find outin accordance with
the standards of scientific inquiry and irrespective of public prejudice and prevailing
preferenceswhat can be stated about technogenesis, and to communicate this
knowledge by adequate means.

Competent technology assessment is possible, no doubt. The methods are established,
and paradigmatic studies are available. The major problem is communication and
acceptance. Most people are reluctant to accept a scientific statement if it does not
comply with their prejudice.

2.5. TECHNOLOGY EVALUATION

Technology evaluation is examination of a technology for the purpose of determining the
technology's fitness for use in a particular context. All technologies work well within a
specific context and under certain conditions. For example, Web services work well for
asynchronous communication over the Internet. In a business environment these conditions
are very common. However, this may not be the case in a military tactical command and
control environment where high performance and availability requirements prevail. A formal
evaluation process that can allow organizations to experiment with technologies before they
are inserted into organizations, and that also considers the context in which the technology
will be used, is necessary to make the right decisions

Technology evaluation is critical for systems of systems and this refers to more than the
technologies used for systems integration. Technologies used within the boundaries of a
system can also have a negative effect on the system of systems. For example, two systems
built on different platforms could represent data types differently causing problems in the data
sent to each other, even though they share the same communication mechanism.
Technology evaluation for systems of systems has to place emphasis on communication
technology as well as technologies within the individual systems. Any experimentation with
technology has to consider end-to-end scenarios that would highlight problems with the
technology that go beyond pure syntax.

2.6. INFORMATION TECHNOLOGY ASSESSMENT AND PLANNING SERVICES

Business Process Workflow Evaluation and Improvement
A business process is a concise description of work carried out by an organization.
Business processes have a programmatic basis and defined results (tangible products,
decisions, services provided). Business processes are characterized by workflow steps
and are usually heavily dependent on information systems, data, and applications. An
evaluation and description of business processes provides a picture of an organizations
operations and information flow. It is the basis for making organizational and operational
improvements and for determining how information technology can support operations
and deliver benefits. Business processes support externally-focused programs directed at
citizens, other public agencies, the business community, etc. as well as internal support
functions and program administration.

2.7. PARADOX OF TECHNOLOGY EVALUATION
A commonly discussed paradox of technology refers to the reality of technology
diffusion and maturation. Once adopted, every technology is bound to be replaced. But
the difficulties and the complexity of technological development and adoption/integration
make replacement an activity mired in frustration, failure, and chance.

But the other less obvious paradox is that of technology evaluation. It concerns the gap
between producer and users of technology. The more technology producers attempt to
bridge the gap and to apply users criteria and measures to their own reasoning and
processes, the less likely they are to produce technology that will replace the existing
technology.
To clarify, the more researchers, for example, attempt to subordinate their thinking to the
commercial reasoning of the ultimate users of the technology, the less innovative the
technology may thus become. Since the criteria for evaluation are generated by the users,
producers of technology find themselves in a position where they must act in accordance
with these criteria in order to survive. By doing so they may lose their distinctive edge of
inventiveness, creativity, and novelty. Hence, in order to be successful (by the criteria of
the users) producers of technology have to conform to the "rules of the game" of users.
But conformity is an antidote to inventiveness, exploration, and risk takingall of which
are necessary conditions for humans to innovate.

2.8. SUMMARY
Technology assessment assumes a global perspective and is future-oriented rather than
backward-looking or anti-technological. ("Scientific research and science-based
technological innovation is an indispensable prerequisite of modern life and civilization.
There is no alternative. For six or eight billion people there is no way back to a less
sophisticated life style." ). TA considers its task as interdisciplinary approach to solving
already existing problems and preventing potential damage caused by the uncritical
application and the commercialization of new technologies. Therefore any results of
technology assessment studies must be published, and particular consideration must be
given to communication with political decision-makers.

2.9. EXERCISE

Q1. What is Technology assessment?
Q2. Write a detailed note on Information technology assessment and planning services?
Q3. Explain the Paradox of technology evaluation?

UNIT 3 FINANCING THE TECHNOLOGY

STRUCTURE

3.0. Introduction
3.1. Objective
3.2. Government funding
3.2.1. CSIR
3.2.2. ICICI
3.2.3. UNDP
3.2.4. DRDO
3.3. Summary
3.4. Exercise

3.0. INTRODUCTION
Project financing is an innovative and timely financing technique that has been used on
many high-profile corporate projects, including Euro Disneyland and the Eurotunnel.
Employing a carefully engineered financing mix, it has long been used to fund large-scale
natural resource projects, from pipelines and refineries to electric-generating facilities
and hydro-electric projects. Increasingly, project financing is emerging as the preferred
alternative to conventional methods of financing infrastructure and other large-scale
projects worldwide.
Project Financing discipline includes understanding the rationale for project financing,
how to prepare the financial plan, assess the risks, design the financing mix, and raise the
funds. In addition, one must understand the cogent analyses of why some project
financing plans have succeeded while others have failed. A knowledge-base is required
regarding the design of contractual arrangements to support project financing; issues for
the host government legislative provisions, public/private infrastructure partnerships,
public/private financing structures; credit requirements of lenders, and how to determine
the project's borrowing capacity; how to prepare cash flow projections and use them to
measure expected rates of return; tax and accounting considerations; and analytical
techniques to validate the project's feasibility
Project finance is finance for a particular project, such as a mine, toll road, railway,
pipeline, power station, ship, hospital or prison, which is repaid from the cash-flow of
that project. Project finance is different from traditional forms of finance because the
financier principally looks to the assets and revenue of the project in order to secure and
service the loan. In contrast to an ordinary borrowing situation, in a project financing the
financier usually has little or no recourse to the non-project assets of the borrower or the
sponsors of the project. In this situation, the credit risk associated with the borrower is
not as important as in an ordinary loan transaction; what is most important is the
identification, analysis, allocation and management of every risk associated with the
project.
The purpose of this paper is to explain, in a brief and general way, the manner in which
risks are approached by financiers in a project finance transaction. Such risk
minimisation lies at the heart of project finance.
In a no recourse or limited recourse project financing, the risks for a financier are great.
Since the loan can only be repaid when the project is operational, if a major part of the
project fails, the financiers are likely to lose a substantial amount of money. The assets
that remain are usually highly specialised and possibly in a remote location. If saleable,
they may have little value outside the project. Therefore, it is not surprising that
financiers, and their advisers, go to substantial efforts to ensure that the risks associated
with the project are reduced or eliminated as far as possible. It is also not surprising that
because of the risks involved, the cost of such finance is generally higher and it is more
time consuming for such finance to be provided.
3.1. OBJECTIVE
Government funding
CSIR
ICICI
UNDP
DRDO

3.2. GOVERNMENT FUNDING
The various organisations involved in the funding of technology/project are:

3.2.1. CSIR
Council of Scientific & Industrial Research (CSIR), India was constituted in 1942 as an
autonomous body under the provision of the Registration of Societies Act XXI of 1860.
After independence, the need for bettering the living standards of the common man by
promoting industry and for helping the industry to solve its problems through stimulus of
scientific research was greatly stressed. The Council, through its constituent laboratories,
has helped the country in increasing the economic growth and industrialization.
The Council has also helped the creation of new schools of research and in enlarging
facilities for research by means of grants, training of research personnel, etc. The main
functions of the Council are :
Promotion, guidance and coordination of scientific and industrial research in India
including other institutions and financing the specific research activities.
Scientific study of problems affecting industries and trade.
Award of Research Fellowships.
Utilization of the results of researches conducted under the Council towards the
development of industries in India.
The establishment, maintenance and management of laboratories, workshops and
organizations to further scientific and industrial research.
The collection and dissemination of information in regard not only to research but
also to industrial matters generally.
Publication of scientific papers.
Other activities to promote generally the objects of resolution.
Council of Scientific & Industrial Research ( CSIR ), India is perhaps among the world's
largest publicly funded R&D organisation. Its chain of 38 world class R&D
establishments with their 80 field stations spread across India are manned by 10,000
highly qualified scientists and engineers, besides 13,000 auxiliary and other staff. Its
range of activities cover practically the entire spectrum of industrial R&D ranging from
aerospace to mining to microelectronics to metallurgy and so on. CSIR is truly a global
R&D resource as its patrons and partners hail from over 50 countries.

3.2.2. ICICI

ICICI Bank India is the largest private bank in India and the second largest in the entire
banking sector (consisting of banks belonging to both public and private sector). Only
State Bank of India (SBI), controlled entirely by the Government of India has a bigger
business than ICICI Bank.

About ICICI Bank India

Founded in 1955 as Industrial Credit and Investment Corporation of India, ICICI Limited
was established by the Government of India in the 1960s as a Financial Institution like
Industrial Development Bank of India (IDBI) to finance large industrial projects.

ICICI then, was not a bank and hence could not take retail deposits and was not required
to comply with Indian banking requirements for liquid reserves. ICICI borrowed funds
from various agencies like the World Bank, often at concessional rates. These funds were
deployed in large corporate loans. However, the scenario changed drastically in1990s
when ICICI founded a separate legal entity and named it "ICICI Bank".ICICI Bank,as the
name would suggest, undertook normal banking operations like accepting
deposits,issuing credit cards, providing car loans etc. The experiment was so successful
that ICICI merged into ICICI Bank and this "reverse merger" happened in 2002.

Today, ICICI Bank,India has the largest market share and value among all banks in retail
or consumer financing. ICICI Bank is the largest issuer of credit cards in India. It was the
first bank to offer a wide network of ATM's and had the largest network of ATM's till
2005, before SBI caught up with it.

ICICI bank now is widely seen as a sophisticated bank able to take on many global banks
in the Indian market. The bank is expanding in overseas markets. It has operations in the
UK, Hong Kong, Singapore and Canada. It acquired a small bank in Russia recently. It
has tie-ups with major banks in the US and China. The bank is aggressively targeting the
NRI (Non Resident Indian) population for expanding its business.

CII

The Confederation of Indian Industry (CII) works to create and sustain an environment
conducive to the growth of industry in India, partnering industry and government alike
through advisory and consultative processes.

CII is a non-government, not-for-profit, industry led and industry managed organisation,
playing a proactive role in India's development process. Founded over 113 years ago, it is
India's premier business association, with a direct membership of over 7500 organisations
from the private as well as public sectors, including SMEs and MNCs, and an indirect
membership of over 83,000 companies from around 380 national and regional sectoral
associations.

CII catalyses change by working closely with government on policy issues, enhancing
efficiency, competitiveness and expanding business opportunities for industry through a
range of specialised services and global linkages. It also provides a platform for sectoral
consensus building and networking. Major emphasis is laid on projecting a positive
image of business, assisting industry to identify and execute corporate citizenship
programmes. Partnerships with over 120 NGOs across the country carry forward our
initiatives in integrated and inclusive development, which include health, education,
livelihood, diversity management, skill development and water, to name a few.

Complementing this vision, CII's theme "India@75: The Emerging Agenda", reflects its
aspirational role to facilitate the acceleration in India's transformation into an
economically vital, technologically innovative, socially and ethically vibrant global
leader by year 2022.

With 64 offices in India, 8 overseas in Australia, Austria, China, France, Japan,
Singapore, UK, USA and institutional partnerships with 271 counterpart organisations in
100 countries, CII serves as a reference point for Indian industry and the international
business community.

3.2.3. UNDP

The United Nations Development Programme (UNDP) India contributes extensively to
the conservation and sustainable management of natural resources and supports the
Government of India (GoI) to meet its commitments under the relevant multilateral
environmental agreements.

UNDP promotes programmes that deal with capacity-building of communities and other
stakeholders for the conservation of biodiversity of global and national significance,
participatory and inclusive planning and decision-making, and diversification of
livelihoods including ecosystem based entrepreneurship particularly among the
marginalized communities. These activities are consistent with the National
Environmental Policy and the envisaged action plans. The National Action Plan on
Climate Change (2008) through the Green India Mission also emphasizes the need to
increase the forest cover through community participation in forest management, private
public partnerships and building capacity. Therefore, in the coming years, UNDP will
extend its support to communities so that they have the wherewithal to protect conserved
areas outside the designated Protected Areas, develop
the capacity of key stakeholders in implementing the Biological Diversity Act (BDA) and
strengthen multi-sectoral cooperation for effectively meeting the environmental
objectives.
The focal areas of work include:
1. Biodiversity conservation, including a) medicinal plants; b) coastal and marine
ecosystems conservation; c) extending conservation outside Protected Areas; and d)
arresting land degradation
2. Ecosystem-based enterprises and diversification of livelihoods for natural resources
conservation
3. Technical and policy support to the national government

3.2.4. DRDO

DRDO functions as wing of the Department of Defence Research and Development (DD
R&D).

Before India became an independent nation in 1947, the defence of the country was the
responsibility of the Defence Department (under the British rule). Soon after India
became independent, the Defence Department became the Ministry of Defence, headed
by a Minister of the Cabinet Rank.
According to the Constitution of India, the President of India is the the supreme
commander of the Armed Forces and executive responsibility for national defence rests
with the Union Cabinet of which Defence Minister is an important member. The official
designation of the Defence Minister is Raksha Mantri (RM) who is assisted by a Ministry
of State called Rajya Raksha Mantry (RRM) assisting the RM. Sometimes there maybe
more than one RRM.
3.3. SUMMARY

In this unit, we have read about the various organs of government involved in financing
of technology/project. Every organ has its own functioning and powers, as given by the
government itself. Thus, each organ plays vital role in the technology management.

3.4. EXERCISE
Q1. Explain CSIR?
Q2. Explain ICICI?
Q3. Explain UNDP?
Q4. Explain DRDO?

UNIT 4 IDENTIFICATION OF CORE COMPETENCE

STRUCTURE

4.0. Introduction
4.1. Objective
4.3. Technology absorption and diffusion
4.4. Importance of core competence
4.5. Capabilities
4.6. Core competencies
4.7. Criteria of sustainable competitive advantage
4.8. Valuable
4.9. Summary
4.10. Exercise

4.0. INTRODUCTION

Venture capital is the finance provided by professionals or Venture capital firms who
invest alongside management in companies which seem to have the potential to develop
into significant economic contributors. A venture capital firm is generally a private
partnership or closely-held corporation funded by private and public pension funds,
wealthy individuals, endowment funds, foundations, corporations, foreign investors,
angel investors, etc and the venture capitalists themselves. These firms funds to start-up
ventures, often well before anyone else would be willing to invest. In exchange for these
funds, the firms often take an active role in running, or at least overseeing, the venture.
They can provide a wealth of information to a beginning entrepreneur and may make the
difference between a good idea and a flourishing business. Venture capital firms provide
an opportunity for entrepreneurs to flourish. But Venture capital firms open up their
wallets with caution and are cautious about the rate of return of their venture capital
investments. To locate a company, one can easily find or search through a venture capital
directory. These venture capital companies help finance many technology start-ups and
earn staggering amounts of money for their investments.

Venture capitalists generally offer financial support to new & rapidly growing
companies, purchase equity securities, offer assistance in development of new products
or services, add value to the company through their active participation, have a long-term
orientations & plans, and take higher risks with the expectation of higher rewards.

