Perceptions of Strategic Management of Technology

PICMET 2009 Proceedings, August 2-6, Portland, Oregon USA © 2009 PICMET

Perceptions of Strategic Management of Technology in Small High-Tech Enterprises Kari Sahlman1, Harri Haapasalo2 1

Nokia Siemens Networks, Finland 2 University of Oulu, Finland

Abstract--Strategic management of technology is a necessity for wealth creation in society, but also in corporations as members of that society. Emergence of new economical order enabled by global competition and proliferation of information involves increasingly rapid changes in technologies which causes major competitive challenges to enterprises to manage their technological capabilities. In the absence of commonly agreed management of technology frameworks this study discovers perceptions and current state of management of technology in high-tech SMEs. Theoretical background of this study is based on a conceptual framework of strategic management of technology originating from large enterprise practices. The elements are classified with respect to structures, objectives and company internal and external impacts. Conceptually entire field is perceived to be complex and there is contingency and immaturity in practices deployment in SMEs. As a conclusion it is suggested that SMEs should consciously develop management of technology practices, and the presented structures elements of strategic management of technology framework would provide a frame of reference when constructing the practices in enterprises. It is also proposed that strategic management of technology should be evolved as a distinguishing functional and managerial domain that enhances the management paradigm of multifunctional strategic orientation in enterprises.

enterprises is to define what elements are needed for strategic management of technology in order to establish or improve the practices in a company. There is also an identifiable separation between technology management and business planning in the small high tech firms [3] which may lead into competitive disadvantage. For smaller companies it is somehow difficult to imagine the technological cycles and continuity of technologies. The purpose of this research is to study perceptions of management of technology and current state and importance of the structures elements of strategic management of technology framework in small and medium-sized high-tech enterprises. The research problem is formulated as the following research questions: RQ 1: What is the perception of management of technology in SMEs? RQ 2: What is the current state and importance of the structures elements of strategic management of technology in SMEs? In this paper first the context of management of technology and the strategic management of technology framework is presented. The framework for strategic management of technology has been developed based on conceptions of large enterprise representatives. The framework is based on literature, integrated management theory [4] and large enterprise practices, and it describes elements of strategic management of technology as classified to structures, objectives and impacts. This study is performed in order to increase theoretical and practical validity of the framework in different enterprise scope. It was expected that SMEs are strategically focused enterprises and concentrating on the most essential activities for the company’s success, therefore findings on technology management activities among SMEs would reveal the most important ones. The empirical study was carried through in Small and Mediumsized Enterprises to study what is the importance and current state of the elements of strategic management of technology structures in SMEs, and what is the perception of management of technology in those companies.

I. INTRODUCTION Enterprise competitiveness and value creation is in the long-term enabled by successful execution of company’s strategy in which technology is a critical resource. Competitive environment is involving increasingly rapid changes in technological, social and economical circumstances. Effective and efficient technology management practices are especially important for small and medium-sized enterprises (SMEs) during all life-stages of an enterprise due to the critical role of technology in entrepreneurial activities and lack of possibilities to miss. Capability of strategic management of technology is an imperative for sustained competiveness and performance of an enterprise [e.g. 16, 24]. Complexity of the subject and missing comprehensive frameworks give rise to managerial challenges for practitioners. Therefore a consistent framework with substantial insights on what are the elements of strategic management of technology is needed. Absence of commonly agreed theoretical frameworks leads into introduction of diverse empirical solutions [17], which do not properly address environmental, economical and social aspects either [5]. According to Drejer [9] common perceptions of technology and management of technology are not well suited for coping with the complexity, and SMEs have to face similar problems as large enterprises even with more limited resources [21]. The practical problem for

II. CONTEXT AND CONCEPTUAL FRAMEWORK OF STRATEGIC MANAGEMENT OF TECHNOLOGY A. Strategic management of technology in context of enterprise management Strategic management of technology within a company contains aspects of explicitly linking business strategy with products and required technologies. Technologies develop and operational environment of an enterprise changes even at

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PICMET 2009 Proceedings, August 2-6, Portland, Oregon USA © 2009 PICMET an accelerating speed due intensified competition. Thus efficient and effective management approach is needed for management of technology which is more complicated than traditional management of research and development due its dynamics and fundamental impacts on company’s strategy, products, competitiveness and people’s knowledge. Strategic management of technology in form of processes and practices shape capabilities of a company internally and with respect to its socio-economic environment, therefore it is practically intertwined with all management activities and operations of an enterprise. Views to enterprise management are presented in fig. 1 to outline the context of strategic management of technology.

