Handbook of Technology Management - Gaynor

vi CONTENTS CONTENTS vii
Chapter 4. The Technological Base of the Company Aaron J. Shenhar Chapter 7. The Contribution of Technology to Competitive
and Paul S. Adler 4.1 Advantage Theodore W Schlie 7.1
4.1. Introduction 4.1 7.1. Introduction 7.1

4.2. Components of the Technological Base 4.2 7.2. Defining Competitive Strategy and Competitive Advantage 7.1
4.3. Core Technological Assets 4.3 7.3. Characteristics of Competitive Strategy 7.2
4.4. Organizational Assets 4.5 7.4. Competitiveness 7.3
4.5. External Assets 4.10 7.5. Competitive Advantages 7.4
4.6. Development Processes 4.11 7.6. Shopping Around 7.7
4.7. Complementary Assets 4.12 7.7. Generic Competitive Strategies 7.8
4.8. Adapting the Technological Base 4.13 7.8. The Value Chain 7.10
4.9. References 4.15 7.9. Technology 7.11
7.10. Creating Competitive Advantage 7.12
7.11. Linking Technology to Competitive Advantage 7.14
Chapter 5. Section 1. The Corporate Board and the Need for 7.12. Technology and Low Cost-Low Price 7.15
Technology Analysis Rias van Wyk 5.1 7.13. Technology and High Quality 7.18
7.14. Technology and Sooner Availability 7.21
5.1. Introduction 5.1 7.15. Summary and Conclusions 7.25
5.2. Corporate Boards Taking More Active Roles 5.2 7.16. References 7.26
5.3. Corporate Boards Increasingly Involved in Strategy 5.3
5.4. Strategic Dimension of MOT Receives Increasing Emphasis 5.3
5.5. Corporate Boards Increasingly Involved in MOT 5.5 Chapter 8. Targeted Basic Research: Industry-University
5.6. Implications for Boards 5.5 Partnerships Frederick Betz 8.1
8.1. Industrial Need for Science 8.1

Chapter 5. Section 2. Technology Analysis: A Foundation for 8.2. Next-Generation Technologies 8.2
Technological Expertise Rias van Wyk 5.9 8.3. Managing Incremental and Discontinuous Innovations 8.4
8.4. Targeted Basic Research 8.5
5.7. Introduction 5.9 8.5. Industry-University Research Cooperation for NGT 8.10
5.8. Describing Technologies 5.11 8.6. Summary 8.13
5.9. Classifying Technology 5.13 8.7. References 8.13
5.10. Identifying Technological Interactions 5.17
5.11. Tracking Technological Change 5.17
5.12. Charting Technological Breakthrough Zones 5.19 Chapter 9. Managing Technology-Based Innovation
5.13. Social Preferences and Technology 5.21 Hans J. Thamhain 9.1
5.14. References 5.22
9.1. The Role of Technological Innovation 9.1
9.2. The Process of Technology-Based Innovation 9.4
Chapter 6. Technology, Strategy, and Competitiveness: An 9.3. Measuring Innovative Performance 9.6
Institutional-Managerial Perspective John Kanz and Danny Lam 6.1 9.4. Characteristics of an Innovative Work Environment 9.8
9.5. Managing People and Process 9.10
6.1. Introduction 6.1 9.6. Recommendations 9.10
6.2. Technology 6.2 9.7. AFinalNote 9.13
6.3. Strategy and Management 6.4 9.8. References 9.13
6.4. Technological Change and Traditional Strategic Management 6.7
6.5. In Search of Management Paradigms 6.9
6.6. Dichotomy: Technology and Management 6.11 Chapter 10. Innovation: Managing the Process Marv Patterson 10.1
6.7. Institutional Sources of Technology Management Competencies 6.13
6.8. Institutions and Technology Management: Competitiveness 6.14 10.1. Introduction 10.1
6.9. Competitiveness 6.18 10.2. Background 10.3
6.10. Strategic Architecture: An Integrative Approach 6.21 10.3. The Business Context 10.4
6.11. What Is Technology Management? 6.27 10.4. Key Areas of Management Focus 10.9
6.12. Summary and Conclusions 6.28 10.5. The Innovation Engine 10.12
x CONTENTS CONTENTS xi
18.6. References 18.24 22.5. References 22.21
Chapter 19. Knowledge Imperative and Learning Processes in Chapter 23. A Framework for Product Model and Family Competition
Technology Management Anil B. Jambekar and Karol I. Pelc 19.1 Vic Uzumeri and Susan Walsh Sanderson 23.1
19.1. Introduction 19.1 23.1. Units of Analysis 23.2

19.2. Knowledge Imperative 19.2 23.2. Levels of Analysis 23.3
19.3. Learning Processes in an Organization 19.5 23.3. The Forces That Drive Variety and Rate of Change 23.8
19.4. References 19.15 23.4. The Product Competition Life Cycle 23.12
23.5. Using the Framework 23.16
23.6. References and Notes 23.17
23.7. Appendix: Measuring Model Variety and Rate of Change 23.19
Chapter 20. Technical Literacy and the Knowledge Imperative
Kevin B. Lowe, Terri A. Scandura, and Mary Ann Von Glinow 20.1
20.1. Introduction 20.1 Chapter 24. The Process of Managing Product Definitions in Software
20.2. The Role of the Worker: A Shifting Paradigm 20.3 Product Development Sara L. Beckman 24.1
20.3. Challenges to the New Paradigm 20.4
20.4. Basic Skills 20.5 24.1. Introduction 24.1
20.5. Technical Literacy 20.6 24.2. Middle, Inc. and the AddressNow Product Line 24.3
20.6. Technical Specialists May Not Be Technically Literate 20.9 24.3. HiTech, Inc. and the LabelIt! Product Line 24.13
20.7. Improving Organizational Learning Capabilities 20.10 24.4. Leader, Inc. and the SendQuick 4.0 Product 24.18
20.8. Literacy and the Knowledge Imperative in Learning Organizations 20.10 24.5. Conclusions 24.21
20.9. Organizational Implications of the Knowledge Imperative 20.12 24.6. References and Notes 24.22
20.ro. Recommendations 20.14
20.11. Summary 20.15
Chapter 25. Product Platform Renewal: Concept to Commercialization

Alvin P. Lehnerd 25.1
Chapter 21. Developing Technology Managers Jeffrey C. Schuman
25.1. Project X: A Product Platform Renewal 25.2
and Hans J. Thamhain 21.1
25.2. Cautions in Managing Team Programs 25.12
25.3. Epilog 25.14
21.1. The New Business Environment 21.1 25.4. Conclusion 25.15
21.2. Skill Requirements 21.3
21.3. Testing Aptitude for Technology Managers 21.6
2 1.4. Preparing for Technical Management 21.11
21.5. Directions for the Future 21.13
21.6. References 21.13 Part 5 Managing Management of Technology
21.7 Bibliography 21.14
Chapter 26. Managing the Management of Technology Process
Lynn W. Ellis 26.3
Part 4 The New-Product Process 26.1. Introduction 26.3

26.2. Processes as a Function of Time 26.4
Chapter 22. Managing Technology in the Substitution Context 26.3. Managing through Resources, Functions, and Infrastructure 26.9
26.4. Managing the Interaction with Functions 26.15
Clayton G. Smith 22.3
26.5. Managing Time 26.20
26.6. Managing Change-the Ultimate Process 26.22
22.1. Established Conceptions 22.5 26.7. The Challenge 26.24
22.2. Emerging View of Substitution 22.7 26.8. References 26.24
22.3. Technology Management Issues 22.11
22.4. Summary and Implications 22.19
xii CONTENTS CONTENTS xiii
Chapter 27. Managing Interfaces K. K. Brockhoff, A. K. Chakrabarti, Chapter 31. Research Performance Effectiveness and Impact
J. Hauschildt, and A. W. Pearson 27.1 Ronald N. Kostoff 31.1
27.1. Introduction 27.1 31.1. Background 31.1