4.1. OBJECTIVE
How venture capital funding works
Technology absorption and diffusion
Importance of core competence
Core competencies
Criteria of sustainable competitive advantage


t is popularly believed that venture capitalists fund only established players and proven
products. There is a lot of cynicism amongst many about all the hype that private equity
and venture capital is getting in India of late.
However, the truth is that, in recent times in India, the VCs have actually provided capital
to relatively new, start-up companies that have a reasonable, though not certain, prospects
to develop into highly profitable ventures. Travelguru.com is a case in point, funded by
Sequoia Capital and Battery Ventures.
The advent of firms like Helion Ventures with a $140 million corpus is helping the VC
scenario to improve in the country. The three key people behind Helion Ventures, Ashish
Gupta, Sanjeev Aggarwal and Kanwaljit Singh, all carry with them a successful track
record across various companies in the international arena.
What is interesting is that for first time in India, venture capital will be backed by
successful entrepreneurs who themselves have a hands-on experience in handling and
developing businesses.
The National Venture Capital Association defines venture capital as: "Money provided
by professionals who invest alongside management in young, rapidly growing companies
that have the potential to develop into significant economic contributors."
Innovation is the key driver of competitiveness within organisations as well as within
countries. It has been well said: "Nothing is more powerful than an idea whose time has
come." However, innovative ideas need more than research and knowledge to succeed.
They need not only financial, but also, managerial (technical, marketing and HR), support
to achieve success. This support is lent in many forms by private funding and incubation
organisations such as venture capitalists.
Akhil Gupta, JMD & CFO of Bharti Airtel, once remarked, "While we could have raised
funding from other sources, Warburg Pincus' involvement helped us in scaling up
significantly." Almost identical has been the findings of a research conducted recently by
Venture Intelligence (founded by Arun Natarajan, a leading provider of information and
networking services to the private equity and venture capital ecosystem in India) with the
guidance of Prof. Amit Bubna of Indian School of Business, Hyderabad, to study the
economic impact of PE and VCs on the Indian businesses.
The following are some of the interesting observations of this study:
The study shows that the PE and VC backed companies grew faster compared to
the non-PE backed peers and even better than the benchmark indices like the NSE
Nifty. They found that the sales of listed PE-backed companies grew at 22.9% as
compared to 10% for non-PE-backed listed firms.
PE backed firms added more jobs to the economy and even the wages at listed PE
financed firms grew at around 32% as compared to 6% for non-PE-backed firms.
An astonishing finding was that almost 96% of the top executives felt that without
the support and the backing of private equity these companies would not have
existed or would have grown at a slower rate, while only about 4% felt that they
would have developed the same way even without PE funding.
The study also shows that the biggest support of the PE investors were provided
in the area of strategic direction followed by the financial advice and then
recruitment and the marketing activities.
Thus venture capital has become an important source of finance for innovative ideas that
are risky and have a potential for high returns over a long-term horizon. Venture
capitalist investment is driven by the expectation that the start-ups invested in could give
them a higher rate of return than other firms.
In the process venture capitalists have created some of the best known companies in the
world. Without VCs we might not have seen companies such as Apple, Compaq, Sun
Microsystems, and Intel to name a few.
Some of the unique features of a VC firm are:
Investment in high-risk, high-returns ventures: As VCs invest in untested,
innovative ideas the investments entail high risks. In return, they expect a much
higher return than usual. (Internal Rate of return expected is generally in the range
of 25 per cent to 40 per cent).
Participation in management: Besides providing finance, venture capitalists
may also provide technical, marketing and strategic support. To safeguard their
investment, they may also at times expect participation in management.
Expertise in managing funds: VCs generally invest in particular type of
industries or some of them invest in particular type of businesses and hence have
a prior experience and contacts in the specific industry which gives them an
expertise in better management of the funds deployed.
Raises funds from several sources: A misconception among people is that
venture capitalists are rich individuals who come together in a partnership. In fact,
VCs are not necessarily rich and almost always deal with funds raised mainly
from others. The various sources of funds are rich individuals, other investment
funds, pension funds, endowment funds, et cetera, in addition to their own funds,
if any.
Diversification of the portfolio: VCs reduce the risk of venture investing by
developing a portfolio of companies and the norm followed by them is same as
the portfolio managers, that is, not to put all the eggs in the same basket.
Exit after specified time: VCs are generally interested in exiting from a business
after a pre-specified period. This period may usually range from 3 to 7 years.
Buyouts and second-stage financing are the most popular stages of venture capital
financing. Globally, according to a report by PricewaterhouseCoopers, around 80 per cent
of the total private equity investment is done at these stages.
However, in spite of the venture capital scenario improving, several specific VC funds
are setting up shop in India, with the year 2006 having been a landmark year for VC
funding in India.
4.3. TECHNOLOGY ABSORPTION AND DIFFUSION

International technology diffusion is a widely studied topic in the economic literature.
While much disagreement remains, especially on measurement, researchers do seem to
agree on two points. First, most countries have benefited from technological inventions of
foreign countries. A strong argument for this is that the majority of the worlds R&D is
performed in a handful of industrial countries, yet productivity gains are widespread over
the world. Second, international technology diffusion is not frictionless and its effect on
productivity of the recipient country is not automatic. There are natural and man-made
barriers that need to be overcome, and learning and
absorption that need to occur.

In this unit we start from these two agreed points and take a step further. First, we ask if
countries at different development stages benefit from different sources of foreign
technology. Second, if they do, we explore the reasons for it, particularly those associated
with policy variables.

4.4. IMPORTANCE OF CORE COMPETENCE

Process of Organisational Analysis
The process of organisational analysis goes through certain sequence of activities. This
process is undertaken so that the organisation reaches at a point at which It can undertake
strategic actions in the light of its strengths and weaknesses. For this purpose, the relevant
information is collected both from internal as well as external sources. Generally, the
organisations strengths and weaknesses are measured in terms of its environment;
otherwise, it Is very difficult to suggest the degree to which a factor can be considered as
strength or weakness. For adopting criteria in respect of these, the external information is
quite helpful. For example, an organisation cannot say that its financial position is strong
unless it is aware about its direct or other competitors financial position.

The process of Organisational Analysis is :
1. Identification of Key Factors. Organisational analysis process starts with the
identification of key factors that can be evaluated for determining strengths and
weaknesses. The analysis should cover all aspects of the organisation. However, what
factors should be taken for consideration is a question, the answer of which may not be
rigid and static. The answer will vary among organisations, and although a generalised
list can be
given, a real situation I would call for critical selection. These factors may be in the area
of organisation structure and management pattern, personnel, finance and accounting,
marketing, manufacturing, research and development, etc. A detailed description of all
these factors will be presented later in the chapter.
2. Identification of Importance of Factors. All the factors identified for the purpose of
analysis may not have equal strategic importance; some are more important, some are
less important. The relative importance of the factors depends on the nature of
organisation and its environment. Their relative importance can be determined by finding
out the contributions of each factor in the achievement of certain key results. The key
result areas for the organisation can be defined on the basis of organisational objectives
towards which total efforts are directed. Another method through which the relative
importance of factors can be measured is to relate them with critical success factors
(CSFs). CSFs, as discussed in the next chapter, are those factors which are crucial for
organisational success. The various factors can be compared with the requirements of
CSFs.
3. Assessing Strengths and Weaknesses on Key Factors. Identification of key strategic
factors may lead to the assessment of organisational strengths and weaknesses in respect
of these factors. Organisational strength on any factor can be defined as the contribution
made by the factor towards the achievement of the organisational objectives. Since
objectives have hierarchy lower level objective contributes to higher level objective, a
factor may not necessarily contribute directly to the achievement of overall objectives
but may contribute indirectly by achieving a lower level objective. An organisational
weakness on a factor can be defined as the negative contribution of the factor in
achieving the organisational objectives. Another way for assessing strengths and
weaknesses is to make a comparative analysis of these factors with those of the
competitors. For the assessment of organisational strengths and weaknesses, some
techniques financial analysis, key factor rating, and functional area profile and resource
development matrix have been developed: the details of these are presented later in this
chapter.
4. Preparing organisational Capability Profile. On the basis of the assessment of
organisational strengths and weaknesses, organisational capability profile is prepared
which shows the various strong areas of the organisation. This profile can show the
strengths or weaknesses in terms of degree, either in quantity like 1 to 5 for various
factors or definition like very strong to average. However, when both strengths and
weaknesses
are taken in the same profile, the positive numbers can be used for strength and negative
numbers can be used for weakness if quantitative measurement is used.
5. Relating Organisational Capability to Strategy. Technically speaking, this is not the
part of the organisational analysis, however, organisational analysis is meaningless unless
it provides a way to relating strengths to its strategy. In relating organisational strengths
to strategy, the managers can proceed in
two ways. First, they undertake activities which are consistent with their strategic
strengths. Thus, rather than taking the various activities, they can concentrate on the
limited number of activities. In fact, that organisation is more effective whose strategy
fits its environment considering its strategic strengths than those who do otherwise.
Second, managers can undertake activities which convert their weakness into strength.
Such an
action may provide synergistic advantages reducing thereby many disadvantages. Thus,
many strategic actions can be taken to increase organisational strengths. The result is that
over the long run. the strategy of the organisation fits its environment taking into account
the strategic strengths

4.5. Capabilities
A companys capabilities represent its capacity to integrate individual company resources
to achieve a desired objective. However, this ability does not emerge overnight.
Capabilities develop over time as a result of complex interactions that take advantage of
the interrelationships between a companys tangible and intangible resources that are
based on the development, transmission, and exchange or sharing of information and
knowledge as carried out by the companys employees (its human capital).

A companys ability to achieve a competitive advantage is thus reflected in its knowledge
base and the ability of its human capital to successfully exploit company capabilities.
Thus, human capital is of significant value in the companys ability to develop
capabilities and core competencies to achieve strategic competitiveness.

The knowledge possessed by the companys human capital may be one of the most
significant sources of a companys competitive advantage. This is because it represents
everything that the company has learned, and thus everything that it knows about
successfully linking or bundling sets of individual resources to develop capabilities as a
foundation for developing core competencies and, ultimately, to achieve a competitive
advantage.

Establishing and nurturing the skills and abilities of the workforce is of critical
importance to a companys ability. Important not only to establish, but to sustain a
competitive advantage by acquiring new knowledge and developing new skills that will
both enhance existing capabilities and core competencies, as well as aid in the
development of new ones. Companies are using a variety of methods to nurture the value
of their human capital. Infosys and Microsoft believe that their best asset is the
intellectual horsepower of their employees.
To continue the trend, the companies are striving continuously to hire people who are
more talented than the current set of employees in hopes of defending and extending the
domain of their intellectual property.
Many companies are hiring Chief Learning Officers (CLO) to find ways for the company
to acquire, internalise, and share knowledge in competitively relevant ways. Managing
knowledge is critical since enterprises view this as their primary source of competitive
advantage and believe it should be used in ways that will create value for customers.
Before we talk more about knowledge, it would be useful to differentiate between data,
information and knowledge. Data are simple facts without interpretation, Information is
data that have been processed, manipulated, categorised, or classified in some manner
and Knowledge is information interpreted with experience, values, judgement, or
intuition.

Knowledge management is the process of cataloguing and distributing the knowledge
that resides in the organisational intellect so that its full value is leveraged across multiple
activities. Siemens tries to infuse its store of customer knowledge into its manufacturing,
development, logistics, and sales systems / processes.
Current research suggests four methods by which knowledge is transferred within a
company:
Socialisation common with apprentice and mentors, this occurs by observation and
practice.
Externalisation this is the process used to convert tacit knowledge into explicit
terms, a type of metaphorical
model building.
Combination this considers knowledge stores in different groups within the company
to try to meld the knowledge and distribute it to other groups.
Internalisation the process by which knowledge generated by the other three
methods gets embedded into the employees of the company Newly internalised
knowledge becomes a base upon which the cycle of knowledge creation, transfer, and
embedding repeats itself. Apart from knowledge, companies also have functional area
capabilities that have been nurtured and are now considered as core competencies. As a
result, these core competencies provide the foundation for the companys competitive
advantage. Capabilities
Capabilities represent: the firms capacity or ability to integrate individual firm resources
to achieve a desired
objective.

Capabilities develop over time as a result of complex interactions that take advantage of
the interrelationships between a firms tangible and intangible resources that are based on
the development, transmission and exchange or sharing of information and knowledge as
carried out by the firms employees. Capabilities become important when they are
combined in unique combinations which create core competencies which have
strategic value and can lead to competitive advantage.

Employee skills and knowledge in such areas as manufacturing, marketing, advertising,
R&D, and others provide the foundation upon which a company can leverage its tangible
and intangible resources. The challenge for companies in the private sector is to maintain
the secrets behind capabilities that are core competencies. As described earlier,
companies such as Infosys, GE, and Microsoft are recognised for their abilities to
develop and leverage the power of the human resources.

4.6. Core Competencies
Resources and capabilities serve as the foundation upon which companies formulate and
implement value creating strategies so that the company can achieve strategic
competitiveness and earn above average returns. However, not all of a companys
resources and capabilities represent strategic assets, assets that have competitive value
and the potential to serve as a source of competitive advantage. If the company has a
deficiency in some of its resources, it may not be able to achieve strategic
competitiveness. For example,
insufficient financial resources may prevent the company from implementing the
processes or integrating the activities required to add superior value by limiting the
companys ability to hire workers with the necessary skills or to invest in the capital
assets (facilities and equipment) that are needed. Thus, companies not only are
challenged to scan the external environment to identify opportunities that can be
exploited, but also to have an indepth understanding of company resources and
capabilities.

4.7. Criteria of Sustainable Competitive Advantage
The relationship between resources, capabilities, and the decision point at which
managers determine whether or not capabilities are (or are not) core competencies. This
decision point, which includes four criteria, should be used to determine whether or not a
companys capabilities are core competencies and can be a source of competitive
advantage. However, a shortterm competitive advantage is available when company
capabilities are valuable, rare, and nonsubstitutable. The length of time that a company
possessing such capabilities can expect to sustain a competitive advantage depends on
how long it takes for competitors to successfully imitate the value creating activity or
process, or reproduce valued features or characteristics of the product or service.

4.8. Valuable
Capabilities that are valuable help a company exploit opportunities and/or neutralise
threats in the external environment. Valuable capabilities enable a company to develop
and implement strategies that create value for customers. For example, Sony uses its
valuable capabilities to design, manufacture, and market miniaturised electronic
technology to add value for consumers (or to serve as a joint venture partner or perform
outsourced activities for other manufacturers who do not possess these valuable
capabilities).

4.9. SUMMARY
Resources and capabilities that are neither valuable, rare, costly to imitate, nor non
substitutable mean that the company will be at a competitive disadvantage and will earn
below average returns. Resources and capabilities that are valuable, but are neither rare
nor costly to imitate and may or may not be non substitutable mean that the company can
achieve competitive parity and earn average returns. Resources and capabilities that are
both valuable and rare, but are not costly to imitate and may or may not be non
substitutable, may enable the company to achieve a temporary competitive advantage and
will earn above average to average returns.

4.10. EXERCISE
Q1. How venture capital funding works?
Q2. Explain Importance of core competence?
Q3. Importance of core competence?
Q4. Define valuable?