As classically defined, strategic management concerns company’s initiatives taken by management to create, enhance and sustain its capabilities regarding to its environment and to reach company’s objectives [1]. From strategic management perspective the mission of an enterprise is to create value for owners, personnel, customers, suppliers and society [e.g. 12]. To create value a company has to determine and structure its position in the value chain through defined strategies and operationalized actions that execute the strategy. Objects to be created and managed to accomplish company’s mission and to place it in a value system are defined by a business model view. It consists of offering, value creation system and revenue logic [23].

STRATEGIC MANAGEMENT OF TECHNOLOGY VIEW

STRATEGIC MOT STRUCTURES

STRATEGIC MOT OBJECTIVES

STRATEGIC MOT IMPACT

ORGANIZATIONAL MANAGEMENT VIEW

NORMATIVE

STRATEGIC

OPERATIONAL

STRATEGY& PLAN.

AQUISITION

EXPLOITATION

IDENTIFICATION

DEVELOPMENT

DISPOSAL

SELECTION

PROTECTION

OTHER?

PRODUCT TECHNOLOGY

INFORMATION TECHNOLOGY

PRODUCTION TECHNOLOGY

MANAGEMENT OF TECHNOLOGY PROCESS VIEW

TECHNOLOGY VIEW

FUNCTIONAL MANAGEMENT VIEW

OPERATIONS MANAGEMENT & PROCESSES CUSTOMER, PRODUCT, BUSINESS PORTFOLIO MANAGEMENT & PROCESSES TECHNOLOGY MANAGEMENT, R&D MANAGEMENT & PROCESSES STRATEGY, PLANNING, F&C, HR, ETC. MANAGEMENT & PROCESSES

COMPETITIVE STRATEGY VIEW

LOWEST TOTAL COST

PRODUCT LEADERSHIP

COMPLETE SOLUTIONS

VALUE CHAIN VIEW

SYSTEM

Customer, Environment

Supplier

Company

LOCK-IN

Environment

Consumer

BUSINESS MODEL VIEW

REVENUE LOGIC

VALUE CREATION SYSTEM

STRATEGY VIEW

OFFERING

VALUE CREATION

Fig. 1: Views to enterprise management in context of strategic management of technology

Offering defines what physical, information or service composition is pursued. Value system describes the value creation structures and networks that are needed to capture the value. It includes relationships to customers, suppliers, collaborators and competitors. Pre-requisite to value capture, cost structures and competitive strategies of the company is set by the revenue logic. Value system can be viewed next as a value chain and network of actors [e.g. 11, 14], including environment as a source for raw-materials and as an object coming in for disposal and waste management of the

products. Different types of technologies are involved in enterprise value chain activities and thus need to be managed for fulfilling customer needs [18]. Strategic management of technology covers technology aspects of company’s offering, value creation system and revenue model, which are determined by which business company is in and by what competitive strategy a company is driving for. Lowest cost, product leadership, total solutions offering and system lock-in strategies set different requirements for the technologies and capabilities a company

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PICMET 2009 Proceedings, August 2-6, Portland, Oregon USA © 2009 PICMET should develop and possess [11]. Offensive, defensive, imitative, dependent or opportunist technology strategies require different policies for technological investments and mix of technology portfolio [8]. For creation of value a company can be structured according to perspectives of customer, financial, internal and learning processes [12] which are intended to be executed as cross-functional and cross-organizational processes. Depending on the organizational structure of a company, from view point of functional management enterprise may have operations management, customer, product and business portfolio management, R&D management, strategy management, human resources, financial, accounting and other support types of management functions and corresponding organizations. Typically technology management is not organized as its own function or organization but it is often embodied in R&D function. Strategic management of technology imposes a major paradigm change on organizing it as a distinguishing function in an enterprise. Technology can be categorized to product technology, manufacturing technology and information technology [22] and it is embodied in people or systems as explicit artifacts or tacit knowledge [6, 13]. Technology management can be seen as activities being involved from research to development of technology for products throughout to commercialization and abolishment of the products. Activities of identification, selection, acquisition, protection and exploitation [10] and technology strategy creation, technology development and disposal [20] cover management of technology activities.