27.2. Organizational Interfaces 27.2 31.2. Research Impact Assessment Methods 31.3
27.3. R&D Interfaces 27.4 31.3. References 31.19
27.4. Interfaces at the Project Level 27.6
27.5. Conclusions 27.15
Chapter 32. Long-Term Success Dimensions in Technology-Based
Organizations Aaron J. Shenhar and Dov Dvir 32.1
Chapter 28. Factors Influencing Effective Integration in Technical 32.1. Introduction 32.1
Organizations J. Daniel Sherman and Wm. E. Souder 28.1 32.2. The Multidimensional Success Assessment Framework 32.3
32.3. The Project Level 32.5
28.1. Introduction 28.1 32.4. The Business-Unit Level 32.9
28.2. The Basis for Integration Requirements 28.1 32.5. The Company Level 32.12
28.3. Organizational Structure and Integration 28.2 32.6. Implications and Conclusion 32.14
28.4. Integration and Cost-Effectiveness: The Case of the U.S. Army Missile Command 28.8 32.7. References 32.14
28.5. Nonstructural Factors Influencing Integration 28.11
Chapter 33. Measuring the Benefits from Managing Technology
Gerard H. (Gus) Gaynor 33.1
Chapter 29. Barriers to Implementation of a Structure for Managing 33.1. Problem and Opportunity 33.1
Technology Anil B. Jambekar and Paul A. Nelson 29.1 33.2. Current Approaches to Measuring Functional Performance 33.2
33.3. Doing the Up-Front Work 33.3
29.1. Introduction 29.1 33.4. Measuring MOT Performance: The Scope 33.4
29.2. Forces Underlying Old Organizational Structures 29.2 33.5. Redefining Research and Development 33.6
29.3. Pressure for Efficiency 29.3 33.6. Management of Technology: Point of Origin 33.7
29.4. Pressure for Stability 29.4 33.7. MOT Process Model 33.10
29.5. Desire for Personal Growth and Development 29.4 33.8. MOT Measurement Model 33.12
29.6. Desire for Equity 29.4 33.9. Selecting the Measurement Parameters 33.13
29.7. The Nature of Organizational Change 29.5 33.10. Scaling the Parameters 33.17
29.8. Approaches to Successfully Implement Change 29.8 33.11. An Approach to Measuring MOT Performance 33.18
29.9. Developing a Long-Term Systems Perspective 29.9 33.12. Questions that Must Be Answered 33.22
29.10. Fallacy of Programmatic Change 29.10 33.13. Summary 33.32
29.11. Achieving Holism 29.10 33.14. References 33.33
29.12. Systems Tools 29.11
29.13. Conclusion 29.11
Part 6 Case Histories and Studies
Chapter 34. NutraSweet-Eureka! Gary S. Lynn 34.3

Chapter 30. The Need for Interdisciplinary Endeavor and Improved
Functional Relationships Thomas G. Whiston 30.1
34.1. Company Background 34.3
34.2. The Aspartame Opportunity 34.4
30.1. Introduction 30.1 34.3. Searle's New Strategic Focus 34.19
30.2. The Need for and Challenges of Interdisciplinary Training and Perspectives 30.2 34.4. Life after Monsanto 34.19
30.3. Patterns of Response to Interdisciplinary and Interfunctional Needs 30.6 34.5. Discussion 34.20
30.4. Remaining Problems 30.10 34.6. Lessons Learned 34.23
30.5. References and Notes 30.11
CONTENTS xv
xiv CONTENTS
34.7. Conclusion 34.24 Appendix A. Institutions Offering Courses or Advanced Degrees in

34.8. Summary 34.25 Management of Technology A.1
Appendix B. Acronyms and Abbreviations B.1
Chapter 35. Communication in an International Environment: Linking

the Technology Resources from Four Countries Richard McNichols 35.1
Index 1.1
35.1. Introduction 35.1
35.2. International Dimensions of Managing Technology and Projects 35.4
35.3. Guidelines for Implementation 35.8
35.4. Summary 35.10
Chapter 36. Product Definition: Keys to Successful Product Design

and Marketplace Acceptance Edith Wilson 36.1
36.1. The "What" Steps 36.3

36.2. The "How" Steps 36.13
36.3. The "Why" of Product Definition: The Project and Business Plan 36.16
Chapter 37. Benchmarking Manufacturing Technology Use in the

United States Paul M. Swamidass 37.1

37.2. Manufacturing Technology Use 37.2
37.3. Benefits ofInvestment in Technology 37.10
37.4. Investment Decisions 37.18
37.5. Plans to Become Skilled in Technology Use 37.22
37.6. An Overview of the Respondents 37.24
37.7. Summary 37.31
37.8. Appendix I: Data Collection 37.33
37.9. Appendix 2: Glossary of Manufacturing Technology Terms 37.37
Chapter 38. Neo-Operations Strategy: Linking Capabilities-Based