UNIT 5 TECHNOLOGY ABSORPTION EFFORT

STRUCTURE

5.0. Introduction
5.1. Objective
5.8. Case study
5.9. Summary
5.10. Exercise

5.0. INTRODUCTION

1. Most technology in latecomers comes from abroad, in mixture of two forms:
Embodied: in capital goods, patents, blueprints, designs, models and so
on
Tacit: knowledge that can be transferred only by close interaction
and learning by new user
2. Using technology efficiently thus needs conscious effort by the enterprise & also
the system in which it works (suppliers, customers, technology support, training
institutions and so on

5.1. OBJECTIVE

Technology flows take many forms
Role of internalized technology flows is growing
Role of MNCs in global economy is growing steadily
How to promote supplier linkages with MNCs?
How can knowledge institutions be made more relevant?


1. Non-contractual: Public knowledge, fairs, conferences, migration, export activity
and informal networks
2. Contractual:
FDI related: (internalized) transfers within multinationals or joint
ventures with MNCs
Arms length: equipment imports, turnkey projects, licensing,
subcontracting, franchising and other contracts
1. Innovation is highly concentrated, by region, country and enterprise
2. MNCs lead in innovation: most R&D is performed by large firms and most
innovative firms are globalized
3. MNCs dominate technology flows in all forms, but form depends on nature of
technology: newest and most valuable technology is internalized, others licensed
1. FDI is growing faster than other economic aggregates: national investment, GDP
or exports
2. MNCs control about 2/3 of world trade.
3. About 30-40% of this trade is within MNCs, and their role is particularly large in
high-tech manufacturing
4. MNC export activity is taking new forms: global production networks, with very
fine vertical specialization by function/component between countries
5. Local companies are also involved in global production networks, but only if they
have very high levels of technological capabilities and form strong ties with
MNCs to access and absorb their technological know-how and management skills
1. FDI is the most efficient way to access foreign technology if countries want ...
New, fast-changing proprietary technologies not available at arms
length
Rapid access to new technology and subsequent upgrading, without
local effort
Non-core components of operation (i.e. management, marketing,
finance etc)
Access to MNC foreign markets, particularly to global production
networks
For local firms
1. Licensing or joint ventures are desirable if:
Local firms are strong in base technologies but need particular new
components of technology
They specialize in activities with stable technologies, where state-of-
art technologies are available at arms length
They can export through foreign buyers (low technology products),
sell undifferentiated products directly or have established brands
They subcontract to MNCs (OEM) or supply local components
FDI location: Traditional factors...
1. Some remain relevant
Stable, transparent and welcoming policies
Good macroeconomic management
Large and/or fast growing markets
Primary resources
Cheap and trainable labour
2. But others are becoming less important
Cheap unskilled labour
Protected markets
New factors in FDI location...
1. Human capital: new skills, flexible practices, training provisions, ease of
expatriate entry
2. Technology systems: MSTQ & R&D strongly linked to and supportive of
enterprises
3. Strong supplier and service network
4. Modern ICT infrastructure and logistics
5. Low transaction costs (entry, exit, expansion, taxation, customs, employment)
6. Strong legal systems and property rights
7. Openness to cross-border mergers & acquisitions
8. Effective FDI promotion, targeting and coordination with supply side policies
Rooting MNCs locally
1. Attracting FDI is not enough: globalized production is (by definition) mobile
2. Retaining MNCs, esp. in export-oriented activities, needs
Constantly rising skill levels
Tighter links to more efficient suppliers
Greater depth of technological activity, in-house and with local
knowledge institutions

1. Local content rules often inefficient and now forbidden by WTO rules
2. Fiscal incentives are costly but can only play an initial stimulating role
3. What works best:
Improving supplier capabilities, directly and with MNC assistance
Matchmaking, information dissemination
Cluster development strategies
Creating a technology culture in industry
1. Raise awareness of need for in-house technological activity and R&D
2. Technology foresight exercises
3. Benchmarking and technology audits
4. R&D incentives: most countries make R&D tax-deductible expense, many offer
extra incentives. Effects mixed, but tax credits linked to incremental R&D seem
best
Strengthening the technology infrastructure
1. Metrology, standards, testing, quality
Quality standards vital (e.g. ISO 9000)
Good standards institutions can help to diffuse technology and quality
awareness
Advanced standards institutions are withdrawing from testing into
basic standard setting and research. They are helping create private
service providers.
Metrology (measurement/calibration) is central to quality certification;
international accreditation is vital to competitiveness
Local metrology capability reduces cost and raises response speed
Secondary metrology can be carried out by private laboratories,
primary metrology has to be done in public institutions
Role for government in providing the public goods and creating
private markets
Research & development institutions
1. Most public R&D/universities are delinked from enterprises: different culture,
no incentives and wrong skills
2. But they are an important resource for accessing, adapting, diffusing, creating
technology and for rooting MNCs
3. Valuable for hi-tech start-ups and SMEs
4. Vital source of creating R&D skills for industry and breaking ground in generic
new technologies
1. Privatization of public laboratories
2. Hard budgets, management change
3. Intensive training of staff and incentives to reach out to industry
4. Funded schemes for joint R&D with industry, exchange of R&D personnel
5. Matchmakers to create links with firms, raise their awareness of capabilities and
potential

5.8. CASE STUDY

I. Enabling Innovation
The Business Intention
With the intention of growing its business, a small regional company in the Pharma
sector had a desire to be a global player and become a leader in a very short span of time.
Mapping a different route
Taking the Design Thinking approach to formulate the strategy and actions, Team
Elephant, along with the MD and the Leadership of the company devised a unique
collaborative method to achieve difficult goal. The key steps of the journey were:-
Step 1 Creating an unconstrained desired scenario of the future, which the leadership was
excited to achieve
Step 2 Detailing the scenario almost to reality and communicating it to the internal team
and other stakeholders. This not only gave a purpose and direction to the team but also
helped in arranging funding for the growth initiative
Step 3 Testing of the various actions which were cornerstones of the desired
scenario. Analysis of the results helped define future actions and milestone, leading to
constant modification of the scenario to make it real without losing the essence
Step 4 The collaborative process is then taken forward to create higher level of desired
scenario after achieving most of the key milestones.
Big boost in Value
Today, 2-3 years after closely implementing the strategy, the company enjoys a
dominating position in the market with a global footprint and SBUs focused on scaling up
the operation.
Team Elephant continues to partner with the company; helping it to orient its culture,
approach, people, and processes with principles of Design Thinking, and the aim of
attaining Global Leadership and helping it redefine market norms along
the way.

II. Innovation strategies in the bulk drug industry Case Study: Unilab Chemicals
Pvt. Ltd. and M/s Blue Circle
Abstract:
Innovation is the fundamental basis for creating firm specific asset that enable a firm to
achieve sustainable advantage and improve its corporate performance (Howard, 1993).
Indian bulk drug industry is expanding at a very fast rate and is an important part of the
Indian economy. Many entrepreneurs have ventured in this industry and are now facing
competition & price wars. This research paper reviews innovation strategies adopted by
the bulk drug manufacturers in India vis a vis their effect on the bottom lines and
sustainable competitive advantage. The directors and other members of the management
of Unilab Chemicals Pvt. Ltd. and M/s Blue Circle were contacted and interviewed
personally by way of semi structured informal interviews. Responses were measured on a
ten point scale. The responses have been qualitatively analysed.

Innovation (Product & Process) are directly proportional to the growth in turnover &
profits. Besides, innovations prove to be the key for continued sustainable advantage and
improvement of the bottom lines. The study makes theoretical & methodological
contribution to the literature for innovation strategies in the bulk drug industry which
would be useful for the manufacturers.
Introduction: A literature survey shows that very less study has been conducted in
establishing a relationship in between the innovations and the impact on the bottom lines
in the bulk drug industry. Like any other industry, Innovation strategies in the bulk drug
industry can be implemented at various levels
1. Company Level/Owner
2. Functional Level Finance , marketing, R&D, manufacturing, information systems
and human resource managers
3. Operational Level- plant managers, sales managers, production and department
managers Growth is the long run intention of any organisation and is sine qua non for its
survival. Growth cycle of a business has mainly five stages, viz, planning, initiation,
penetration, accelerated growth and transition. Innovation strategies can be aimed at
growth which can be by means of any of the basic growth approaches. The growth can be
sustained when a company has a sustainable competitive advantage especially in the bulk
drug industry where the technology gets copied relatively in advance as compared to
other industries. This competitive advantage can be derived from two basic themes viz (i)
Competitor Centered & (ii) Customer Centered. Competitor Centered implies deriving
strategies by comparing your
performance with respect to your competitors and for which the BCG, SWOT and finally
the financial performance of the competitor is considered. Customer Centered involves
studying issues like the type of benefits preferred by the customer, innovations, customer
complaints, comparing the potential vs. the extraction rate of the customer, process
analyses, etc (R. Gopal 2007).
As per Porters five generic descriptions of industries, the bulk drug industry is a mature
industry. It is the onus of the various companies in this industry to tap the markets by
formulating a competitive growth strategy which is its sustainable competitive
advantage to reflect on the return on investments Research Objectives
The research seeks answers to questions like
1. Which of the innovation strategies at various levels would prove effective for an Indian
company in the bulk drug industry to grow
2. How to formulate a competitive growth strategy? Does innovation help in developing
competitiveness; competitiveness being measured in terms of turnover, profits & market
share?
3. The study evaluates the effect of innovations on the bottom lines.
Research Methodology:
1. The study employs the popular case study method for assimilation of facts. Study of
Innovation Strategies has been conducted in two companies namely Unilab Chemicals
Pvt. Ltd. and M/s Blue Circle; manufacturers and exporters of bulk drugs.
2. Data was collected from the respective industries with regards to the impact of
innovations on the revenues & profit margins by way of personally by way of continuous
interaction & semi structured informal interviews with the management of these
companies and also interaction with the personnel in their research and development
departments. Details were collected with regards to two bulk drugs viz chlorohexidine
gluconate & cetrimide.
3. Responses were measured on a ten point scale. The responses have been qualitatively
analysed.
4. Periodicals and magazines on the Indian chemical industry like the Chemical Weekly
Annual and books on strategic management have been referred for theoretical inputs
Limitations of the study:
1. Since the study employs the case study method, it suffers from the problem of a small
sample size.
2. A lot of the data is confidential in nature and has not been revealed by the company
officials
3. In absence of data some assumptions and projections have been made which may have
a significant effect on the accuracy of the results
4. The study is based on the bulk drug industry only. Many findings are specific to this
industry and hence it is not possible to generalise the findings of the study

The Indian Bulk Drug Industry:
Indian bulk drugs market in 2006 was about US$3.29 billion, witnessing a growth of 19%
over 2005 at CAGR of 18.81% in the last six years. India ranks 4th in terms of volume,
among the top 15 drug manufacturing countries worldwide. Indian companies have the
distinction of developing cost-effective technologies for manufacturing bulk drugs and
intermediates, conforming to global standards. India has over 80 US FDA approved
plants, the second highest in the world. Indian bulk drug market is fragmented with top
10 companies contributing 44% of the market and about 1,323 companies accounting for
the balance 56%. Nearly 70% of the bulk drugs, manufactured are exported to more than
50 countries. Contract manufacturing in India in 2006 was USD658.6 million, registering
a growth of 48% over previous year. Indian companies have filed 408 DMF's during
2006 out
of a total 704. By 2010, Indian bulk drugs market is projected to grow to about US$6.54
billion and contract manufacturing to USD1.5billion.

The Pharmaceutical Industry in India is increasingly being recognised as a reliable source
of quality medicines at affordable prices and is emerging as a global powerhouse. As we
enter the Knowledge Economy, speedy and efficient exchange of reliable information
will be a prime requirement for the efficient management of our intellectual capital. The
Indian manufacturers of bulk drugs have taken the
advantage of the prevalent economic conditions and have accordingly carved their
markets. During the times when the import duty was as high as 115%, the Indian bulk
drugs were positioned as import substitutes and when the duty fell they have become
exporters. The growth which the Indian Pharmaceutical Industry has achieved is mainly
due to the Indian Patents Act, 1970 which was one of the achievements of IDMA in
strengthening the national sector.

Unilab Chemical & Pharmaceuticals Pvt Ltd:
Unilab Chemicals & Pharmaceuticals Pvt. Ltd. is a manufacturing company established
in 1978. It is a quality manufacturer of bulk drugs & formulations, APIs (active
pharmaceutical ingredients), API intermediates, quaternary compounds and fine
chemicals . The Company specializes in the manufacture of antiseptics and disinfectants.
Unilab holds all necessary licences and a Good Manufacturing Practices (GMP)
certificate granted by the Food and Drug
Administration, Maharashtra State.

M/s Blue Circle Ltd.:
Blue Circle has three strong manufacturing sites located in the industrial belt of Thane,
having close proximity to Mumbai. Jet Chemicals Pvt. Ltd. (JCPL) incorporated in 1969
is the oldest unit built over an area of 12000 Sq. Mtrs. Blue Circle Speciality Chemicals
Pvt. Ltd. (BCSCPL) incorporated in 1989, occupies an area of 3000 Sq. Mtrs. Blue Circle
Organics Pvt. Ltd. Came into being in July 2004. They have a strong presence in the
global market with their expertise being
1. Gomberg and related reactions and formations of biaryl compounds
2. Sandmeyer reaction
3. Grignard reaction
4. Hydrogenation with nobel metal catalyst
The company is recognised in four major areas:
1. Pharmaceutical intermediaries/ Fine chemicals
2. X Ray Contrast Media Intermediaries
3. Polymer Modifiers
4. Custom Synthesis and Toll manufacturing
Their production facilities can take up multi-step synthesis. Their facilities are equipped
with glass-lined and stainless steel multi-purpose reactor, safety and control system
installation. All manufacturing operations are carried out as per ICH Q-7A guideline.
Blue Circle also aims at manufacture of products with flexibility and with the regulations
in force concerning the environment, safety & health.
Innovation strategies employed: Unilab Chemicals & Pharmaceuticals Pvt. Ltd.
(UCPL) started with the production of Cetrimide and Chlorhexidine Gluconate. It is in
the transition from the third stage (market penetration) to the fourth stage (accelerated
growth) of the business growth cycle. UCPL & Blue circle have gone for combination
growth strategies. Both the companies are engaged in international business at the very
first rung of direct exports. They went for intensive expansion at varying levels. Markets
were carefully carved in the developing countries like Africa, Latin America rather than
developed countries from Europe & USA. Advantage was that these countries were
initially importing from Europe at a much higher price and are behind India in terms of
technology by approximately 10 years. Also, this is an industry where profits lie in
volumes and these countries will not have market large
enough to even achieve break even if they start manufacturing themselves.

UCPL & Blue circle have resorted to forward integration by also producing the
intermediaries and for some chemicals the packaged product for the end user eg phenolic
cleaners. They are also helping their existing customers to set up manufacturing units
while ensuring life time partial dependence for the generation of continuous income.
Sustainable competitive advantage in the bulk drug industry where the technology gets
copied relatively in advance as compared to other industries; comes in the form of
continuous innovations. This competitive advantage is derived from the combination of
two basic themes viz (i) Competitor Centered
& (ii) Customer Centered.

Product related innovations are in general customer centered and process related
innovations are generally competitor centered. As a result of these innovations it is
observed that there is either an increase in the price or decrease in the price along with
increase in the volume. In any of the cases, the result has been an increase in the return on
investment. The process innovations help reduce the cost and hence increase the margins.

One of the processes to obtain 98% purity of a molecule, it had to undergo reflux reaction
in which Naphtha was used as a solvent, took 125 hours for a batch of 500 cc. They
introduced a new wax process by which though the purity was reduced by three percent
to 95%, the reflux would be completed in 8 hours. As a result of this twelve batches
could be produced instead of just one batch in the same period of
time. This amounted to 30% utility cost reduction.