Integrated management theory model [4] defines normative, strategic and operational areas of an enterprise management. They all have structural, objectives oriented and behavioral elements. And finally, management is planning, organizing, leading and controlling activities completed through people [19]. Within this context, as presented in figure 1, elements of strategic management of technology structures, objectives and impacts form a framework for strategic management of technology. In this research definition of strategic management of technology is derived from definitions of technology, strategy and management and it is defined as: “Strategic management of technology is management of technological activities interacting with company’s technology infrastructure and socio-economic environment to contribute to formulation and execution of company’s strategy.” B. Strategic management of technology framework Strategic management of technology framework is presented in fig. 2. It defines elements of technology infrastructure that consists of internal and external structures, resources and capabilities, objectives and internal and external impacts within the company and towards its environment. The framework is building on studies of Luggen and Tschirky [15], and the framework is applied and amended by Sahlman and Haapasalo [20] to comprise substructures and to consider company internal objectives, structures and impacts to external industry environment. In the following is presented key principles of the framework.

NORMATIVE MANAGEMENT STRUCTURES

STRATEGIC MANAGEMENT

OBJECTIVES

IMPACT

ARTEFACTS

STRATEGIC

TANGIBLE OUTCOMES

PROCESSES

QUANTITATIVE

SOCIOECONOMIC

METHODS, TOOLS, IT SYSTEMS

QUALITATIVE

ENVIRONMENTAL

ORGANIZATIONAL FUNCTIONS

TIMELINESS

PHENOMENON

GOVERNANCE

ECONOMIC

INTANGIBLE OUTCOMES

COLLABORATION NETWORKS

OTHER OBJECTIVES

OTHER IMPACT

OPERATIONAL MANAGEMENT Fig. 2: Strategic management of technology framework

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PICMET 2009 Proceedings, August 2-6, Portland, Oregon USA © 2009 PICMET The framework is a conceptual model that describes hierarchical structure of the elements in an open system. Each column represents categories that constitute elements of strategic management of technology. Major categories are structures, objectives and impacts. They can be classified into sub-categories that contain the elements at the next level of detail, and theoretically structures, objectives and outcomes are the classified key viewpoints to technology management. The conceptual model describes what the elements of strategic management of technology are, but the framework does not describe how the elements function. Actual implementation of management of technology practices depend on the company mission, business, size, maturity and environment it operates in. Operational activities using processes, practices and methods produce documents, intangible and concrete outcomes. These activities form and shape the company’s technology infrastructure or are manifested as outcomes that are delivered externally. Objectives of strategic management of technology are classified to strategic, qualitative, quantitative, economical and timeliness. Objectives need to conform to company’s strategic objectives and to contribute on definition, execution and shaping of the strategy. Impacts of strategic management of technology can be divided into tangible and intangible outcomes, which consequently through operational activities have impact to company internal capabilities and to its external socio-economic environment. In the following the structures elements part of the framework is described in more details and the proposed classification is presented in table 1. Classification is not asserted to be exhaustive. In the framework the major categorization of technology management processes contains processes of technology strategy creation, planning, identification, selection, acquisition, protection, development, exploitation and disposal of technology. Each of the processes typically can have several sub-process or practices e.g. identification of technologies consists of practices for technology scanning, scouting, monitoring and forecasting. Artefacts, as classified in the framework, are the typical and major outcomes of the operative technology management

activities that are using the processes. All the artifacts need to be included in the technology infrastructure of the company and be strategically managed. Creation and utilization of the artifacts requires appropriate methods, tools and IT systems for data and knowledge management. Methods, especially for collection and analysis of information, are needed for operational activities and planning methods are needed for managerial tasks. Engineering methods and tools are required for research, selection, creation and development of technologies. Data and knowledge management systems form the IT backbone of the technology infrastructure and are used for storing and co-ordination of the planning and exploitation of technological assets of the company. Organizational structure for technology management functions depend on the business, size, traditions and principal decisions about the degree of centralization and decentralization of the business units and other functions in an organization. Technology management is seldom recognized as a discipline of its own, whereas functions like research, product development, product management and business management and human resources management are organized as separate entities. Processes of strategic management of technology require corresponding management organization and personnel for planning and operative execution of strategic management of technology objectives. Company needs also to manage related operational activities like research, technology development, intellectual property and collaboration management. Governance structure, principle models and criteria are for decision making to communicate and co-ordinate execution of the technology strategy and for prioritization of strategic actions. Different types of alliances, coalitions and agreements form basic structures for strategic management of technology collaboration and networks which constitute of institutes, sub-contractors, suppliers, industry analysts, regulatory bodies, customers and even competitors. As a summary the suggested categorization for strategic structures is: processes, artifacts, methods and tools, organizational management functions, governance and collaboration networks.