Competition and Technology Aleda V. Roth 38.1

38.2. Drivers of Change 38.4
38.3. Strategic Manufacturing Epochs 38.6
38.4. Competitive Progression Theory 38.13
38.5. Competitive Capabilities and Technological Experience 38.18
38.6. Results and Discussion 38.28
38.8. Summary 38.41
Paul S. Adler is currently Associate Professor at the University of Southern California School of
Business Administration. He began his education in Australia and moved to France in 1974, where
he received his doctorate in Economics and Management while working as a Research Economist
for the French government. Before coming to USC in 1991, Dr. Adler was a Visiting Scholar at the
Brookings Institution and a Post-doctoral Research Fellow at the Harvard Business School. He also
taught at Columbia and Stanford. His principal research interests are in the management of new tech-
nologies in production and engineering operations. Dr. Adler has published widely in academic and
managerial journals both in the United States and overseas. Most recently he published two edited
volumes, "Technology and the Future of Work," and "Usability: Turning Technologies into Tools."
He is on the editorial boards of IEEE Transactions in Engineering Management, Journal of
Engineering and Technology Management, and International Journal of Human Factors in
Manufacturing, and currently serves as Senior Editor at Organization Science and Associate Editor
at Management Science. (CHAP. 4)
Sarah Beckman has B.S., M.S., and Ph.D. degrees from the Department of Industrial Engineering
and Engineering Management at Stanford University and an M.S. in Statistics from the same institu-
tion. Dr. Beckman is Co-Director of the Management of Technology Program at the University of
California, Berkeley's Haas School of Business. Her primary research interests are in green design
and manufacturing, product definition processes for software products, and the effects of vertical
"disintegration." Prior to and concurrent with her involvement at the Haas School, Dr. Beckman
worked for the Hewlett-Packard Company, most recently as Director of the Product Generation
Change Management Team. (CHAP. 24)
Frederick Betz received a Ph.D. in physics from the University of California at Berkeley and
later changed fields to management science and operations research. He taught in management
schools for several years and is currently at the National Science Foundation, funding research in
several areas of science and engineering. He is the author of several books about the management
of technology, the most recent being Strategic Technology Management (McGraw-Hill, 1991).
(CHAPS. 8 and 12)
Klaus K. Brockhoff is professor of Technology Management and director of the Institute for
Research in Innovation Management at the University of Kiel, Germany. He was a visiting professor
at institutions in Austria, Belgium, Sweden, and the United States. He acts as consultant to various
governments and to industrial firms. (CHAP. 27)
Alok K. Chakrabarti is Dean of the School of Industrial Management, New Jersey Institute of
Technology, Newark, N.J., and a distinguished professor for technology management at the same
institution. He has published extensively in national and international journals and has taught man-
agement of technology courses as a visiting professor in Germany and India. (CHAP. 27)
Joseph P. Cory of the Cory Group is a Management and Educational Consultant in the
Management of Technology. Currently, he is Visiting Associate Professor at Stevens Institute of
Technology where he was responsible for developing the curriculum leading to an M.S. in the
Management of Technology. A practitioner for more than 35 years across most industry sectors, he
also wrote and reviewed for the International Journal of Technology Management and other jour-
xvii
xviii CONTRIBUTORS CONTRIBUTORS xix
nals. Recently, he left IBM where he was curriculum manager and developed and taught courses in Structured Enterprise Modeling. At Baldwin Wallace College, Berea, Ohio, John enjoys teaching
Technology Management. He monitored Technology Management programs for IBM at MIT Sloan Management Information Science and Decision Models in the Executive M.B.A. program. He holds
School and the National Technological University. He represented IBM at CIMS at Lehigh an M.S.E.E., with emphasis on Systems Engineering and a M.B.A. with an area of concentration in
University and is a reviewer and writer of articles for the International Association in the International Business. (CHAP. 16)
Management of Technology. He held various positions at IBM in development, marketing, market
research, plans, and controls. He also was a senior management consultant with The Diebold Group
and associate engineer at David Sarnoff Research Center. (CHAP. 2) John Kanz is President of DMS OnLine Locator, Inc., Scottsdale, Arizona, a specialized interna-
tional database service. His analyses of competitive forces, technology trends, and institutional fac-
tors in the global semiconductor industry have received wide attention. Prior research as Associate
Dov Dvir is a senior lecturer and the head of Management of Technology Department in the Professor and Chair, Management of Technology, The University of Calgary, combined with more
Holon Center for Technological Education. He is also a lecturer in Management of Technology at than 25 years in management at major U.S. electronics firms while chairing U.S. and international
the Tel Aviv University, Faculty of Management, the Leon Recanati School of Business electronics standards committees, gives a unique perspective to his frequent publications. He is a
Administration. Previously, he was a senior officer in the Israeli Defense Force (IDF). He holds a registered professional engineer and holds a B.S. in Physics (University of Washington), an M.S. in
B.S. in electrical engineering from the Technion-Israel Institute of Technology; an M.S. in opera- physics (University of Illinois), and an M.B.A. and Ph.D. in Management from the Peter Drucker
tions research and an M.B.A. from Tel Aviv University; and a Ph.D. in management from Tel Aviv Center at Clarement. (CHAP. 6)
. University. (CHAP. 32)
Ronald Neil Kostoff received a Ph.D. in Aerospace and Mechanical Sciences from Princeton
Lynn W. Ellis is scholar-in-residence at the University of New Haven (Connecticut) where he is a University in 1967. At Bell Labs, he performed technical studies in support of the NASA Office of
retired professor of management. He is a former research director at ITT, and the author of The Manned Space Flight and economic and financial studies in support of AT&T Headquarters. At the
Financial Side of Industrial Research Management (Wiley 1984) as well as many articles on issues U.S. Department of Energy, he managed the Nuclear Applied Technology Development Division, the
related to the management of research and development. He has a doctorate of professional studies Fusion Systems Studies Program, and the Advanced Technology Program. At the Office of Naval
in management degree from Pace University. Dr. Ellis is a Life Fellow of the Institute of Electrical Research, he was Director of Technical Assessment for many years. His present interests revolve
and Electronics Engineers, and a Fellow of the American Association for the Advancement of around improved methods to assess the impact of research. (CHAP. 31)
Science. (CHAP. 26)
Danny Lam is Research Fellow at the Economic Development Institute at Auburn University where
Gerard H. (Gus) Gaynor brings more than 40 years of technical and management expertise in he co-directs the Project on Institutions of Advanced Development. During 1992-94, he was a Fellow
managing technology and innovation. After more than a decade in upper atmosphere research and of the Pacific Basin Research Center-Center for Science and International Affairs, John F. Kennedy
development he began a 25-year career at 3M. Upon retirement from 3M, as a senior technology School of Government, Harvard University. He has been a fellow of the Pacific Cultural Foundation
executive, he organized G. H. Gaynor and Associates, Inc., a consulting firm, focusing on managing and a Visiting Scholar at the Chung Hwa Institute for Economic Research in Taiwan. Dr. Lam was a
technology from a systems perspective. McGraw-Hill has published two of his books: Achieving the guest editor of the Special Issue on the Competitiveness Debate in Business and the Contemporary
Competitive Edge Through Integrated Technology Management and Exploiting Cycle Time in World. His publications have appeared in Harvard International Law Journal, Journal of Northeast
Technology Management. Since retirement he has been appointed twice as a Senior Fulbright Asian Studies, and The Atlantic Monthly. Dr. Lam completed his Ph.D. Thesis on the Development of
Scholar. (CHAPS. 1 and 33) Taiwan's Computer and Electronics Industries at Carleton University in 1992. (CHAP. 6)
Juergen Hauschildt is professor of organization and director of the Institute of Business Alvin P. Lehnerd holds a B.S.E.E. degree from Ohio University and an M.E.A. degree from
Administration at the University of Kiel, Germany. He is the author of numerous books and papers, George Washington University. Recently retired as vice president of Steelcase office furniture prod-
among them Innovation Management. He was awarded an honorary doctors degree from the ucts, he has previous experience with DuPont, General Electric, Black & Decker, and Sunbeam. Mr.
University of Rostock. (CHAP. 27) Lehnerd has led several well known developments and innovations resulting in new product success-
es including the Dustbuster, the first electronic and global iron, orthopedic surgical tools, the com-
Anil B. Jambekar is Chairman and Professor of Operations and Engineering Management at plete redesign of Black & Decker double insulated power tools and several Steelcase office furniture