The factory forward process involves Business Competency Process, Channel
Management, Customer Account and Order Execution. It is the most complicated &
difficult process. As the Indian Bulk Drug industry relies a lot on direct exports, the
complications get compounded. Effective debtor management becomes vital.

The financial analyses give a clear picture of the problem areas of the firm. Eg a high
level of debtors indicates that the 4Ps need to be relooked, a high level of raw material
inventory may imply that the supply chain needs to be modified. Initially, the import
duties were 115% of FOB value and the landed price of the raw material worked out to
be almost 2.5 times of the actual price. Market for the bulk drugs was growing in India
and witnessed an increase in the number of manufacturers and hence the competition.
Unilab Chemicals & Pharmaceuticals Pvt. Ltd. And M/s Blue Circle employed
continuous innovations in order to maintain the price level and remain in the market.
1. Company Level/Owner: Unilab Chemicals & Pharmaceuticals Pvt. Ltd. changed its
structure from
a partnership firm to private limited company
2. Functional Level & Operational level:
a. Acquisition of more land for increasing production capacity meant for exports
b. Marketing
i. In 1970s the only marketing channel that was available in India was groups of
traders, brokers and Purchase executives of MNCs who where looking for indigenous
products and person to person contact with these people was the only
way to promote the product. Slowly there were innovations in communication
technology. Later participation in International trade fares (e.g. CPhI Worldwide
Pharmaceutical Ingredients in Frankfurt a three day event which attracts everyone
from manufacturers to consumers). Being Internet savvy has helped them break
many barriers and attract international markets
ii. Markets were carved in the developing countries like Africa, Latin America rather
than developed countries from Europe & USA. Advantage was that these countries
were initially importing from Europe at a much higher price and are behind India in
terms of technology by approximately 10 years. Also, this is an industry where
profits lie in volumes and these countries will not have market large enough to
even achieve break even
c. Advantage of all export incentives offered by the government such as import of duty
free raw material as well as duty draw back, was taken
d. Substantial emphasis on R&D and process innovations was laid. Work was carried out
on various kinds of solvents. Major process changes were done in 1995 to improve the
yield per unit of raw material consumed
e. In case of Chlorhexidine Gluconate, prior to 1990 only ICI was the only major
manufacturer in India and the price of this product was Rs.600 per Kg. Along with
Unilab Chemical & Pharmaceuticals Pvt Ltd, two other manufacturers entered into this
product in 1992-93 and within 1 year the price of this product went down to Rs.350/- per
Kg. which was also due to the saving on import of raw material by making this product
with indigenous raw material. Size of the market was very small. Subsequently few more
companies entered into the market and the price war started. This reduced the product
cost and after this most of the companies started exporting. As a result, the price of the
products chlorohexidine gluconate & cetrimide were drastically brought down f. The dip
in the prices helped increasing volumes and hence the profit margins
g. This resulted into a need for further process innovation.
h. They purchased latest automated machines. Substantial expenditure on information
systems.

Conclusions:
1. Bulk drug industry is a growing industry. The growth and achievement of the Indian
bulk drug industry has been highest among the developing countries. It was established
by the study that innovations have a positive impact on not just the bottom lines but also
is vital for survival in this industry where the entry of the competitors is marked quite
early due to the copying mechanism.
2. Customised strategies are means rather than ends of the growth for the enterprises in
the bulk drug industry
3. There is no general formula for formulation of innovation strategies targeted at growth
at various levels which would prove effective for an Indian company in the bulk drug
industry
4. The combination of the basic growth strategies would depend on the business
environment. Though the customer centered as well as competitor centered companies
have performed better in the Indian bulk drug industry
5. Sustainable Competitive Advantage in the bulk Drug industry can be attained mainly
by way continuous product & process innovations
6. The strategies adopted by Unilab Chemical & Pharmaceuticals Pvt. Ltd and M/s Blue
Circle have been found effective in terms of growth, business expansion and
competitiveness (competitiveness assessed in terms of turnover, profits & market share).

5.9. SUMMARY
1. Technology absorption needs stable and conducive policy framework
2. Technology access is increasingly linked to FDI but attracting, rooting and
extracting benefits from FDI needs dynamic local firms & institutions
3. Building local capabilities is basic to effective technology absorption: and this
needs strong policy support

5.10. EXERCISE
Q1. How can knowledge institutions be made more relevant?
Q2. How to promote supplier linkages with MNCs?
Q3. What is the role of internalized technology?
UNIT 6 MANAGEMENT OF TECHNOLOGY ABSORPTION

STRUCTURE

6.0. Introduction
6.1. Objective
6.2. Management of technology absorption
6.3. Innovation, catch-up, and economic growth
6.4. Summary
6.5. Exercise

6.0. INTRODUCTION
Absorption of imported technology is at the centre of developing

countries' tryst with
(technological) 'catching-up'. The astounding

success of the Japanese in converting
imported technology into

a decisive advantage with adaptation and improvements has
apparently

fuelled this ambition. India invested heavily in technology

absorption, with
several policies/programmes in the lead. This

article compiles the activities reported
under technology absorption

from companies' annual reports and published data of the
Department

of Scientific and Industrial Research on in-house R&D achievements.

These
were grouped under several heads in separate categories:

technology absorption,
adaptation and improvement. The various

initiatives taken by Government of India to
facilitate absorption

are summarized. Finally, reasons and causes for the difference

in
performance of Indian industry from that of the Japanese

are analyzed, based on Japanese
writers' perceptions of their

own showing. The article suggests that the time has come to

reorient technology absorption efforts by shifting focus from

substitution of components,
which are fully codified and embodied,

to internalizing capabilities, which are mostly
tacit (uncodified).

It is hypothesised that small enterprises have certain learning

characteristics which enable
them to adopt new technologies

faster than large enterprises. The entrepreneurial work
structure

of small enterprises are exemplary for large enterprises where

cognitive and goal
dissonance amongst members act as impediments

to technology absorption. Several other
factors point to superior

absorption performance of the small enterprises. This position

contrasts the view that large enterprises, owing to their higher

R&D spending have higher
absorptive capacity, and therefore

are expected to learn quicker than small enterprises.
The paper

proposes an empirical research for ascertaining this hypothesis

6.1. OBJECTIVE
Management of technology absorption
Innovation, catch-up, and economic growth

6.2. MANAGEMENT OF TECHNOLOGY ABSORPTION
Improving the absorptive technology capability of countriestheir ability to tap into the
global technology poolis an important mechanism for accelerating industrial development,
raising productivity of workers, and increasing economic growth.Trade flows,
foreigndirect investment (FDI), research and development (R&D), and labor mobility and
training are widely accepted as key mechanisms for knowledge absorption.
Furthermore,the wealth of detailed information that patents and patent citations contain
offer a useful window into the technological absorption process in Europe and Central
Asia (ECA).While patents are indications of new-to-the-world innovation,much of this
innovation is incremental, building closely on technical foundations developed in foreign
countries.Patent citations connect ECA inventions to the prior foreign inventions upon
which ECA inventions build, tracing pathways of international knowledge diffusion.
The process of knowledge absorption is neither automatic nor costless. It requires a
favorable investment climate, as well good national education and research and
development systems. This study analyzes the extent of knowledge and technology
absorption for firms in ECA, as well as the factors that influence absorption, using
statistical analyses of various data sources, including the World Bank Enterprise Surveys,
patent databases maintained by the U.S. and European patent offices, and case studies.
6.3. Innovation, Catch-Up, and Economic Growth
The development of the neoclassical growth theory supported by the introduction of
new macroeconomic statistics and computing capability in the 1950s marked the
beginning of the rise of interest in innovation studies (Fagerberg et al., 2005). However,
the many who became interested in understanding the processes of technological
progress or innovation gradually created this research area, because they all felt the
limitations of the conceptual framework of the neoclassical model in capturing the
sophisticated processes of learning and innovating or technological progress (Nelson
and Winter, 1982). To distinguish the development of the standard economic growth
theory from Solow to Romer, this group of scholars has often been referred to as the
Schumpeterian school or evolutionary economists. While the growing interest in
innovation is a more recent phenomenon, many scholars took up the issues of
productivity and income growth throughout the history of capitalism in the wake of the
Industrial Revolution. Adam Smith and Alfred Marshal were among the leading
scholars who grappled with questions of productivity and income growth. In particular,
the long-term trend in the divergence of productivity and income growth across
different economies has been one of the important questions for many social scientists.
As Fagerberg and Godinho acknowledged, there are two main related but distinctive
research trends associated with the question of productivity growth. One is the idea of
convergence; the other is catch-up. Fagerberg and Godinho made the following
distinction: Catch-up relates to the ability of a single country to narrow the gap in
productivity and income vis--vis a leader country, while convergence refers to a trend
towards a reduction of the overall differences in productivity and income in the world as
a whole (Fagerberg, Nelson, and Mowery, 2005). Thus, the question that Asian
economies need to address is why only some countries were able to narrow the gap with
the front-runners while others fell behind. This is essentially the catch-up problem.
Earlier writers on catch-up tried to show how Germany was successful in catching up
with the UK in the period prior to WWI. The works of Thorstein Veblen and Friederich
List were among the first to point out the importance of institutions in the process of
catch-up. Since then, there have been a number of studies with the central research
focus on understanding the processes and institutions involved in technological progress.
Consequently, given the present environment of the globalization of innovation,
understanding the processes and institutions involved in catch-up should be an
important question for the economic studies of development. Furthermore, much of
todays policy debates in this area clearly depends on how well we understand the
experiences of Germany, the USA, and then Japan, the Republic of Korea, and the
Republic of China in successfully catching up with the technological and economic
leaders of their time, then carefully reflecting on what is different about the present
conditions for the Peoples Republic of China, India, and others to follow.
Catch-up requires gaining access to and mastering of the technologies and forms of
economic and social organization used by the leading economies of that time. Thus, the
acutual mechanisms of learning advanced technology need to be explored. However,
one needs to take a broader view of what technologies are, defining the term covering
the wide range of techniques that have been developed over the years, from
sophisticated product designs, to procedures used in productive agriculture, to effective
public health practices, to air traffic control systems, and to alternative energy supply
systems. Consequently, in the process of catching up, many different kinds of
capabilities must be acquired; hence, their acquisition may take different paths for each
case of technological progress.
In many instances, it is not easy to learn what others already have done. Moreover,
while the term catching up seems to mean more or less exact copying of the practices
of the more technologically advanced economies, and efforts to develop often involve
attempts in deliberate copying, what is achieved often diverges in a number of ways
from those practices in the countries serving as the model. On the one hand, this
divergence reflects that imitating the model perfectly is almost impossible, and that
attempts to replicate at best barely come close in reality. On the other hand, it shows
deliberate and often creative modifications to make those practices more adaptive to the
local environment. The organizational, managerial, and institutional aspects of
innovative practices often are the most difficult to replicate or reproduce for catching-up
economies (Sunami, 2001).
Moses Abramowitz has been one of the key scholars eloquently illustrating how
institutions determine successful catch-up level variables that are too aggregated to
permit analysis of many of the relevant factors(Abramowitz, 1989). Following his work,
there have been a few recent empirical studies showing how countries that are rapidly
catching up have focused on the development of their higher education systems for
engineering training and have developed indigenous research capabilities through these
institutions. Furthermore, several studies examined firms in developing countries which
have successfully caught up in specific industries. However, almost all of those studies
concentrated on manufacturing, and few were concerned with agriculture or service
industries. Successful economic development requires learning from abroad and
modifying to adapt what is learned to the distinctively unique environment. Studies on
the ways developing countries learn to improve their systems of public health and
medical care and on how competence in resource and environmental management is
acquired are becoming an important part of innovation research.
6.4. SUMMARY
Globalisation has produced remarkable changes in business structures and organizations
across the world. A key upshot of these changes has been greater synchronisation of
economic activities across borders leading to emergence of trans-national production
systems, organised as distinct global production networks. Advent of these networks has
been followed by rearranging of industrial structures, which has influenced the process of
local development.

For developing country enterprises, successful entry into global production networks has
emerged as a key challenge. Entry into global chains promises upgradation of firm-level
capabilities from learning through technology diffusion and exposure to international
best practice systems of corporate governance. However, the ability of developing
country firms to move into global chains and graduate to high-end activities depends on
their existing technological capabilities, as well as the support mechanism made available
by national country governments.

6.5. EXERCISE
Q1. What is Management of technology absorption?
Q2. Innovation, catch-up, and economic growth?

UNIT 7 DIFFUSION STRATEGIES

STRUCTURE

7.0. Introduction
7.1. Objective
7.4. Comparative Approaches to Technology Adoption And Applications Development
7.7. Case Study
7.8. Summary
7.9. Exercise

7.0. INTRODUCTION

The growing focus on technology diffusion, learning and absorptive capacity in Research
and Technological Development (RTD) policy1 poses important challenges to both those
who use and those who do evaluations. The type of evaluation that should be done in any
given situation depends not on some general principle but on the policy makers practical
needs for learning and accountability. Evaluations using a single approach are rarely
useful. Rather, the evaluator must be agile enough to apply the right tools at the right
time. While, at present, there is renewed enthusiasm for cost-benefit approaches,
especially in the context of technology diffusion programmes, these also have limitations.
Good evaluations use multiple approaches to answer relevant policy questions.