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PICMET 2009 Proceedings, August 2-6, Portland, Oregon USA © 2009 PICMET TABLE 1: STRUCTURES ELEMENTS OF STRATEGIC MANAGEMENT OF TECHNOLOGY FRAMEWORK Structures of Strategic Management of Technology Artifacts Processes (continued) Technology strategy Deployment Technology forecasts, trajectories Technology road mapping Technology map Technology portfolio planning Technology roadmap Technology assets accounting Architectures Lifecycle planning Architecture roadmaps Technology insertion, refresh Research portfolio Technology retirement Technology portfolio Technology licensing Technology portfolio development plan Disposal Technology portfolio deployment plan End of life/disposal planning Technology portfolio repository Tools, methods, IT systems Internal/external technical guidelines Data management methods&tools Internal/external technical standards Knowledge manag. methods&tools Supplier&collaborator base Analysis&planning methods & tools Engineering methods & tools Processes Technology strategy & planning Governance Technology outlook analysis Decision making structure Technology SWOT analysis Decision making points Technology planning Decision making subjects Identification Decision making metrics Technology scanning, scouting Decision making criteria Technology monitoring Tech. guidelines governance Technology intelligence Organizational management functions Technology forecasting Technology management Technology research Tech. strategy management Selection Tech. planning management Technology evaluation Tech. portfolio management Technology benchmarking Tech. architecture management Technology feasibility analysis Tech. assets management Tech. cost capability analysis Tech. quideline/stds management Technology performance analysis Research management Supplier evaluation Product. dev. management Supplier cost capability analysis Tech. dev. management Competitor analysis IPR management Acquisition Standardization management Due diligence,procurement Supplier base management Technology in-licencing Collaboration management Early supplier engagement Collaboration networks Technology creation Research collaborators, institutes Development Technology collaborators Technology improvement Technology sub-contractors Technology re-architecting Standardization collaborators Technology platform creation Industry alliances Protection Strategic suppliers Patenting, trademarks, copyrights Competitors License management Customers Encryption Regulatory authorities Standardization Industry analysts

III. RESEARCH METHOD B. Implementation of the research and evolvement of the theoretical framework Research method for developing the framework is abductive in which the initial framework, presented in Figure 1, was derived from literature and practitioner workshop findings, describes the proposition which is expanded on and validated through the results of subsequent research. The logic how empirical data is connected to the proposition is based on comparing and amending the developed initial framework with the analysis of the results of quantitative and qualitative research in SMEs. Thus information is gathered from multiple sources and inference is sought to find best

A. Scope of the empirical research Due to practical reasons, but compliant to requirements of qualitative research, the geographical scope is limited to enterprises having premises and personnel in Oulu region in Finland to ensure availability of interviewees and efficient use of research resources [see 25]. Type of companies was not specifically limited to any industry. Most of the companies have global market, customers, competition and operations. Companies are designing, manufacturing and providing electronics, mechanical, medical instruments and software products, solutions and services.

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PICMET 2009 Proceedings, August 2-6, Portland, Oregon USA © 2009 PICMET possible description of the framework. It is expected that results support contents of the initial theoretical framework and increase its validity and enables generalization of the initial proposition. This research focuses on the SME perceptions and current state of the structures part of the framework. The empirical research was conducted as interviews in 20 SME companies in Oulu region during November 2008. The informants for interviews were persons responsible on functions that are dealing with topics of technology management i.e. business, product, technology and R&D management, typically company founders and senior managers. The job titles of the 25 interviewed persons included CEO, COO, CTO, Site Manager, Engineering Manager, Director, Factory Director, Country Manager, Business Development Manager, Founder, Partner, SW Architect and Senior Specialist. Average working experience

of the interviewees was over 15 years. Eleven of the companies are less that 6 years old. In table 2 is presented the number of personnel and turnover of the participating companies as classified according to SME definition of commission of European Union. Based on the number of personnel and turnover of the interviewed companies, there are 6 medium-sized enterprises and 12 small enterprises participating in this research. By definition 7 of the companies are micro companies from personnel point of view and 10 according to turnover. Two of the interview results were omitted from this analysis due number of personnel and turnover exceeding the definition of SME. The overview of the proceeding of the research and evolvement of the theoretical framework is presented in the fig. 3. The initial framework was developed during year 2007 and early 2008, thus that research is not in the scope of this paper.

TABLE 2: NUMBER OF COMPANIES PARTICIPATING IN THE RESEARCH AS CLASSIFIED ACCORDING TO NUMBER OF PERSONNEL AND TURNOVER.

6

Number of enterprises

5

n