Michigan Technological University. He also serves as a director of the graduate program in products. Currently a consultant to industry, he has expertise in a number of areas including product
Operations Management and has been principal in continuing development of the program. He and process innovation, global competitiveness, strategic allocation of technology and technology
received D.Sc. in Operations Research from Washington University, St. Louis, and has worked as an resources, and new business-new venture development. He has lectured and presented papers at
Industrial Engineer at Olin, E. Alton, Ill. His current research is in the area of systems thinking, quali- MIT's Sloan School of Management, University of California at Los Angeles, Cal Tech, National
ty engineering, and management, and productivity issues with regard to technology management. He Academy of Engineering, and Harvard Business School and for many industry and government
has more than 35 scholarly publications and served as a consultant to several private organizations. organizations. (CHAP. 25)
(CHAPS. 19 and 29)
Kevin B. Lowe is a doctoral candidate at Florida International University. His work includes sever-
John E. Juhasz, founder and president of the Micron Group International, a management consult- al scholarly articles which have appeared in journals such as The Academy of Management Journal,
ing firm, has 26 years of combined technical-managerial responsibility, including product-system The Leadership Quarterly, and Journal of Advances in International Comparative Management. He
development and strategic planning. Industry experience spans process control, automotive electron- is a member of the Academy of Management, the Society of Industrial and Organizational
ics, equipment manufacturing, aerospace systems, and management services. John holds eleven Psychology, and the Southern Management Association. His current research interests include the
patents and is the recipient of numerous awards including Rockwell International's Engineer of the study of best practices for the management of human resources in international settings, the effects
Year. He is author-developer of a unique, computer-based systems methodology, published as of multiculturalism on group processes, and the evolving role of leaders in the post-industrial organi-
zation. (CHAP. 20)
xx CONTRIBUTORS CONTRIBUTORS xxi
Gary S. Lynn is an Assistant Professor of Marketing at the University of Alabama in Huntsville. Karol I. Pelc. M.S. Electrical Engineering (Technical University of Wroclaw, Poland), Ph.D.
Dr. Lynn received a bachelors degree in mechanical engineering from Vanderbilt, a masters in busi- Electronics (Uppsala University, Sweden), Ph.D. EconomicslManagement (Technical University of
ness from the Kellogg School, and a Ph.D. in management and technology from Rensselaer Wroclaw), is a professor of engineering management at Michigan Technological University. He has
Polytechnic Institute. Dr. Lynn's specialty is new product development and marketing under uncer- worked as a designer of electronic instruments, a manager of manufacturing, and a manager of a
tainty. He has written and co-authored four books and several articles on new product development research laboratory in the electric power industry. He has served as consultant to several companies
and marketing, including From Concept to Market (John Wiley & Sons). Dr. Lynn has licensed his and lectured at universities in Europe, India, Japan, and the United States. His current research inter-
own products and patents in the United States and abroad and has conducted countertrade negotia- ests include: R&D management, dynamics of technological innovation, interdisciplinary knowledge
tions with the Minister of Trade in the Philippines and the Minister of Economics in Taiwan. Dr. mapping, knowledge systems and AI for engineering/technology management, international technol-
Lynn was a technical designer and marketing specialist at General Electric with a secret security ogy management, and the Japanese innovation management system. Dr. Pelc serves on the editorial
clearance. He started, built, and sold three companies. He is listed in Whos Who Leading American boards of these journals: Technological Forecasting and Social Changes (U.S.), R&D Management
Business Executives and was the editor of Probus Innovation Book Series. (CHAP. 34) (U.K.), and Transformations (Poland). He is also a member of the Academy of Management,
American Society for Engineering Management, IEEE, Engineering Management Society.
International Association for the Management of Technology, and RADMA Association for R&D
Ann Majchrzak is Associate Professor at the Institute of Safety and Systems Management (ISSM) Management (U.K.). (CHAP. I3 and 19)
with a joint appointment at the Industrial Systems and Engineering Department. Dr. Majchrzak has
conducted research, teaching, and consulting on the integration of organizational and human factors
in the design, implementation, and management of manufacturing technology. She has authored The Aleda V. Roth. associate professor of operations management. Before joining the Kenan-Flagler
Human Side of Factory Automation: Managerial and Human Resource Strategies for Making faculty, Roth was an associate professor at Duke University's Fuqua School of Business. She also
Automation Succeed and HITOP: A Reference Manual for Highly-Integrated Technology, held faculty positions at Boston University and Ohio State University. Her research interests include
Organization and People. She is co-director of the ACTION consortium, a $10 million investment of empirical and theoretical investigation of operations strategy and world class performance. Roth is
the Air Force Mantech Program, National Center for Manufacturing Sciences, DEC, HP, TI, GM & the principal investigator of the CME Global Business Process Reengineering Project and the
Hughes to create computer-based tools to facilitate integration. (CHAP. 11) Knowledge Factory Research Project, and a co-principal investigator of the Global Manufacturing
Strategy and Technology Futures Project. She is a member of the U.S. Quality Council-II and
Quality Management Center of the Conference Board and Board of Directors of the Operations
Richard McNichols earned his B.S. in Finance from the University of Illinois at Chicago in 1980, Management Association. Roth received a Ph.D. from the College of Administrative Science at Ohio
his CPA certificate in February 1981, and his M.B.A. from the University of Baltimore in 1989. He State University, an MSPH from the School of Public Health at UNC-Chapel Hill, and a B.S. from
is the treasurer of NUM Corporation, a high tech manufacturer of CNC and Robotic Controls. He is Ohio State University. (CHAP. 38)
also an active speaker at university and continuing professional education seminars and the author of
articles on multinational financial management and factory automation. (CHAP. 35)
Susan Walsh Sanderson is an associate professor at Rensselaer Polytechnic Institute where she
teaches in the School of Management. She has previously held teaching and research positions at
Paul A. Nelson is Chairman and Associate Professor of Business Administration and Management Carnegie-Mellon University, the Conference Board, and the Colegio de Mexico in Mexico City as
at Michigan Technological University. He received a Ph.D. degree in Industrial Organization from well as visiting positions at Harvard Business School and MIT. She served on the advisory commit-
the University of Wisconsin, and served as an Army field artillery officer, operations research ana- tee of the Design and Operations Management Program of the National Science Foundation. She is
lyst, and comptroller staff officer before coming to Michigan Tech in 1972. His current research an author of the Design and Manufacturing Learning Environment and other interactive multimedia
interest is in the area of justification and implementation of advanced manufacturing technology and material for teaching management of design and manufacturing. She has published in Research
implementation of change in organizations. He has co-authored two books on institutional impedi- Policy, The Design Management Journal, and other business an academic journals. (CHAP. 23)
ments to the adoption of geothermal energy technology, and has served as a consultant to the U.S.
Department of Energy and the Federal Energy Regulatory Commission on the effectiveness of pool-
ing agreements among electric utilities. (CHAP. 29) Terri A. Scandura is an Associate Professor of Management at the University of Miami. She
received her Ph.D. from the University of Cincinnati in 1988 and teaches Organizational Behavior at
the undergraduate, M.B.A., and doctoral levels. She has published scholarly articles in numerous
Marvin L. Patterson is founder and President of Innovation Resultants International (IRI), a San journals including the Journal of Applied Psychology and the Academy of Management Journal, and
Diego firm dedicated to helping client companies become more competitive at new product innova- she is on the editorial board of the Journal of Management. She is a member of the Academy of
tion. Prior to founding IRI, Patterson enjoyed twenty years in new product development with Management, the Society of Industrial and Organizational Psychology (Division 14 of the American
Hewlett-Packard Company including five years as Director of HP's Corporate Engineering depart- Psychological Association), and the Southern Management Association. Dr. Scandura's current
ment, a group focused on improving HP's product development process. Marv is the author of research interests are in the development of international competitiveness through leadership, team-
Accelerating Innovation: Improving the Process of Product Development (Van Nostrand Reinhold, building, and innovation best practices. (CHAP. 20)
New York, 1993). (CHAP. 10)
Theodore W. Schlie is an Associate Professor of Technology Management in the College of