7.1. OBJECTIVE
Technology Adoption/Diffusion: Two Views
Adoption/Diffusion Theories
Comparative Approaches to Technology Adoption And Applications
Development
Challenges to RTD evaluation from policy shifts
Since early in this century, various "new" educational technologies have been touted as
the revolutionary pedagogical wave of the future. Classroom films, programmed learning
devices, language laboratories, educational television, computer-assisted instruction and,
more recently, interactive videodisc technology have been adopted and integrated into the
curriculum with varying degrees of success. Each technology was widely perceived as
meeting a need, and each gained a measure of initial commitment of resources from a
high level administrative or legislative entity. Their adoption and diffusion process
generally followed what has been termed the "traditional model," a "top-down" process in
which administrative "mandate" introduced the technology and administrative
perceptions, decisions and strategies drove adoption and diffusion. Successful adoption
was highly dependent on the degree, stability and wisdom of administrative sponsorship.
None of these technologies, however, has been generally available for individual or
private use due to cost, scope or application. This deterred a "grass roots" technology
adoption cycle as it was nearly impossible to generate movement from the bottom up by
influencing faculty peers and administrators with demonstrations of successful
applications.
Today's educational generation, however, sees personal computers, the Internet and the
World Wide Web as technology's new wave. Proponents of distributed learning
environments and distance learning on the World Wide Web forecast dramatic innovation
at all levels and in all areas of education. And although this enthusiasm is reminiscent of
that of past innovators, there are significant differences in the nature of this technology
revolution in education and that of earlier ones with corresponding implications for
adoption and diffusion.
Unlike most earlier technologies which were thrust upon the education community,
Internet technology is individually available to faculty and students who can use their
own systems to serve their own purposes. The impetus for the innovation frequently
grows from individual users of the technology, and as their communication and influence
moves laterally through their contacts, a body of support can grow and exert "pressure"
on the institutional administration to commit to adoption of the technology. There is,
therefore, a high potential for a "bottom-up" or "grass roots" adoption process to succeed.
Indeed, Everett Rogers , considered by many the "guru" of adoption/diffusion research
since publishing Diffusion of Innovations (now in its fourth edition) in 1960, reveals
three important ways in which the adoption of interactive communications differs from
that of previous innovations. 1) A critical mass of adopters is needed to convince the
"mainstream" teachers of the technology's efficacy. 2) Regular and frequent use is
necessary to ensure success of the diffusion effort. 3) Internet technology is a tool that
can be applied in different ways and for different purposes and is part of a dynamic
process that may involve change, modification and reinvention by individual adopters.
Internet technology actually embodies a number of technologies--e-mail, databases, chat
rooms, information and education resources, among others. Additionally, the Internet
exhibits many elements that constitute a culture or community--language, symbols,
rituals, interaction, and other elements of communication. It thus essentially becomes an
environment into which users enter (December, 1993; North, 1995). "Visionary"
innovation and "pragmatic" application can begin with grass-roots enthusiasts who enter
this environment. Viewed as a culture or community, however, the Internet can be
perceived as a threatening competitor to the established norms of an existing culture or
community, such as an academic department or some other institutional entity.
The "top-down" and "bottom-up" models of adoption/diffusion provide a directional
perspective to the process. Another theory dichotomy relates to the scale of innovation
efforts by distinguishing between macro-level theories and micro-level theories.
Macro-level theories focus on the institution and systemic change initiatives. Innovation
typically involves broad aspects of curriculum and instruction and might encompass a
wide range of technologies and practices. Micro-level theories, on the other hand, focus
on the individual adopters and a specific innovation or product rather than on large-scale
change.
Rogers recently presented four additional adoption/diffusion theories.
Innovation Decision Process theory. Potential adopters of a technology progress over
time through five stages in the diffusion process. First, they must learn about the
innovation (knowledge); second, they must be persuaded of the value of the innovation
(persuasion); they then must decide to adopt it (decision); the innovation must then be
implemented (implementation); and finally, the decision must be reaffirmed or rejected
(confirmation). The focus is on the user or adopter.
Individual Innovativeness theory.Individuals who are risk takers or otherwise innovative
will adopt an innovation earlier in the continuum of adoption/diffusion.
Rate of Adoption theory. Diffusion takes place over time with innovations going through
a slow, gradual growth period, followed by dramatic and rapid growth, and then a gradual
stabilization and finally a decline.
Perceived Attributes theory. There are five attributes upon which an innovation is judged:
that it can be tried out (trialability), that results can be observed (observability), that it
has an advantage over other innovations or the present circumstance (relative
advantage), that it is not overly complex to learn or use (complexity), that it fits in or is
compatible with the circumstances into which it will be adopted (compatibility).
Each of the above can be considered in the context of either a top-down or a bottom-up
adoption/diffusion process and in either macro-level or micro-level reforms. But there is
one other adoption/diffusion theory dichotomy that is relevant to the discussion of
Internet innovation. The distinction is between a determinist (developer-based) focus
and an instrumentalist (adopter-based) one.
Determinists regard technology as the primary cause of social change. The process is
seen as a series of revolutionary advances that are thought to be out of direct human
control. Consequently, focus is on an innovation's technical characteristics. Successful
adoption/diffusion is the assumed result of an innovation's technological superiority. The
innovation's developer is viewed as the primary change agent.
For instrumentalists the process is evolutionary, and the causes of change are in social
conditions and in human aspirations for change and improvement. Thus their focus is on
the user (adopter) of a technology and its value as a tool to bring about desired change.
Human control over the innovation is a key issue, and it is considered essential to
understand the social context in which it will be used and the function that it will serve.
7.4. Comparative Approaches To Technology Adoption And Applications
Development
Internet and World Wide Web technology offer opportunities for creating new and
significantly different educational applications. But technological functionality is not the
sole force currently driving its rapid adoption. Rather, the hope held by many in the
educational community that new ways of teaching and learning that the technology
makes possible appears to be increasing the rate of adoption. Concomitantly, many
instructional technologists and educators now reject technical superiority alone as a
sufficient basis for the successful diffusion of Internet and Web-based innovations.
David Jaffee , in his analysis of resistance to asynchronous learning networks (ALN)--
which would include many Internet/Web based learning applications--reminds us that
classroom teaching is an established practice and cultural tradition of the teaching faculty.
It centralizes power and influence with the instructor and serves as a focal point of
professional identity. Jaffee suggests that institutionalization of the classroom teaching
model is a major factor in reluctance to adopt ALN technology. He also observed that
faculty exhibit less opposition to the use of televideo for transmission of classroom
lectures, perhaps because the classroom setting is maintained between transmission and
reception sites. The virtual classrooms afforded by ALNs and Web based learning modes,
on the other hand, can be viewed as a threat in this context. He notes, however, that
where professional identity is based on classroom presentation and student "reaction" to it,
a disinterested and disengaged student audience might adversely affect that identity.
Given that circumstance, Jaffee suggests that the ALN (Internet/Web) based virtual
classroom concept might be conceived, or at least presented and promoted, as
professionally enhancing.
Thus the focus of the process has shifted to the potential adopter and the organization into
which the technology will be integrated. An adopter based, instrumentalist approach
incorporating both macro-and micro-level perspectives now appears to be the most
widely used to promote the adoption and diffusion of Internet technology.
Ernest Burkman's user-oriented development approach exemplifies those currently
favored for the adoption and diffusion of instructional technology generally and Internet
technology in particular. It consists of 5 adopter-focused steps: 1) potential adopter
identification, 2) measurement of their relevant perceptions, 3) user (adopter)-friendly
product design and development, 4) informing the potential user (adopter) of the product,
and 5) support after adoption. An alternative model developed at the University of
Minnesota's Telecommunication Center recommended a complete analysis of educational
need and user characteristics along with the identification of a new educational
technology's relevant and appropriate features and factors .
Tessmer stresses the need to analyze the environment in which the potential adopter is
expected to use the technology. This process includes identifying the relevant physical
and use characteristics of both the instructional situation and the support system. The
approach is intended to ensure actual, correct and continual product use.
An adoption analysis approach considers the process from the broader perspective of both
user-perception and organization attributes, resulting in a plan for carrying out the
adoption of technology that is rooted in an organizational context and addresses issues of
concern to the intended user. Product and application design and development are also
significantly influenced by this approach.
No single approach or process may be sufficient to ensure successful innovation adoption.
But clearly, Internet and Web-based technology is individual-user based in application,
and the adoption/diffusion process should start at that level. It should focus on the
potential adopters and address their characteristics in the context of the environment in
which they will be using the technology.
Addressing the needs implied by the early adopter-early majority differences when
designing diffusion strategies can greatly enhance the likelihood that a technology will be
successfully integrated into the curriculum by groups beyond the innovators and early
adopters .
Need for recognition and process involvement. The chances of successfully "selling" an
innovation to the pragmatic early majority will significantly increase if their differences
are addressed in terms of their perceptions and needs. They should be recognized as a
distinct group within the community and made a part of the planning and policy making
process. Attempts to "convert" them to the point of view of the innovators and early
adopters are likely to be futile, not to mention almost certainly disastrous to impose the
technology on them otherwise. Diffusion of the innovation to the late majority and
laggards is more likely to occur through this early majority involvement since the vertical
lines of communication between the three groups are more direct than with the innovators
and early adopters.
Need for vertical support structure to overcome technophobia. When technology
adoption begins from the grass roots, innovators and early adopters, with their strong
technology orientation, may be able to get by on their own initiative. Narrowly focused
technical support staff may not pose a threat or discouragement to them and their needs
for initial training and support may be relatively easy to accommodate. Members of the
early majority, however, tend to have no interest in the technology per se and some may
exhibit a form of technophobia. Their introduction to the technology should be related to
their perceived program and process needs. Since they tend to focus vertically within a
discipline, training and support provided by staff who enjoy discipline/content credibility
will likely be best received. Correspondingly, such training and support will be more
transferable to the late majority and laggards.
Need for well-defined purpose or reason. The very existence of a technology may be
reason enough for innovators and early adopters to pursue it. Their bent for
experimentation and their innate interest in technology may dispose them to adopt it and
be content with "finding a problem to fit the solution". Members of the early majority
(and the others by extension), however, tend to derive their purposes from problems
related to their disciplines. If the innovation can be demonstrated as an effective, efficient
and easily applied solution to those focused needs, it is more likely to be adopted and
integrated into the program.
Need for ease of use and low risk of failure. The early majority's aversion to risk quite
naturally translates into a need for ease of use and early success if they are to adopt and
diffuse the technology. The overlap with support and training requirements is obvious.
Need for institutional/administrative advocacy and commitment. In the top-down
adoption effort, institutional sponsorship and support is a given. The innovation may be
mandated and grant moneys or other funds are committed. Without advocacy and
resource commitment by the institution's "policy setters" and "holders of the purse
strings", other issues become moot as the process is likely doomed to stalemate, if not to
an early demise. But innovation that occurs from the bottom-up also requires institutional
attention, and an administration as an entity (except for some possible rare exceptions)
tends to emulate the early majority rather than the innovators and early adopters. And
even when an institution initiates an innovation from the top, their perspective tends to be
a pragmatic one based on a problem or need that a given technology promises to alleviate.
It may relate to staffing, financing, scheduling, teaching, distance or communication. In
any case, the mindset is similar to that of the early majority and, as always, there is a
need for advocacy to occur if the conditions and activities that can promote adoption by
the early and late majorities and laggards are to prevail.
Meeting these needs is an essential part of any successful diffusion strategy. From their
work at the University of Colorado, Wilson, Ryder, McCahan and Sherry (1996) derived
several principles that apply particularly to situations in which students and faculty are
introduced to networked learning environments.
First-time success. No one enjoys frustration or failure. An innovation is most likely to be
accepted and integrated by the early and late majorities if success is experienced initially
and subsequently built upon. E-mail is typically introduced early on because of its ease of
use, and its success is almost guaranteed. It also extends the peer network, both within
and outside the institution, thereby magnifying its impact on adoption and diffusion.
On-going peer support. Complementing the experience of initial success, there should be
ample "hand-holding" along the way of integration as other Internet applications are
introduced. Live peer support not only serves as assistance and encouragement; it
contributes to the person-to-person communication that promotes diffusion throughout an
educational community. In addition to a training cadre of recognized peers, a network of
on-line mentors can expand the potential of the support structure to promote the exchange
of innovative techniques.
Real task activities The early and late majorities are pragmatists who see technology in
terms of real problem and task solutions. Activities designed to introduce and teach the
technology should address those needs. As pointed out earlier, institutional
administrations tend to emulate this pragmatic perspective. Internet access to information
and resources, and its use for intra and inter-institutional communication can address
many administrative needs in addition to those of the faculty, as well as establish a well-
defined and recognizable need for adopting the technology.
Ownership and identity on the Internet Encouraging and enabling faculty and students to
"create an active presence" on the Internet is important. Participating in listservs, creating
a personal home page, publishing electronic papers all contribute to the electronic world-
community and help ease "cultural assimilation." As with using e-mail to ensure early
success with the technology, this "presence" extends the peer network impact on its
adoption and diffusion. Beyond that, it also creates a professional identity and a
credibility standing similar to that derived from traditional publication.
Variety of incentives. Attempts to impose a technology through explicit mandates and
requirements, as in the top-down scenario, are not likely to be effective. This is
particularly true with Internet and Web technology because the technology is so generally
available to anyone who has a mind to adopt it. Policies and procedures promoting the
technology should grow naturally from its application, and incentives for using it
likewise should be tied to its practical use. Adoption and diffusion is more likely to occur
where incentives and policies encourage a natural acceptance and use of the new
technology.
Technology innovation in the educational community has often been hindered by the lack
of a reward structure. Written publication has long been held as evidence of scholarly
work that is worthy of recognition through promotions or tenure. In contrast, time
consuming effort directed to pragmatic problem solving, instructional materials design
and development or innovative classroom teaching has rarely received similar recognition.
Integrating a technology like the Internet into one's teaching is time consuming and
"effort intensive," usurping time and energy that otherwise could be devoted to more
traditional--and more rewarded--endeavors. If innovative behavior is to be sustained,
there must be a recognized and acknowledged system of rewards parallel to, and equal to,
that associated with "traditional" academic pursuits.


In RTD policy, government has historically focused on the innovation-creation process.
This
has been justified by arguments about market failure: the inability of market mechanisms
to secure long-term, common good improvements in science and technology.2
However, over the last decade, policy makers have increasingly accepted that it is not
the creation of technological
leadership in itself that affords a nation its competitive advantage, but the rate and level
of diffusion of the technology into economic use.
Technology development and diffusion are clearly of considerable potential
economic importance, with diffusion offering particularly large benefits.
Technology diffusion involves far more than the simple introduction of new
machinery into the firm. Additional measures, such as internal reorganisation of
both production and management processes and upgrading of skills, may be
essential to capturing economic value from investment in new technology.
Whereas it may not be necessary to produce technology to reap its benefits,
diffusion is essential to maximise potential national economic returns. However,
realising the benefits of diffusion may depend critically on broader social and
institutional changes, which may, in fact, represent the most important obstacles
of all.

As a result, there has been a proliferation of programmes aimed at increasing the rate of
adoption
of new technologies. These activities work both directly on the adoption process itself but
also
indirectly by trying to increase technological capabilities. One important side-effect of
this new
emphasis has been the fragmentation of the supply side. Typically, OECD countries
now have
technological infrastructures to support industry which involve large numbers of
programmes and
institutions. These have overlapping responsibilities and impacts on the economy.
Not only has the emphasis of policy been shifting along the spectrum of activity from
basic
research towards innovation and diffusion, but the means used to design and implement
actions have also been changing. The use of programmes, as distinct from projects, as the
primary level at which policy is defined is an important innovation in RTD policy which
has enabled the state to bring some of the scientific and technological activities it funds
under closer managerial control. Collaboration and the use of networks as vehicles for
innovation policy have increased. Many countries have deliberately sought to bring more
of the public RTD system under the control of the users of research outputs.

7.7. CASE STUDY I: Information Technology Diffusion: A Comparative Case
Study of Intranet Adoption
INTRODUCTION
An intranet is an organizations internal computer network protected from the Internet by
a firewall. The
Gartner Group reports that the implementation of an enterprise-wide intranet can lead to
increased accessibility to current information, the ability to work off-site, prestige,
competitive advantage, reduced maintenance expenses, increased employee satisfaction
and a Return on Investment (ROI) of over 1000 percent. The current design uses the
client-server architecture, with a Hypertext Transport Protocol (HTTP) server and a web-
browser as the client. TCP/IP is the foundational protocol. The HTTP server delivers
static or dynamic web pages. Dynamic web pages allow query and transactional
processing of information
contained in a Data Base Management System (DBMS). The web-based model creates a
universal interface for all types of organizational computers.

There has been little scientific research on the process of successful intranet
implementation. Although a large body of literature on information systems strategy in
organizations exists, almost all of this literature is concerned with prescriptive methods
and frameworks aimed at aiding management in the formulation of strategy. A much
smaller body of work and studies how the process of Information Systems (IS) strategy
links to implementation . More research dealing with the implementation of new
technology in organizations is needed. To support this goal, this paper will conduct
exploratory research to identify the
factors that influence the adoption and diffusion of intranet technology and present a
recommended approach for strategic adoption and diffusion.