Alan W; Pearson is the Director of the R&D Research Unit at Manchester Business school. He is Business and Economics at Lehigh University where he teaches and does research in the fields of
past director of the M.B.A. program and past Dean of the Faculty of Manchester Business School. Innovation Management and Policy, Production/Operations Management, Business Policy and
Currently he is the chairman of the management committee for the recently formed Manchester Strategy, and International Competitiveness. Dr. Schlie is also Associate Director for Research at
Federal School of Business and Management. He was awarded a honorary doctorate degree from Lehigh's Center for Innovation Management Studies where he is responsible for administering a
the University of Kiel, a centennial medal from IEEE for contributions to engineering management, nationwide research grants program in the area of innovation management funded by a number of
and-jointly with Klaus K. Brockhoff-the Max Planck Research Award. (CHAPS. 15 and 27) industrial sponsors. He is co-director of Lehigh's Management of Technology graduate program and
xxii CONTRIBUTORS CONTRIBUTORS xxiii
the Director of Field Research Projects for the National Technological University's Masters Degree more than 20 years experience in modeling systems for R&D project and portfolio management.
Program in Management of Technology. He is a consultant to a number of industrial and governmen- (CHAP. IS)
tal clients. Dr. Schlie received both his M.S. and Ph.D. degrees from the Department of Industrial
Engineering and Management Sciences at Northwestern University. (CHAP. 7)
David J. Sumanth is Professor of Industrial Engineering and Founding Director of the UM
Productivity Research Group (UM PRG) since 1979 at the University of Miami. He founded the
Aaron J. Shenhar, is the James J. Renier Visiting Professor in Technological Leadership at the International Conference series on Productivity and Quality Research (ICPQR's), and chaired the
Center for the Development of Technological Leadership, University of Minnesota. Dr. Shenhar first five conferences from 1987 to 1995. He also founded The International Society for Productivity
holds five academic degrees in engineering, statistics, and economic systems-acquired in Israel and and Quality Research (ISPQR) in 1993, and serves as Chairman of its board. Dr. Sumanth is the
at Stanford University. Prior to academia, Dr. Shenhar accumulated extensive engineering, scientific, author/co-author/editor of more than 20 books, monographs, and video courses, and more than 100
and management experience in a high-tech environment. Working for more than 20 years in the publications. His more than 60 honors, recognitions, and awards include the Outstanding Industrial
defense industry in Israel, he went through all phases of technical management, from functional and Engineer of the Year Award (1983, 1984), the George Washington Honor Medal for Excellence in
project manager, to vice president of human resources, and finally, to manager of a large systems Economic Education (1987), and Fellow of the World Academy of Productivity Science (1989).
development division. Dr. Shenhar's current teaching and research interests include management of (CHAPS. 3 and 17)
technology and innovation, and project and product development management. He is a recognized
,speaker and consultant to various leading high-technology organizations. (CHAP. 4 and 32)
John J. Sumanth is an undergraduate research assistant in the UM Productivity Research Group.
He is presently pursuing a degree in Biomedical Engineering at the University of Miami. His acade-
J. Daniel Sherman received a B.S. degree from the University of Iowa, an M.A. degree from Yale mic honors include: Provost's Honor Roll, Dean's List, induction into Alpha Lamda Delta Honor
University, and a Ph.D. in organizational theory/organizational behavior from the University of Society, and a listing in The National Dean's List. His research interests are in technology and "com-
Alabama. In 1989-90 he was a visiting scholar at the Stanford Center for Organizations Research at petitive economics." (CHAPS. 3 and 17)
Stanford University. He currently serves as chairman of the Management and Marketing department
at the University of Alabama. His research has been published in Academy of Management Journal,
Paul M. Swamidass is the Associate Director, Thomas Walter Center for Technology
Psychological Bulletin, Journal of Management, Personnel Psychology, IEEE Transactions on
Management, Auburn University, Auburn, Alabama. His undergraduate degree is in mechanical engi-
Engineering Management, and other journals. His current research interests focus on the manage-
ment of innovation. (CHAP. 28) neering. He has a doctorate in production/operations management from the University of
Washington, Seattle. His professional background includes seven years of experience as production
manager for a large power station equipment manufacturer. His research and teaching interests
Jeffrey C. Shuman is an Associate Professor of Management at Bentley College in Waltham, include manufacturing strategy, manufacturing technology, and international manufacturing. His
Massachusetts. He received a bachelor's degree in Electrical Engineering from Lowell Technological publications have appeared in leading academic as well as practitioner journals including
Institute and a masters and doctorate in Management from Rensselaer Polytechnic Institute. Dr. Management Science, the Academy of Management Review, the Journal of Management, IEEE
Shuman has crafted a unique career as an entrepreneur, consultant and professor, and in active Spectrum, the International Journal of Production Research, Long Range Planning, and the Journal
research or entrepreneurship. He has founded or been part of the founding team of four businesses, of International Business Studies. He is known for his report Technology on the Factory Floor II,
served as a consultant to dozens of entrepreneurs, and has developed and taught new courses in which is a study of technology use in U.S. manufacturing plants. The study was sponsored by the
entrepreneurship that tap state-of-the-art knowledge about business creation. And he has contributed National Association of Manufacturers and the National Science Foundation. (CHAP. 37)
to this knowledge base by authoring dozens of articles and two books on entrepreneurship and the
venture creation process. (CHAP. 21)
Robert Szakonyi is Director, Center of Technology Management of lIT Center. Szakonyi has a
B.A. from Dartmouth College and a Ph.D. from Columbia University. Previously he worked at SRI
Clayton G. Smith (deceased) was Professor of Management at Oklahoma City University. International (Stanford Research Institute), George Washington University, and American University.
Professor Smith held a B.B.A. degree from Pace University and M.S. and Ph.D. degrees from Dr. Szakonyi has consulted with or conducted research at over 500 companies in the United States,
Purdue University. He was a member of the Academy of Management, the American Management Canada, and Europe during the last 17 years. In 1983 he participated in the White House Conference
Association, and the Strategic Management Society. Professor Smith's research interests and publi- Committee on Technology. He has authored seven books: World Class R&D Management,
cations concerned the "interface" of Strategic Management and the Management of Technology: the Managing New Product Technology, How to Successfully Keep R&D Projects on Track, Technology
specific interests concerned diversification into young industries (based on major product innova- Management: Case Studies in Innovation, Volumes 1,2,3, and 4. (CHAP. 14)
tions), technological substitution, and strategies for building strong competitive positions in markets
with established competitors. (CHAP. 22)
Hans L. Thamhain is Associate Professor of Management at Bentley College in Waltham,
Massachusetts. He received masters degrees in Engineering and Business Administration, and a doc-
Wm. E. Souder holds the Alabama Eminent Scholar Endowed Chair in Management of torate in Management from Syracuse University. Dr. Thamhain has held engineering and manage-
Technology at the University of Alabama in Huntsville (UAH). At UAH, Dr. Souder is also the ment positions with GTE, General Electric, and Westinghouse, and is well known for his research on
founder and Director of the Center for the Management of Science and Technology (CMOST), and Engineering Team Building and Project Management. Dr. Thamhain is a frequent speaker at major
he also holds positions as Professor of Engineering and Professor of Management Science. Dr. conferences, has written more than 60 research papers and four books on engineering/project man-
Souder received a B.S. from Purdue University, an M.B.A. from St. Louis University, and a Ph.D. in agement, and is consulted in all phases of technology management. (CHAPS. 9 and 21)
Management Science from St. Louis University. He has twelve years of varied industrial manage-
ment experience, seven years of government laboratory experience and over twenty years of experi-
Mustafa (Vie) Uzumeri is an assistant professor in operations management at Auburn University.
ence in academe. He is the author of over two hundred papers and six books. (CHAP. 28)
He has worked in transportation engineering, international contracting, business development, test
facility marketing, and software product management. His research interests include operations man-
M. J. W. Stratford is currently a Visiting Fellow at the Manchester Business School. He was pre- agement, management of technology, product planning, and the strategic implications of emerging
viously a senior consultant in the Corporate Management Services Group at ICI Pic where he had quality management standards such as ISO 9000. Dr. Uzumeri has published in Design Management
xxiv CONTRIBUTORS
Journal, Research Policy, Manufacturing Engineer, and the Southern Business and Economic
Journal. (CHAP.23)
Rias J. van Wyk is a graduate of Harvard University, the University of Stellenbosch, and the
University of Pretoria. At present he teaches management of technology at the Graduate School of
Business, University of Cape Town, South Africa, and at the Center for the Development of
Technological Leadership, University of Minnesota, Minneapolis, Minnesota, USA. He has taught or
done research at various centers throughout the world. These include: MIT, Cambridge,
Massachusetts; Case Western Reserve University, Cleveland, Ohio; IMD, Lausanne, Switzerland;
IAE, Aix-en-Provence, France; Tel-Aviv University, Israel; and the Technical University, Karlsruhe,
Germany. He conducts in-company courses in mapping and forecasting technology and offers board-
room briefings on the changing technological frontier. He has served on a variety of corporate boards
for two decades. (CHAP 5, SECS. I and 2)
Mary Ann Von Glinow is Professor of Management and International Business at Florida
International University. She was President of the Academy of Management in 1995. Dr. Yon ABOUT THE EDITOR IN CHIEF
Glinow's research interests have centered around the management of high technology and profes-
sional employees, and international HRM. She has authored more than 100 journal articles and six
books. Her current work is on Best Practice Innovators, which looks at global best practice in the
management of engineering professionals. (CHAP. 20)
Abdus Wadee is currently working with Eltec, a regional training and enterprise company, where Gerard H. (Gus) Gaynor is the principal of G. H. Gaynor and Associates, Inc., a technolo-
he is involved in designing training programs and collaborative ventures with industry after under- gy management consulting firm. A 24-year career at 3M (Minnesota Mining and
taking research for a high degree at the Manchester Business School. (CHAP. 15) Manufacturing) provided him with extensive executive-level experience in managing
technology in a global context. A recent Fulbright Scholar in management and a sought-
Thomas G Whiston is a Senior Fellow and Director of Studies of the M.Sc. in Technology and after lecturer, Mr. Gaynor is active in several professional societies. He also serves on the
Innovation Management at the Science Policy Research Unit, University of Sussex. His main areas industrial advisory boards of several universities and professional journals and is presi-
of research relate to global forecasting and related policy analysis, higher education policy, and the dent of the IEEE's Engineering Management Society. He is the author of two previous
influence of technical change upon organization structures. He has published several texts and McGraw-Hill books: Achieving the Competitive Edge Through Integrated Technology
approximately 150 articles, policy studies and monographs related to these areas. He has been a Management and Exploiting Cycle Time in Technology Management. Gus Gaynor is
senior consultant to most UK research councils and several international agencies. During 1992/93
based in Minneapolis, Minnesota.
he was co-leader of a large EC program entitled Global Perspective 2010: Tasks for Science and
Technology, a program involving about forty international researchers. The results have been pub-
lished in twenty-three volumes. (CHAPS. 18 and 30)
Alan Wilkinson was Technical Director of a major division of a multinational chemical company
before joining Manchester Business School as Administrative Director. Recently retired he played a
major part in setting up the industrial contacts and supervising the early stages of the research.
(CHAP. 15)
Edith Wilson has been with Hewlett-Packard for more than fifteen years and has had a variety of
positions ranging from being an engineer at Hewlett-Packard Research Laboratories in 1980 to her
current position as Manager of Product Definition and Prospecting for New Businesses at the
Corporate level. Her background includes a Bachelor's Degree in Bio-Medical Engineering from
Duke University and both a Master's and an Engineer's Degree in Mechanical Engineering from
Stanford University. Ms. Wilson's interest in the marketability of excellent design is the thrust of her
department's endeavors to improve product definitions throughout Hewlett-Packard. The department
focuses on encouraging divisions to only pursue excellent opportunities and to redeploy or cancel the
less attractive projects early in the development cycle. Currently, she also holds a position as Senior
Lecturer at Stanford where she teaches graduate students the interrelationship of engineering design
and marketing and business fundamentals. She lives in Palo Alto, California, with her husband and
daughter. (CHAP. 36)
Technology Management (TM) can be viewed from many different perspectives. The
word technology itself is subject to many different interpretations-artifact, knowl-
edge, and/or, whatever interpretation one wishes to use. Some only consider informa-
tion as technology. Thus the approaches to technology management can be quite dif-
ferent depending on how users describe technology, management, and technology
management. The authors of this handbook approach the topics from different experi-
ences that are associated with many different environments. So, if in considering any
particular issue, you find different or even contradictory approaches, recognize that
context of TM will determine the description. There are not many individuals or cor-
porations that consider TM from a holistic perspective and as an integrative activity.
This handbook looks at technology from a system perspective. It focuses attention
on integration of all of the technology related issues. It should not be construed as a
handbook of engineering, research, development, manufacturing, information, or some
limited technology issue. The handbook takes a wide-angle view of TM. It is not sin-
gle-issue oriented. It has no recipes for success. It raises the issues that are essential if
organizations wish to improve their performance levels and the rewards from invest-
ing in technology.
The purpose is not only to provide information about TM and expand the scope and
meaning of TM but to raise issues that force reconsideration of some fundamental
management principles. As managers have recently learned, gurus are not the answer;
going back to fundamentals provides greater assurance of success. Those fundamental
management principles require an emphasis on integration of resources related to TM.
TM crosses all disciplines and all levels of an organization. Depending on the size
and type of organization it may even be part of the CEO's domain. The handbook does
not deal with technology but its management. The authors recognize that technology is
a rich source of opportunity and not a threat and that managing technology is not sim-
ply a technical issue but a major business responsibility.
TM includes the decisions of scientists and engineers from the lowest to the high-
est levels, the decisions of science and engineering managers at all levels, and the
decision processes of managers and executives from marketing, from sales, from
human resources, and representatives of all the affiliated functional disciplines.
Technology does not take precedence in the decision processes, but how that technolo-
gy can be implemented within the constraints of the business, the marketplace, and the
economy does.
The construct of the Handbook focuses on the two basic reasons why businesses
invest in technology: to improve financial performance and enhance their competitive
position. The Handbook brings together the latest thinking, research results, and prac-
tices related to TM. It considers TM as an integrating activity.
The Handbook is divided into seven parts:
Perspectives on Technology Management