A literature review of innovation and implementation is conducted in the next section.
Section III
describes the methodology used to gather information. A comparative analysis is
conducted in section IV and section V presents a recommended approach for adoption.

II. THEORETICAL BACKGROUND
Innovation is a new way of doing things. Mohr states that an organization must possess
and be willing to
commit the resources needed to implement a new technology for it to be successful. He
writes that Innovation = Motivation times Resources.

Lewin created a three-step sequential model that describes how processes are changed.
The present behavior is unfrozen, then it is changed to develop a new behavior and
finally refrozen to reinforce the new behavior. He suggests there are multiple forces for
change and for maintaining the status quo . Forces for change:

- survival

Forces that inhibit change:

- member complacency
-learned skills.
Beath believes that organizational members need to identify with a champion who
spearheads the change to
enable unfreezing. Cooper and Zmud defined IT implementation as an organizational
effort directed toward diffusing appropriate information technology within a user
community. They developed a six-staged model of IT implementation based on Lewins
work:
Initiation: Active and /or passive scanning of problems/opportunities.
Adoption: Negotiations for backing IT application implementation.
Adaptation: IT application and organizational procedures are revised.
Acceptance: Organizational members are induced to commit to IT application.
Routinization: Usage of the IT application is encouraged as a normal activity.
Infusion: Increased effectiveness obtained by using the IT.
They also described five major contextual factors that impacted each stage in the process:

eing adopted (complexity)

Rogers designed a five-stage innovation process for organizations:
(1) Agenda-setting, (2) Matching, (3) Redefining/Restructuring, (4) Clarifying, and (5)
Routinizing. He states that champions are so crucial to the success of innovation in
organizations that new ideas find a champion or die.

III. METHODOLOGY
Case studies were chosen because they provide the ability to discover new contextual
factors and enable longitudinal study. Polar types were selected "to exploit planned
opportunism because this approach produces interesting research as well as an excellent
opportunity for comparisons" 13]. Archives, interviews, and personal observations were
used to create the qualitative data. Quantitative statistical comparisons based on Likert
scale questionnaires were then used to triangulate the data and compare the case studies.
A. Model Development
A customized model was created to help identify and measure factors in the case studies
that influence innovation. It was designed by modifying Cooper and Zmuds model as
well as using an approach adopted by Liu Sheng :
The four-step process includes:
1. Scanning/Matching: Either an opportunistic approach that scans for new ideas or an
approach that scans for innovative solutions for existing problems.
2. Fit: The innovation is redesigned to fit the organizations needs. Political negotiations
are conducted to gain support for the match.
3. Adoption: Initial application use. Identification of a champion. Users are encouraged to
regularly use the new innovation.
4. Diffusion: The IT application is spread throughout the organization in modified ways
to increases overall efficiency or to solve additional problems.
B. Data Collection
Archival data was reviewed to provide longitudinal information. Quantitative data from
both sites was obtained through the use of questionnaires. Qualitative information was
obtained through observation and from interviews with users, computer specialists,
executive board members and students. This data is used for comparison of the case
studies in section IV.
1) Case One: The Naval Postgraduate School: The first study was conducted at the
United States Navys research university, the Naval Postgraduate School (NPS) .
Approximately 1400 masters and Ph.D. students are enrolled in various technical
programs. Students from all branches of the United States Military, the Department of
Defense, and numerous foreign countries attend. There are 1500 full-time staff and
faculty with approximately three thousand five hundred computers connected to the
campus network.
2) Case two: Sandia National Laboratories: Sandia National Laboratories was chosen
because it is structurally similar to the NPS and was named one of the nations top six
intranet sites for its excellence in
execution, innovative use of technologies and demonstrated intranet benefits. Sandia is a
multi-program national security laboratory operated by Sandia Corporation for the U.S.
Department of Energy. It works in partnership with universities and industry to enhance
the security, prosperity, and well being of the nation. Sandia employs approximately
6,600 technical and administrative employees and has approximately eight thousand
workstations connected to its computer network.

IV. COMPARATIVE FINDINGS
A. General characteristics
The two sites provided an excellent comparison because of their similar mission and
hierarchical organization structure. Sandia has done an excellent job of adoption and
diffusion while the Naval Postgraduate School's pace has been much slower. Information
sharing at both sites is somewhat inhibited because the departments are not highly
interdependent and there is a need for some security compartmentalization. The general
technological expertise of both groups is excellent. There is a high level of heterogeneity
between workstations at both sites with multiple versions of Windows, UNIX and Apple
workstations supported as well as multiple Network Operating Systems. There are
notable differences. Sandia has more than twice the number of computer personnel and
workstations as NPS and its network was upgraded just prior to the introduction of web
technology. NPSs network is currently undergoing a major upgrade to increase
bandwidth and enhance reliability. A Chief Information Officer (CIO) controls all
Sandias computer personnel, while NPS has about one-third of its computer personnel
centrally managed with the remaining assigned to the departments. Sandia developed a
strategic plan for intranet implementation and committed two full-time programmers who
named themselves the Engineering Viewing Environment (E.V.E.) Team; NPS did not.
B. Scanning/Matching Comparison
Both NPS and Sandia used informal opportunistic approaches to discover and acquire
intranet technology; they chose to match the innovation with an enterprise-wide need.
There was one major difference. The Sandia match was a simple solution initially
adopted in one department using a web site to transfer files. The Naval Postgraduate
Schools match was a more complex solution (an enterprise telephone and email
directory) that required information sharing between all the campus departments and
executive board approval for adoption.
C. Fit Comparison
There was quite a difference in the two case studies. Since Sandias solution was initially
adopted in a single department, resources and personnel were easily dedicated and the
design was quickly approved. The Naval Postgraduate School chose a complex enterprise
solution that required executive support and interdepartmental cooperation. Only one
part-time designer was assigned. The political complexity of the project made this stage
very timeconsuming and no resources were available to cultivate additional champions.
Table III is a comparison of the fit stage characteristics.
D. Adoption Comparison
The rate of adoption for the case studies provides a clear sign of the differences that exist
between them. Sandia provided a simple and effective solution to a well-known single
departmental problem. The E.V.E. Team aggressively demonstrated to potential users
throughout the organization how an intranet could directly benefit them by creating
custom web-based applications. Numerous department personnel became champions and
system administrators were eager to learn the new technology. The Naval Postgraduate
School provided very limited resources to their complex enterprise-wide solution. A
single student created
the application, which limited user involvement and provided no resources for
organizational training. The result was a relatively low visibility champion, only
moderate initial user support, and an inability to cultivate additional champions. Table IV
provides a comparison of the adoption process.

E. Diffusion Comparison
Diffusion occurred rapidly at Sandia because the initial intranet application was simple,
very successful and
created a broad base of support for further enterprise development. Grass roots personnel
and executive board members were eager to find more opportunities to use this
technology and accelerated enterprise intranet application development. An added benefit
was that because the E.V.E team had been the harbinger of this technology, they were
naturally looked to for future applications. The Naval Postgraduate Schools initial
application was a complex, technically sophisticated system that was resisted by some
users because it replaced a legacy system that was well liked. It did not create the broad
base of user support for future intranet applications that Sandia enjoyed. NPS has
improved their enterprise telephone and email directory program, responded to users
suggestions and is moving closer to achieving the critical mass needed for enterprise-
wide intranet development.
V. RECOMMENDED APPROACH
A. Scanning/Matching
Opportunistic and need scanning must be continuous. Individuals should be assigned
from a central computer department to continuously conduct opportunistic and need
scanning. Active innovation identification will empower the organization to stay at the
forefront of innovation, reducing inefficiency and heterogeneity of solutions. Centralized
evaluation of innovation leads to standardization and better
diffusion. Ensure the end-users are involved in the match between innovation and need.
Do not create a match just to experiment with a new technology. There should be a need.
B. Fit
Political support must be generated for the innovation. A champion must emerge who has
the capability to allocate resources and the power to gather support for the new process. If
support cannot be gained, drop the project. Adequate resources must be committed to the
design team. In radical new technology, create a simple implementation first to create
support for later complex solutions. Ensure user involvement is incorporated at all stages
of the redesign.
C. Adoption
User support is the key to adoption. Demonstrate how this solution will benefit the user
(easier, better, more fun). If it does not, it is not a good solution. Adequate resources must
be committed to training and maintenance of the project. The champion must be visible,
creditable and enthusiastic. Network bandwidth and reliability must also be adequate.
D. Diffusion
Full-time advocates of innovation change must be assigned to the process. Change agents
must be encouraged to review all processes that could be enhanced by intranet
technology. Training must be continued to encourage user inputs for changes that can be
made. Rewards must be given to those who significantly contribute to the successful
implementation of the innovation.
VI. CONCLUSION
The purpose of this paper has been twofold: (1) identify factors that influence the
organizational adoption and diffusion of intranet technology and (2) recommend a
strategic plan for its adoption and diffusion. A comparative case study was conducted
between two sites: the Naval Postgraduate School which has struggled to adopt and
diffuse intranet technology and Sandia National Laboratories which has been very
successful, receiving national recognition for its intranet. A customized model based on
Lewins threestep
sequential model for the change process and Cooper and Zmuds six-staged model of IT
implementation was created to help identify the important factors that affect
implementation and study the process of intranet adoption and diffusion. With this new
model, a comparison of the two case studies was completed in section four which led to a
recommended approach for intranet implementation described in section five.
In conclusion, intranet technology is a complex tool kit of innovative ideas that must be
custom-designed for each organization. Continuous scanning, a good match to a
recognized need, a capable champion, a culture ready for change, and political support
that produces adequate resources are important factors that must be attained before
successful adoption and diffusion can be achieved.
7.8. Summary
The adoption and diffusion of an innovation within an institution does not guarantee its
successful integration into the curriculum or its continued use. A classic example might
be the once ubiquitous classroom film, frequently used in public schools as a "Friday
afternoon filler" rather than as a planned learning experience. Similarly, the lack of
appropriate and adequate teacher training inhibited the full use of language laboratories in
public schools decades ago. Now, Internet technology is at risk of being misused. If its
glitz, popularity and apparent ease of use are allowed to preempt careful planning, or if
teachers and students do not receive proper training in its use, its integration as an
information and learning resource, as well as a communication tool will likely be
subverted.
In addition to a strong stable advocacy needed to ensure the conditions necessary for
technology adoption and diffusion, training in its technical aspects and application to real
needs is crucial to its integration beyond the innovators and early adopters. Time for
experimentation and development of applications is essential. Successful peer users are
needed to lead its integration into the curriculum. If the technology is perceived as
difficult to learn and/or too time consuming to prepare and use, or is in some other way
perceived as threatening, it probably will not be used. No amount of administrative force
would likely be effective reversing a negative trend. A perception of value in terms of
needs/problem solving and academic or other rewards through establishment of policies,
incentives, recognition and an on-line presence in the Internet culture and environment
need to be nurtured by the institution's administration.
7.9. EXERCISE
Q1. Define technology adoption?
Q2. What is the importance of diffusion in management?
Q3. What are the various diffusion strategies?

UNIT 8 TECHNOLOGY MARKETING ISSUES AND STRATEGIES

STRUCTURE

8.0. Introduction
8.1. Objective
8.2. Technology life cycle
8.3. Technology assets & technology portfolio
8.4. Technology risk
8.5. Forms of technology acquisition & transfer
8.6. Evaluation of the technology subject
8.9. Concept & characteristics of technology marketing
8.10. Summary
8.11. Exercise

8.0. INTRODUCTION
In this chapter, technology distinction standards, selection methods etc. to properly derive
the marketing subject technology will be studied. In the valuation of a technology
subject, the value as a transfer subject must be recognized to guarantee transfer
feasibility, and this is examined in terms of all transfer parties, economical life cycle,
transfer possibility etc.

Previously, the characteristics of the technology as the marketing subjects and the
technology marketing were examined. These characteristics must be fundamentally
considered in planning & executing technology marketing activities. Continuing from
that, this chapter will examine the technology subject that will be the target of marketing.
As in the saying that if the enemy and I are known in a war, there is no danger, it is
important to first examine the subject technology for which the marketing will be
conducted. However, valuation which is the money value of technology and market
valuation of technology is dealt with separately, so it is omitted from this section. Firstly,
the position in the technology life cycle, technology asset & portfolio, technology risk
etc. of the technology possessed by the firm or research center will be examined for the
selection of technology; after then, the detailed evaluation in relation to the sales target
technology will be explained.

8.1. OBJECTIVE
Technology life cycle
Technology assets & technology portfolio
Forms of technology acquisition & transfer
Concept & characteristics of technology marketing
Economic life cycle of technology
Technology transfer possibility

8.2. Technology Life Cycle
Technology life cycle stage classification is similar to the product life cycle consisting of
creation,
growth & maturity, and decline.
Technology life cycle
Efficiency
Introduction stage
growth stage
maturity stage
decline stage
time

Introduction stage
Much investment by the firm
- Little or no profits

Growth Stage
Knowledge & competitiveness accumulate and profits gained
With the purpose of improving the technology, comprehensive tests are conducted
with very different designs
As more superior designs are discovered, further improvement gradually become
impossible
Maturity Stage
As profits gradually rise, performance improvements continue
Product features are agreed upon by the producer and customers, and in
accordance with market expansion a movement from product innovation to
process innovation can arise
As the industry becomes more stable, more confidence is gained with the use of
specialized high value equipment
The PC industry in the 1990s is an example of this. That is, the subject of challenge was
to produce more hardware boxes with features limited to what consumers favored more
quickly and
economically.
Decline Stage
A situation where the technology has reached its physical limits, additional R&D
investment & effort has been increasing the state of saturation, or a situation
where additional sales cannot occur. In the case of technology, not only the
absolute physical limitations but also the relative limitations of the technology
compared to other technologies must be appraised. Generally, competing
technologies are interrelated in the growing spiral form. This is because the
procedures of new technology require a high level of investment, but the
technology replacing it has its starting point at a level very similar level to the
highest capacity of the existing technology. technology capacity time
consumption
8.3.Technology Assets & Technology Portfolio
Technological resource is the fundamental asset of firms producing high tech products.
Like human resource, marketing & financial resources, this kind of technology resource
must be managed with a long-term point of view. This technology resource requires
protection using patents and licenses where possible.

Firms must know the utilization scope of technology currently in use as well as
technology not in
use. Through this, strengths and weaknesses of competitors can be determined by which
the
competitive effects of the technology can be appraised. The technology portfolio
technique is often used as a method to select technology resources that influence
competitiveness through the level of technology significance, relative standard of
technology, control effects etc.
Technology portfolio
High
Low
level of technology significance
relative technology standard
technology sector

Technologies in the 1st technology sector have a high level of significance but low
technology standard, and the 3rd technology sector is the opposite. Both the level of
significance and technology standard in the 2nd technology sector are high and greatly
contributes to competitiveness. Through not only challenging R&D but also the purchase
of new advanced
equipment etc. it actively promotes the maximization of technology capabilities.

The following figure appraised technology assets in terms of competitive impact and
control. Here,
the competitive impact of technology can be evaluated by rate of cost-effectiveness,
value addition rate, differentiation probability etc.
high
medium
low
competitive impact
control

There was an instance when Texas Instruments used a portfolio of a comparison between
competitive impact and the rate of technological & commercial success for the selection
of
computer technology.
Portfolio analysis of Texas Instruments
high
medium
low
potential impact on competitiveness
technological industrial success rate
image recognition
speech recognition
expert systems
speech synthesis

The most favorable technology selection was expert systems. This technology was
appraised as having not only high technological & industrial success rate but also high
competitive impact.