Methodologies, Tools, and Techniques
Education and Learning
xxviii PREFACE PREFACE xxix
The New Product Process munication as being at the crossroads for success in linking the technology resources
of four countries. Chapter 36 raises the important issue of product definition as a key
Managing Technology Management to successful product design and marketplace acceptance. Chapter 37, a manufacturing
Case Histories and Studies study, focuses on the issues related to benchmarking manufacturing. Chapter 38 lays
Appendix down the principles for building strategic agility through a neo-operations strategy
that links combinative competitive capabilities and advanced manufacturing technolo-
Part I, Perspectives on Technology Management sets forth some broad fundamen- gy strategies under the rubric of economies of knowledge.
tal issues. Chapter I describes TM as an integrative function and sets the stage for Part 7, Appendix A provides the reader with a listing of universities, for reference
describing TM in a business context. Chapter 2 presents a business architecture for only, that offer courses or advanced degree programs in TM.
TM. Chapter 3 explores "Technology Cycle" as an approach to TM. Chapter 4 focuses
on the organization's technology base. Chapter 5 reflects on the implications of corpo-
rate boards and executive committees understanding of technology analysis. Chapters
6 and 7 consider the issues of technology strategy, competitiveness, and competitive
advantage from an institutional-managerial perspective and the contribution of tech-
nology to the business enterprise. Chapter 8 focuses on targeted basic research as
related to industry-university partnerships. Chapters 9 and 10 provide two comple-
mentary approaches to managing the process of technology-based innovation.
Part 2, Methodologies, Tools, and Techniques considers approaches that should
force organizations to rethink their current practices in managing technology. Chapter
11 suggests some tools for analyzing organizational impact of new technology.
Chapter 12 considers issues in forecasting and planning technology. Chapter 13
reveals the benefits of using technology mapping as a tool for TM. Chapter 14 consid-
ers the process of developing an R&D strategy in the TM context. Chapter 15 looks at
decision support systems in R&D project management through use of matrices.
Chapter 16 brings to managers an enterprise engineering approach in the systems age.
Chapter 17 develops the issues related to managing the "Technology Gradient" for
global competitiveness.
Part 3, Education and Learning places these concepts in perspective. Chapter 18
recognizes the importance of learning far beyond what is proposed by the learning
gurus and the business press. Chapter 19 lays down the principles of learning process-
es for TM. Chapter 20 draws attention to the importance of technological literacy.
Chapter 21 looks at learning skill requirements in developing technology managers.
Part 4, The New Product Process discusses issues related to TM. Chapter 22 deals
with MT in the product substitution context. Chapter 23 develops a framework and
model for product family competition. Chapter 24 looks at the process for managing
product definition in software product development. Chapter 25 provides some real
life examples and processes for renewing product platforms.
Part 5, Managing Technology Management sets forth in eight chapters the issues of
implementing a systems approach to TM. Chapter 26 develops selected models for
managing the TM process. Chapter 27 brings together the real life situations involved
in managing functional and other interfaces. Chapter 28 builds on previous work and
identifies the factors that influence effective integration of technical organizations.
Chapter 29 looks at the barriers to implementing an integrated TM approach. Chapter
30 focuses on the need for developing interdisciplinary relationships in order to
improve functional performance. Chapter 31 looks at the effectiveness and impact on
research performance in the context of TM. Chapter 32 organizes the long-term suc-
cess dimensions in technology-based organizations. Chapter 33 recognizes the lack of
adequate tools to measure the effectiveness and impact of TM and provides a listing of
questions that must be asked in developing meaningful measurement systems.
Part 6, Case Histories and Studies provides information from the real world about
the issues involved in TM. Chapter 34, the NutraSweet case involves just about every
aspect of TM from the concept to commercialization cycle. Chapter 35 looks at wm-
The list of the individuals who have affected my thinking regarding this subject of
technology management is extensive and multidisciplinary. I am positive that many of
them are not aware of the lessons they may have taught, either positive or negative. I
obviously come with certain preconceived notions of TM because as a practicing engi-
neer whose experience has spanned research, development, design, and manufactur-
ing, as well as management in each of these functions in both a domestic and interna-
tional setting, the word "integration" became a guiding force in my decision
processes. How would my decision affect other functions, other design parameters,
and so on, was always a question that needed a response. To me technology was and is
a business issue and not solely a technology issue. As such, successful implementation
of technology management (TM) requires systems thinking as contrasted to more con-
ventional promotion of some single-issues.
I want to take this opportunity to thank all the authors who participated in this
Handbook. They come from diverse experiences and with different perspectives that
span the academic to practitioner continuum. TM requires this linkage of the academic
and practitioner perspectives. While TM is essentially a practitioners discipline,
knowledge and understanding of the issues can only come from research into the field
of technology management. As editor of the Handbook, my sincere thanks to each of
them for taking the time to pass on their knowledge and perspectives as related to this
discipline of technology management.
My sincere thanks to McGraw-Hili's sponsoring editor Harold B. Crawford for his
interest in promoting the concept of the Handbook of Technology Management, to Ms.
Peggy Lamb, editing manager, and to Pamela A. Pelton, the production supervisor. My
compliments to them and their staff for their high level of professionalism.
Finally, to my wife Shirley, my partner who made the decision with me to pursue
this effort, my sincere thanks for her interest, collaboration, and cooperation.
Gerard H. (Gus) Gaynor