8.4. Technology Risk
If technology innovation can properly determine future business direction, technology
marketing
activities will also become very easy. However, as explained in the introduction, it is not
easy to
overcome uncertainty associated with the technology itself. Technology uncertainty can
be
explained by the following 4 factors.
1) There are many cases where new technology moves in a immature state, and it is
difficult to
predict future circumstances like performance, scale, price, economic outcomes etc.
2) In the case of technology newly produced in basic science research, it is difficult to
make a
distinction of its usage and takes much time. Scanners, MRI etc. are examples of this.
3) The impact of technology innovation is sometimes made possible by supplementary
inventions.
Supplementary inventions or peripheric technology inventions contributes to the system
solution for the supplementation of demand. For example, the laser connected to fiber
optics brought innovative changes to data transmission.
4) Technology developments are carried out to find solution for a particular problem, but
there are
many situations where new usages are discovered which could not be predicted at the
time. For
example, computers play numerous roles in cars.
If this uncertainty in technology is composed into a portfolio by dividing it into
technology
development uncertainty and business impact due to the lack of development aims, it is
as follows.

8.5. Forms of Technology Acquisition & Transfer
Technology transfer & transaction, which is the result of technology marketing activity,
is a special
situation faced by both transacting parties and a careful decision must be made based on
corporate strategy. Important variables that impact this kind of decision include
technology acquisition costs, time, risk associated with technology acquisition (e.g.
violation of technological autonomy) etc. The relative distribution of technology
acquisition methods when technology acquisition time consumption, the urgency of
technology demand and technology autonomy have been taken into consideration as
important strategic variables.

On the other hand, plans to distinguish proper technology acquisition methods in
accordance with the speed of technology changes can be considered. As seen in the
following , if the speed of technology & market changes is slow, independent
development is the most favorable, but
if the speed of change in both technology and the market is fast corporate takeover is the
most
effective. The distinction of these kinds of technology acquisition methods is seen in the
viewpoint
of the buyer, but it is also crucial for technology marketers to analyze the purchasing
conditions of
technology buyers.

Evaluation standards for technology acquisition methods: time consumption &
technological autonomy
technology autonomy
high
low
corporate takeover
independent development
consigned development
technology implementation
joint venture
low
high
time consumption
Technology acquisition methods in accordance with the relative transformation speed of
the technology & market speed of technology change
Fast
Slow
observation joint venture
corporate takeover
independent development
technology implementation
speed of market change
Apart from this, there are many and diverse methods and types of technology acquisition,
and the
method that came as a result of the advancement in technology cooperation is the
strategic
technology alliance. Strategic technology alliance has various advantages including risk
diversification, economies of scale, competition absorption, barriers, simplification of
market access etc. and the most common example is licensing.
Table 8.1:Forms of strategic technology alliance

<R&D Alliance>
1. Licensing agreement: a legal right of use is acquired by paying a predetermined fee in
relation to patented technologies of other firms or technologies with exclusive right
2. Cross-Licensing agreement: 2 or more firms use each others patented or exclusive
technology by way of exchange
3. Technology exchange: exchange of exclusive technology; payment of fees may or may
not occur
4. Visitation and research participation: research personnel of ones company visits or
participates in the R&D activities of the company in alliance
5. Personnel exchange: a continuous program where research personnel are made to
stay and work for a set period in another company
6. Joint development: development of new products or technology by firms jointly
investing resources
7. Technology acquisition investment: an investment in overseas firms for technology
acquisition, and the target is usually small new technology innovation companies
<Production & Manufacturing Alliance>
8. OEM: products are manufactured for another company which attaches their own labels
and conducts marketing & service activities, and all other business activities that are
portrayed as if they were carried out by the ordering firm
9. Second sourcing: in accordance with the agreement, permission to produce products
developed by another firm is obtained by which a 2nd source of supply is provided to
consumers for the products with the same specifications
10. Fabrication agreement: products fabricated and produced using the production
facilities
of another company (in the case where production facilities are not possessed or
sub-contract is desired)
11. Testing agreement: test & inspection of products using the equipment & facilities of
other companies

8.6. Evaluation of the Technology Subject
Advantages for ones company
Where is the value of the time, money, and effort to be invested in marketing this
technology?
Monetary profit arising after the transfer of this technology, provision of
incentives for internal research personnel & R&D activation effects
External image improvement, new network creation & strengthening with the
accomplishment of the technology transfer

Potential advantages for customers
Technology merchandizing is viewing technology through the eyes of the customer, and
customers here are potential contractors of purchase & licensing. If the tangible &
intangible advantage of the technology to the buying firm is not properly determined, the
transfer cannot be achieved.
Why would the customer want this technology?
Why do they want to purchase or obtain a license for the technology from us?
How much will this technology change the existing product/process? (creation of
a completely new function, improvement of existing function, improvement of
existing production methods, function additions to existing products etc.)

Patented technology has a legally valid life, but in the view of economics, the life of
technology is
the period during which a firm can gain profits from the technology. This is influenced by
the
following factors.
The possibility of a competitor possessing the capability of developing a similar
technology or producing a competition product
Effects of new law: the economic life of the technology can be shortened by the
establishment of new regulatory systems such as the environmental protection law
Increase in price of raw materials & technology related components: the
appearance of a substitute product with higher cost-effectiveness is possible due
to particular technology increase in prices of raw materials & technology related
components.

Technology must have a strong type of intellectual property right, meaning that it must be
able to be transferred without loss of exclusive right. Also, technology must be able to be
used in a different place to the inventors environment, and it should not be so closely
combined with the internal technologies of the firm so that it cannot be used separately.
Whether the technology is exclusive or not, that is, whether it is necessary in the core
business of a particular firm, is a very important factor in considering technology
transfer.

Determining the necessity of resources for technology transfer

Technology transfer generally takes place with the provision of know-how of a certain
level so that the technology can be appropriately used by the purchaser. Because some
technologies are too dependent on the know-how of the inventor or the invention team,
there are cases where it cannot be transferred to another firm to be used for production,
supplementation or further development.

Deciding on the method of corporate know-how transfer and whether there is a need to
temporarily assign particular personnel of the technology provider (licensor) to work in
the company of the purchaser is very important. If the technology provider does not
sufficiently provide assistance, there are cases where the technology implementer fails to
learn the technology. Time and effort is required in these activities.

Apart from this, the following factors can be used as detailed analysis indicators in
relation to
technology attributes, product value etc.
Early Evaluation
-103 Are there any potential partners in relation to similar technologies?
-104 Is this a product technology or process technology?
-105 Is there demand for the technology?
-106 What is the intellectual property right situation?
-107 What is the maturity level of the technology?
Commercialization feasibility
-108 What is the quality level of research up till now?
-109 Is this technology new and unique?
-110Can the technology buyer link the technology to the market?
-111 Are there any regulation related issues?
-112What are the competition technologies?
-113What is the advantage of this technology?
-114Can this technology really satisfy the needs of the technology buyer?
Market Prospects
-115Which market will be targeted by this technology or the related product?
-116What is the maximum scale of this market?
-117Which firms are involved in this market?

8.9. Concept & Characteristics of Technology Marketing
Basic concepts and characteristics of technology marketing are explained in this chapter.
In this
chapter, readers will learn the concept of marketing & technology marketing,
characteristics of the
technology as the technology subject, technology marketing characteristics etc.
The Concept of Marketing & Technology Marketing
If marketing is seen as an act of exchange, technology is the subject of exchange in
technology
marketing. Recently in our society, with the increase in the recognition of the importance
of
intangible assets such as services, the marketing research domain of special fields
including hotel marketing, culture marketing, event marketing etc. is becoming wider.
Together with the term technology management, technology marketing is also gradually
more frequently used.
If the name of all products and industries are added as the subjects of marketing
activities, such as motor vehicle marketing, university marketing, soap marketing, watch
marketing etc. there will be an infinite number of marketing classifications. Even so, the
term marketing is being misused with a negative meaning in many cases, and it is not
something that can be expressed as XX marketing whenever some new offerings get
attention. Despite this, in technology marketing there are many cases where involvement
of transfer parties and the level of risk is not common place due to the characteristics,
complexity, and intangibility of the technology itself. As a result, the general marketing
principles are not well applied to technology but it has established a separate research
domain.

Like all other faculties, the concept of the term technology marketing is diverse
depending on the user. In western countries, technology marketing is seen as marketing
for high tech. products,. That is, it is not seen as the marketing of technology but the
marketing of technology intensive products. However, NTTC (National Technology
Transfer Center) defines technology marketing as the effort to efficiently transfer &
transact technology. On the other hand, research results and literature relating to
technology marketing are very scarce in Korea, and there is a tendency to define the
concept very narrowly. As a matter of fact, technology marketing is regarded as
technology transfer, technology sales etc. in Korea, so it is sales-oriented rather than
being marketing-oriented, and often there are cases where it partly overlaps with
commercialization of technology.

The technology marketing concept in this text sees technology as a product and defines it
as the
various efforts for its efficient and effective marketing. Originally, marketing is widely
known to have the following concept structure.

Marketing is a process involving planning/executing of conceptioning/pricing/
distribution/promotion of products/services/ideas for the accomplishment of
individual/organizational goals so that exchange can take place.

If this is applied to technology marketing, the subjects of exchange such as products,
service,
ideas etc. are compressed into technology. Thus, technology marketing can be defined
as
follows.
A process involving the planning & executing of conceptioning, pricing, distribution,
promotion of technology so that exchange activity can take place.
In this text, the technology devising process, that is, the activities involving demand
analysis,
technology forecast, new technology prospects etc. for the development of the technology
is
omitted due to lack of space. However, it includes the evaluation of the product, which is
the
technology as the transfer subject.

So, the main contents in this text can be summarized as follows.
valuation of technology as the marketing subject technology customer analysis
market analysis
planning of technology marketing
execution of technology marketing
Characteristics of Technology Marketing
With marketing activities targeting technology, the first priority in terms of establishing
and executing the marketing strategy is to examine what characteristics it has compared
to general marketing. To do this, the features of technology will be examined first.

Characteristics of the Technology as the Transfer Subject
Technologies subject to transfer are mostly new technologies and advanced technologies.
The
characteristics of this kind of technology include ingenuity, complexity, innovativeness,
non-standardization etc.
Uncertainty: technology cannot be touched or tapped, and its usefulness is
difficult to predict precisely. In view of the technology purchaser it cannot be
known whether the technology can be properly utilized.
Ingenuity: as there are many advanced science research results, it is ingenious,
complex and in cases still being developed.
Innovativeness: there are cases where technology or products, which are the
results of technology, drive out existing technology or other products from the
market. The appearance of new technology speeds up the decline of existing
technology, and in the case where the scope is wide it can suddenly transform the
condition of a particular industry.
Reduced development period & short life cycle: the speeding up of development
and the shortened life cycle of todays technology is the general trend. New
technology is quickly developed and replaced.
Complexity: in accordance with the fusion with other technologies and
advancement, technology development has high complexity with diverse
technological factors and technology solutions in relation to buyers.

Characteristics of Technology Marketing
In accordance with the above technology characteristics, technology marketing also has
different
characteristics to the marketing in other areas.
High risk : burden of high risk is felt by the decision maker in relation to
technology marketing. With technology itself being intangible, the risk becomes
greater the more complex and elaborate the technology, and the shorter the life
cycle.
Long transfer period & procedural complexity: technology transfer are more
complex than the transfer procedure of general products and often take a long
period of time.
Importance of time management: with the shortening of technology life cycles
and the rapid increase in development speed, efficient time management is more
important. This means that if there is hesitation after technology development, it
can be soon weeded out from the market.
Importance of opinion adjustments between transfer parties: technology buyers
and sellers are all comprised of many sections, and there are many cases where
their attitudes differ. Differences in opinion often occur between the research
personnel and the marketing manager within the selling organization, and
between the high level management and the technology director within the
purchasing organization. This is an obstacle factor in technology transfer and
transactions. Characteristics of technology and technology marketing have been
explained above. As the technology is an intangible asset, it is closer to a service
than a product, and the transfer type is more industrial rather than consumable.
Thus, the application of a marketing strategy for services and industrial property
would be the most favorable. On the other hand, there is a need to devise a
advanced venture product marketing technique in accordance with the complex,
high risk, innovative characteristics of the technology. Finally, the technology can
be simply transferred, but can also be utilized through licensing, strategic alliance,
venture enterprise etc.

Characteristics of technology marketing
Product
tangible assets
intangible assets
transfer type
consumer goods
industrial goods
type of application
license
sales
alliance
venture business

8.10. SUMMARY
Developing a brand strategy can be one of the most difficult steps in the marketing plan
process. It's often the element that causes most businesses the biggest challenge, but it's a
vital step in creating the company identity.
Your brand identity will be repeatedly communicated, in multiple ways with frequency
and consistency throughout the life of your business.
8.11. EXERCISE
Q1. What is Technology life cycle?
Q2. Explain the forms of technology acquisition & transfer?
Q3. Define Concept & characteristics of technology marketing?

GLOSSARY

Activity Ratio: financial analysis technique which compares a firms revenues with the
resources used to generate them. Examples include asset turnover, sales to fixed assets,
inventory turnover, accounts receivable turnover.
Adaptive Mode: a stage of firm development where strategic decisions are closely linked
to the firms existing strategy; usually applies to medium sized firms. See also
Entrepreneurial Mode, Planning Mode.
Allocators: real estate firms that view investors as their primary customers; allocators
work closely with investors to develop and fine tune real estate portfolios; firms usually
organized on a matrix basis with a top down strategic orientation. See also Operators,
Matrix Organization, Top down Investment Strategy.
Annual Goals: Company goals tied to specific accomplishments in specific time periods.
See also Company Goals
Annual Objectives: a firms anticipated results on a yearly basis; much more specific
than long-term objectives; also called short-term objectives. See also Long Term
objectives.
Asset Assemblers: real estate firms which generate value from the success of the real
estate assets they own or manage (e.g. investment advisors, real estate mutual fund
managers, REITs that do not develop, etc.)
Asset Enhancers: real estate firms which add value through the assets they own as well
as their ability to reposition the asset use, physical design, tenancy, or capital structure
(e.g. REITs with development capabilities, REOCs, developers, opportunity funds, etc.)
Backward Integration: a form of vertical integration in which supplier firms are
acquired. See also Vertical Integration.
Balanced Scorecard: an evaluation system which helps define and evaluate a firms
strategy in four major areas: financial, customer, internal business, and innovation and
learning.
Barriers to Entry/Exit: Economic or other characteristics of a marketplace that make it
difficult for new firms to enter or exit. Examples include: economies of scale; product
differentiation; capital requirements; cost disadvantages other than size; access to
distribution channels; government policy; etc.
Benchmarking: an analysis of competitor strengths and weaknesses; used to evaluate a
firms relative competitive position, opportunities for improving, and success/failure in
achieving such improvement.
Best Practices: the business methods and procedures utilized by firms considered the
leaders in an industry.
Bottom-Up Investment Strategy: portfolio investment strategy based on changes at the
firm or property level. See also Top-Down Investment Strategy

Boundaries of Industry: the outer limits of an industry where firm similarities begin to
disappear.
Brainstorming: group discussion and generation of ideas in a non-critical environment.
Buy-in: generalized agreement and internalization of strategic changes by a firms
management, employees, customers, suppliers, shareholders and other stakeholders.
Chaebols: Korean industry organization. See also Consortia.
Coalition Phenomenon: the banding together of sub-units of a business firm to support
certain alternatives and oppose others; usually associated with large organizations.
Company Creed: statement of a companys philosophy; usually appears in companys
mission statement. See also Company Mission.
Company Culture: the mix of important assumptions shared by members of an
organization; may be explicit or implicit. usually determined by the business environment
of a firms industry; the prior experience of employees in other firms, professions,
communities, etc.; and the experiences that the employees share in their everyday work
environment within the firm.
Company Goals: what a firm strives to attain through its operations. Usually stated as
economic goals, namely survival, growth, and profitability. See Company Objectives.
Company Mission: the unique purpose of a firm that sets it apart from firms of its type;
identifies scope of operations including markets, customers, products, distribution,
technology, etc. in a manner that reflects values and priorities of the firms strategies.
Company Objectives: translates company goals into specific long-term targets and time
frames for their achievement. See also Company Goals.
Company Philosophy: See Company Creed.
Company Policies: broad guidelines that influence the thinking, decisions, and actions of
managers and subordinates in implementing the firms strategy.
Company Profile: describes the quality and quantity of a firms human, physical, and
financial resources; evaluates strengths and weaknesses of the firms organization and
management structure; compares firms historical successes with current capabilities in
order to determine firms future capabilities.
Company Self-Concept: how a firm thinks about itself.
Competencies: a bundle of skills and technologies representing the sum of learning
across individual skill sets and organizational units; in essence, an efficient, standardized
way of completing tasks. See also Core Competencies, Non-Core Activities, Distinctive
Competence.
Competency Convergence: when competition between firms becomes so intense that
the customer has little basis to differentiate one firm from another.
Competitive Advantage: advantages that a firm has over its competitors. See also
Sustainable Competitive Advantage.
Competitive Environment: see External Environment.
Competitive Forces: description of forces influencing the competitive position of firms
within an industry. According to Michael Porter, the most critical forces are the
bargaining power of suppliers and customers, the threat of substitute products/services
and new entrants; and the rivalry among existing firms in the industry.
Competitive Position: the position that a firm has or wishes to achieve within its
industry as measured against its competition.
Competitive Reaction: anticipated reaction of competition to a firms strategic
initiatives.
Competitive Space: areas of business where a firm can operate with less competitive
pressure; often associated with industry leadership and dominance.
Concentrated Growth: a strategy of growing a firm by focusing on specific products
and markets similar to or complementary with existing activities.
Concentrated Industry: an industry in which one or a few firms command a significant
market share and can thereby influence industry outcomes. See also Fragmented
Industry.
Concentric Diversification: a strategy of growing a firm by acquiring other firms which
are similar to and synergestic with the acquiring firm in terms of markets, products, or
technology. See also Conglomerate Diversification.
Conglomerate Diversification: a strategy of growing a firm by acquiring other firms for
investment purposes; usually little or no anticipated synergy with the acquired firm. See
also Concentric Diversification.
Connexity: interdependence between individuals and global communication systems.
Consolidation: the merger of business units and/or property portfolios.
Consortia: interwoven ownership relationships between firms in an industry. Called
keiretsus in Japan; chaebols in Korea.
Contending Forces: the strongest competitive forces affecting an industry. See also
Competitive Forces.
Contingency Plans: alternative management plans to be implemented when certain
Trigger Points are reached. See also Trigger Point.
Contract Alternative: outsourcing of activity to another firm rather than utilizing
internal resources. See also Make or Buy Decision; Outsourcing.
Control and Evaluation: measuring the degree of success in implementing a strategic
plan.
Core Competencies: the competencies of a firm required to fulfill its value proposition
with its customers; competencies may be competitively unique to an industry but not
necessarily a single firm. See also Competencies, Non-Core Activities, Value
Proposition.
Corporate Real Estate (CRE): the management of assets owned by corporations for
operating purposes.
Cost Advantage (Disadvantage): operating advantage enjoyed by an entrenched firm,
which would be difficult for entering firms to capture, regardless of size. May relate to
patent protection, proprietary technology, learning curve, experience curve, government
subsidies, favorable locations or access to key raw materials.
significant competition.
Delphi Method: a forecasting technique in which individual points of view are
developed, evaluated, and synthesized through a set of predesigned questionnaires;
interspersed with feedback of opinions from previous questionnaires.
Deviation: the degree to which progress in implementing a strategic plan varies from the
expected progress. See also Control and Evaluation.
Dialectical Inquiry: a forecasting tool in which separate management groups debate
points of view; groups then assemble to present and synthesize their conclusions.
Differentiation: creating and explaining to the customer the differences in a firms
and/or competitors products or services.
Differentiation Strategy: one of three generic strategies in which a firm strives to create
and market unique products/services for various customer groups. See also Focus
Strategy and Low Cost Strategy.
Distribution Channel: the means by which products or services are moved from
production to the customer.
Distinctive Competence: a competence that provides a firm with a competitive
advantage in the marketplace. See also Competencies; Competitive Advantage.
Divestiture: the sale of all or a major part of a firm.
Early Entrants: firms entering new markets or developing new products before other
firms.
Econometric Model: a forecasting technique utilizing a computer-assisted simulation of
future events based on the historic relationships of key dependent and independent
variables; usually considers the future behavior of international, national, or local
economies, industries, or businesses.
Economy of Scale: a reduction in costs through larger operating units, spreading fixed
costs over large numbers of items/units.
Emerging Industry: a newly formed or restructured industry growing faster than the
overall economy. Usually created by changing customer needs, technological change or
other socioeconomic conditions. See also Mature Industry.
Entrepreneurial Mode: a stage of firm development where one or a few owners make
most or all of the strategic decisions; usually applies to smaller firms. See also Adaptive
Mode, Planning Mode.
Entry Threats: firms that pose a threat of entering a market. See Barriers to Entry.
Experience Curve: an increase in productivity as a result of the ability of a worker to
apply lessons learned in one activity to another activity. See also Learning Curve.
External Dependence: the dependence of a firm on external parties such as customers,
competitors, suppliers, owners, government, unions, etc. The greater the dependence of
firm on these parties, the more limited its strategic options.
Forecast: a prediction of future events.
Forward Integration: a form of vertical integration in which channels of distribution are
acquired. See also Vertical Integration; Backward Integration.
Fragmented Industry: an industry in which no firm has a significant market share and
the ability to influence industry outcomes. See also Concentrated Industry.
Functional Organization: an organizational structure along functional lines (e.g.
marketing, acquisition, asset management, development, finance and accounting, etc.
See also Flat, Matrix, Networked, and Virtual Organizations.
Functional Strategies: strategies for each firms function or division; integrates into
Grand Strategy and ties to Long-Term Objectives. See Grand Strategy; Long-Term
Objectives.
Game Theory: computer simulation of future events to determine their impact on major
planning premises; can be used to make changes in strategy as new information becomes
available (e.g. a competitors response to a firms actions).
Generic Strategies: three approaches to strategic planning based on different
fundamental ideas about how to appeal to the customer. See Low Cost Strategy,
Differentiation Strategy, and Focus Strategy.
Grand Strategy: a firms comprehensive plan of key actions by which it plans to achieve
its Long-Term Objectives; usually considers factors such as market development, product
development, innovation, horizontal and/or vertical integration, diversification, joint
ventures and strategic alliances, turnaround, divestiture, liquidation, etc.
Growth Industry: an industry growing at the same rate as the nations economy.
Implementation Control: a process of assessing whether an overall strategy should be
modified as various elements of the strategic plan are implemented
Implementation: the process of translating a plan into reality.
Inbound Logistics: activities associated with receiving, storing, and disseminating
production inputs. See also Outbound Logistics.
Information Systems: management reporting system on the status of various business
indicators (e.g. sales, operations, cash, profits, suppliers, etc.).
Institutionalization: the process of translating a firms strategic plan into short-term
action guidelines for all employees; requires integration of a firms structure, culture,
leadership, and employee rewards.
Joint Venture: a third party commercial operation established by two or more firms to
pursue a particular market, resource supply, or other business opportunity. Created and
operated for the benefit of the co-owners.
Learning Curve: the ability of a worker to increase productivity as tasks or portions of
tasks are repeated over time. See Experience Curve.
Long-Term Objectives: a firms intended performance over a multi-year period of time;
usually includes measures such as competitive position, profitability, return on
investment, technology leadership, productivity, employee relations and development,
public responsibility, etc. see Short-Term Objectives; Annual Objectives.
Low Cost Strategy: one of three generic strategies in which a firm attempts to establish
itself as the cost leader in the industry. See also Focus Strategy and Differentiation
Strategy.
Make-or-Buy Decision: a management decision whether to conduct an activity
internally or by contracting with other firms. See Contract Alternative; Outsourcing.
Market Opportunity Analysis: a forecasting technique that identifies market factors
that will influence the demand for a particular product or service.
Market Segmentation:
Market Share: the revenues generated by a firm as a percentage of total revenues;
usually measured by industries, markets, or products.
Matrix Organization: an organizational structure which delegates power to independent
operating units which then rely on centralized corporate facilities for functional support.
See also Functional, Flat, Networked, and Virtual Organizations.
Networked Organization: an organizational structure which divides a firm into units
which operate independently from each other within a framework which is consistent
with broader corporate goals and objectives; data and information are widely shared,
largely through a telecommunication system linking all of the units to each other and to
the corporate support group. See also Functional, Matrix, Flat, and Virtual
Organizations.
Nominal Group Technique: a forecasting technique in which individual points of view
are presented and synthesized in a group setting.
Non-Core Activities: activities of a firm not required to fulfill its value proposition with
its customers; in some cases, may be eliminated or out-sourced to others. See also Core
Competencies.
One-off Interviews: an interview by one person of another person.
Operating Effectively: the ability of a firm to provide its customers with better
performance by creating greater value or by delivering comparable value at a lower cost.
Operating Environment: See External Environment.
Operators: real estate firms that view tenants as their primary customers; specialize on
focused niches of real estate, largely differentiated by geography, property type,
investment structure, or management style; usually organized on a vertically integrated,
bottom-up strategic orientation; internally manages all disciplines necessary to deliver the
full range of services required; on occasion, may take investment positions with
allocators and/or investors. See also Allocators, Bottom-Up Investment Strategy.
Outbound Logistics: activities associated with storing and distributing a firms product
to its customers. See also Inbound Logistics.
Outcomes: results arising from management actions.
Outsourcing: contracting an activity to another firm. See Contract Alternative; Makeor-
Buy Decision.
Partnering: a strategic alliance with another firm(s); see also Strategic Alliance.
Pioneers: See Early Entrants.
Planning Mode: a stage of firm development where strategic decisions are made through
a comprehensive, formal planning process which considers totally new initiatives; usually
applies to larger firms with multi-product/service lines. See also Adaptive Mode,
Entrepreneurial Mode.
Portfolio Approach: a method of looking at each of the businesses of a firm as
elements in a total portfolio.
Procurement: a component of Inbound Logistics associated with purchasing inputs
required in the production process. See also Inbound Logistics.
Product Life Cycle Analysis: a forecasting technique which analyzes/predicts the
performance of a product/service during each stage of its development.
Product Market Impact Analysis: a forecasting technique which analyzes the successes
and failures of a diverse group of firms.
Recovery Response: in a turnaround situation, growth strategies to improve a firms
fortunes. See also Retrenchment Response.
Remote Environment: factors originating beyond but impacting upon a firms
operation. Includes economic, social, political, technological, and ecological factors.
Retrenchment Response: in a turnaround situation, cost cutting and asset reduction to
improve a firms fortunes. See also Recovery Response.
Risk Adverse: the desire to avoid or reduce risk.
Risk: the possibility of failure or unplanned outcomes.
Sales Force Estimate: a forecasting technique based on combined salespersons
estimates.
Scenario Development: a forecasting technique evaluating the impacts of anticipated
conditions suggested by forecasters.
Service Providers: real estate firms that add value by providing services to other firms;
generally do not own equity or debt interests in real estate assets (e.g. property managers,
brokers, leasing agents, tenant representatives, mortgage brokers, architects, engineers,
lawyers, consultants, appraisers, accountants, etc.)
Short-Term Objectives: see Annual Objectives.
Simulation Technique: a forecasting technique utilizing computers to simulate future
situations and then predicting outcomes of various courses of action.
Situation Severity: in a turnaround situation, the factors affecting a firms chance of
survival.
Situational Analysis: a forecasting technique that incorporates the systematic evaluation
of past and future data to identify a firms strengths/weaknesses and threats/opportunities.
Stakeholder: a person, group, or business that has an interest in the outcomes of a firms
operations.
Stretch Thinking: out of the box strategic thinking; not necessarily tied to available
resources.
Sustainable Competitive Advantage: competitive advantages that can be maintained
over a fairly long period of time. See also Competitive Advantage.
Sustainable Growth Model: a forecasting technique which analyzes the sales growth
rate necessary to meet market share objectives; may also evaluate the amount of capacity
required to achieve the sales growth rate
Switching Costs: the costs incurred by a customer in changing from one firm to another
to meet their requirements.
Systematic Procedure for Identification of Relevant Environments (SPIRE):
computer-assisted tool for forecasting environmental changes that may affect a firms
operations.
Technological Substitution: a customers substitution of one product for another based
on its technological superiority.
Technology Development: activities involved in designing, producing, and distributing a
firms products.
Times Series Model: a forecasting technique utilizing linear, exponential, S-Curve, or
other types of projection devices.
Top-Down Investment Strategy: portfolio investment strategy based on changes in the
economy, demographics, business cycle, and other macro forces. See also Bottom-Up
Investment Strategy.
Total Quality Management (TQM): an organizational policy and culture focusing on
improving customer satisfaction through improvement in the firms products, services,
and processes.
Trend Extrapolation: a forecasting technique utilizing linear or exponential smoothing
or averaging of historical values.
Trigger Point: key threshold of change in predetermined measure or activity (e.g. market
share; competitor action; cost change; etc.) which represents unusual threat or
opportunity; may lead to management action including implementation of Contingency
Plan(s). See also Contingency Plan.
Value Proposition: the mix of products and services offered by a firm to its customers
and the price and terms by which it will perform its obligations; defines the relationship
between the firm and its customers.
Vertical Integration: the acquisition of suppliers (backward integration) or distributors
(forward integration). Utilized to expand operations, achieve greater market share,
increase the efficiency of capital, and/or improve economies of scale. See also
Horizontal Integration.
Virtual Organization: an organizational structure in which a firm performs internally
only its core activities with heavy reliance on an advanced telecommunications system
linking individual units. See also Functional, Matrix, Flat, and Networked Organizations.
Weakness: a limitation or lack of skills, resources, or capabilities that impedes a firms
effective performance. See also Strength.
Work Teams: a form of organization in which employees and other resources are
dedicated to developing and marketing one or more new products or services.

References:
1. Jain, Ashok, S Pruthi, K.C Garg, D. Anabi: Indicators of Indian Science &
Technology , Segment Books Publ.
2. Hawthorne, Edward P: Management of Technology, London, McGraw Hill.

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