Editor in Chief
1.1 AN OVERVIEW
In a speech at the First International Conference on Engineering Management in 1986

Edward Roberts, David Sarnoff professor of management of technology at
Massachusetts Institute of Technology, suggested that the failures of the automotive,
office equipment, and electronics industries were not a result of trade, economic, or
political policies but from the inability of industry to implement programs in technolo-
gy management. He emphasized the need for
Integrating technology into the firm's strategic objectives

Taking a proactive stance in introducing new technologies, new products, and new
processes with a greater emphasis on cycle time
Increasing the productivity and performance of the firm's technical community
Understanding the interdisciplinary needs in project management
Analyzing the resources and infrastructure to effectively select the technical scope
of the work effort
Dr. Roberts also focused on the need for increasing the manager's understanding of
the issues related to the management of technology (MOT). His major concern was
that universities could be accused of false advertising in their depiction of MOT
courses. He said that there is seldom any teaching of either engineering management
or MOT. There is a teaching of both engineering and management as separate disci-
plines, but no teaching of engineering and management combined. For some reason
the "and" was omitted.
This situation is not unusual; academic institutions rarely recognize interdiscipli-
nary study or research. Somehow it offends them. But MOT, with its need for integra-
tion, requires an interdisciplinary approach.
1.3
1.4 MANAGEMENT OF TECHNOLOGY (MOT) PERSPECTIVES
MOT: DESCRIPTION, SCOPE, AND IMPLICATIONS 1.5
Since that time many books have been written on MOT and several thousand
grated into a technology management system. There is one key word that must be
papers presented at conferences. The industry press has also focused attention on the
emphasized in the management of technology: integration. MOT involves managing
many issues involved in MOT. Yet organizations fail to manage their technology
the system; it also involves managing the pieces. Neither the system nor the pieces can
effectively, efficiently, and with the economic use of resources. Projects continue to
be subordinated. MOT involves integrating the "pieces" into an acceptable "whole" by
miss timely implementation, continue to fail to meet requirements and specifications,
focusing attention on the interdependence of the pieces.
and continue to exceed allocated funding.
In the intervening years organizations have failed to focus any significant effort on
managing technology as an integrated effort. While many organizations have been
caught up in the frenzy of hiring the latest guru anointed by the business press, that 1.2.1 Management and Administration
effort has resulted in focusing attention on single issues which may afford some short-
To understand management of technology, it is necessary to clarify what we mean by
term benefit but provide no benefit for sustainable future performance. Single-issue
management and what we mean by technology and then explain management of tech-
management, as a principle of management, ignores the realities of the competitive
nology. The discussion is further complicated by the fact that technology can be
forces that allow an organization to meet the expectations of the stakeholders. By now,
viewed in many different ways. As an example, technology can be viewed as a
most organization have discovered that they cannot Baldrige or ISO 9000 their way to
economic success for either the short or long term.
Tool
The suggestions presented by Dr. Roberts continue to be valid not only for manag-
ing the technology-related issues but also for the total business enterprise. Physical manifestation
Management of technology (MOT) cannot be accomplished by some predetermined Knowledge
recipe or prescription. Guidelines provide direction and the caution lights, but the fact Applied science
remains that MOT can be implemented effectively only within the context of a specif-
ic organization with consideration of its strengths and weaknesses and in relation to its Academic discipline
available resources and infrastructure.
We view technology as a tool. It is a means for accomplishing some end. Viewing
This introductory chapter, on the general characteristics, scope, and implications of
technology management, includes technology as an applied science limits the scope and essentially focuses on the issues
engaged by engineers and scientists. MOT as an academic discipline could provide a
An overview benefit at some future point in time when academia becomes oriented toward intensive
multidisciplinary research that possesses some semblance of relevance and is directed
A general description of technology management
toward problem solving and problem finding. The physical manifestation of technolo-
Delineation of the scope of technology management gy surfaces in all our lives 24 hours a day and has no relevance to this discussion. To
A system model-resources, infrastructure, and activities reiterate, technology will be considered as a tool throughout this chapter.
To understand just what MOT includes, it is necessary to clearly differentiate
An integrated and holistic model
between management and administration. Management and administration are not the
A brief introduction to strategic, operational, and management issues same; there is a clear distinction between the two, and that differentiation is important.
Classification of technologies Simply stated, management involves degrees of creativity, leadership, risk, and con-
A section on education in technology management cern about future performance, while administration involves supervising the assigned
activities or tasks that are essential to keep an organization afloat.
Summary and conclusions Management, or, more appropriately, managing, is a complex process-much more
complex than administration. Such factors as managerial creativity and innovation and
taking a proactive approach make special demands. Pushing the frontiers, regardless
1.2 MANAGEMENT OF TECHNOLOGY: A of discipline or function, requires people with not only special talent but also foresight
DESCRIPTION of what is possible on the basis of available resources and infrastructure. Management
of technology requires leadership. That leadership function must focus on the long-
term as well as the short-term requirements in order to maintain the viability of the
Is it necessary to ask the question: What is management of technology? The answer is firm. That kind of leadership requires focus and discipline, moves the organization
a resounding "yes." You may argue that the answers are self-evident, but any discus- into the future, and takes place at all levels of the organization. The traditional
sion of MOT usually brings out a diversity of opinion-opinion but not knowledge or approach that the leader is at the top is no longer viable, if ever it was. It is certainly
understanding. The two words management and technology carry the burden of many not viable for managing technology where technology leadership is expected at all
different meanings. The combination of the two words presents additional complexi- levels. Chief executive officers (CEOs) do not make the decisions that determine suc-
ties. To many, MOT means managing engineering. To others it means managing infor- cess or failure of technology.
mation, managing research, managing development, managing manufacturing opera-
tions, managing the activities of engineers and scientists, or managing functional 1. Management. Management is not a science. As much as researchers try, they
activities without concern for the total spectrum of activities that encompass the busi- cannot and have not developed any consistent theories that guide human performance
ness concept to commercialization process. Those interrelated activities must be inte- in a logical sequence from point a to point b. Not only are people different, but the
1.6 MANAGEMENT OF TECHNOLOGY (MOT) PERSPECTIVES MOT: DESCRIPTION, SCOPE, AND IMPLICATIONS 1.7
same person acts and reacts differently in different situations. There are no mathemati- some are very simple and others, very complex. A description of technology in the
cal equations that can be written and then applied to describe the interactions that take MOT context must go beyond the traditional.
place between people. At best, management is an applied art that involves using the Technology can be described in different ways:
linkage of data, information, knowledge, and the social interaction between people in
solving problems or pursuing opportunities. 1. Technology is the means for accomplishing a task-it includes whatever is needed
2. Administration. Administration, on the other hand, implies following rules and to convert resources into products or services.
regulations. It implies following predetermined processes and methods. Words such as 2. Technology includes the knowledge and resources that are required to achieve an
creativity, innovation, and risk are not in the administrator's lexicon. This does not objective.
mean that creativity and innovation are not essential to the organization. It does imply 3. Technology is the body of scientific and engineering knowledge which can be
that these activities will be more tightly controlled. It does not excuse these adminis- applied in the design of products and/or processes or in the search for new knowl-
tration functions from exercising their creativity in a systematic way toward continu-
edge.
ous improvement. In MOT administration, creative accounting on a daily basis would
most likely be challenged. Creativity and innovation may not be desirable attributes
for the payroll department. Paychecks must be issued in the correct amount and on
1.2.3 Management as a Technology
time. Administration, however, must be differentiated from the general negative atti-
tudes toward bureaucracy. Bureaucracies are essential to survival of any business, but Within this context, is management a technology? The response can be a resounding
those bureaucracies must be effective and efficient. In essence, administration means "yes" or a resounding "no." The response depends on the limits placed on the descrip-
fulfilling the routine activities of the organization. These routine activities can neither
tion of technology.
be ignored nor dominate the actions of the organization. Every management action requires a process-or at the least should follow a
process. But that process must be accompanied by substance, action, and integrity.
This distinction between management and administration becomes of greater The "seat of the pants" and "play it by ear" approaches have outlived their usefulness.
importance in considering the issues related to the management of technology. For Gut reactions may be acceptable but should be validated from other perspectives.
many years managers involved in managing the technical activities of the business It seems almost trite to say that all decisions should follow some predetermined
have tended to spend a greater percentage of their time on routine administrative mat- process regardless of whether the decision involves a major financial investment or
ters. Managers in science and engineering in many situations have become paper the introduction of some new human resource program. Both involve allocation of
pushers. Much of this evolution from management to administration came about as a resources, so a fiscally responsible action must be guided by some process. To that
result of some misguided human resource professionals and academic behavioral sci- extent management as a technology can be defined simply:
entists-the manager was not to interfere and was to let scientists and engineers do
their own thing and let every employee start at the bottom of the learning curve. In the
Management as a technology can be described as the process of integrating the busi-
process, the role of the manager as teacher was totally ignored.
ness unit resources and infrastructure in the fulfillment of its defined purposes, objectives,
Both management and administration are essential. The question that must be
strategies, and operations.
answered in the context of the organization's purposes and objectives is: What is the
proper balance between management and administration? That question must be
answered, and the answer depends on the many characteristics that define the organi- This is a simple statement with significant implications for management of technolo-
zation-the resources, infrastructure, and the activities in which the organization gy. If the broader descriptions in 1 and 2 (in the list at the end of Sec. 1.2.2) are
engages. The proper balance may be quite different for an automotive company like accepted, then management definitely is a technology. If the restrictive approach of
Ford and a multiproduct innovative company like 3M. The balance will be quite dif- description 3 (technology as a body of scientific and engineering knowledge) is used,
ferent for an order-entry department and a research department. The best product can- management would probably not be considered as a technology.
not be introduced on time, within specifications and requirements, and at estimated It could be argued that descriptions 1 and 2 are so broad that they encompass all of
cost without the effective performance of many routine activities. management and further that considering management as a technology is stretching
the description of technology. It is true that the broad perspective is all-encompassing,
but then technology in one form or another or to a greater or lesser extent drives most
1.2.2 What Is Technology? organizations-especially those that are concerned about the future. If it does not
drive the product base, it does drive the distribution process from order entry to cus-
The word technology usually conjures up many different images and generally refers tomer satisfaction. Technology cannot be restricted to the manufacturing industries. It
to what has been described as the "high-tech" (high-technology) industries. Limiting encompasses not only the manufacturing sector but all industries-agriculture, air-
technology to high-tech industries such as computers, chips, superconductivity, genet- lines, banks, communication, entertainment, fast food, clothing, hospitals, insurance,
ic engineering, robotics, and so on focuses excessive attention on what the media con- investment, and so on-and determines future viability of the business unit as well as
sider newsworthy. Limiting technology to science, engineering, and mathematics also the industry.
loses sight of other supporting technologies. Technology includes more than machines, There is no limit to the way in which organizations can describe technology. The
processes, and inventions. There are many different manifestations of technology; important point is that organizations define what they mean by technology. This chap-
ter uses the description of technology as the means for accomplishing a task; it 1.3.1 Phase 3- The Beginning of MOT
includes whatever is needed to convert resources into products and services. This is a Phase 3 adds the marketing, sales, physical distribution, and customer service activi-
holistic approach and differentiates MOT from the single-issues approach-managing ties. It is the minimum level at which an organization can claim to have a semblance
engineering, managing research, and so on. of an MOT approach. Certain conditions preclude pursuing the requirements of phase
3. The primary constraint involves trying to integrate eight different major functions
with a multiplicity of subfunctions into some form of cohesive system. But these are
1.3 MANAGEMENT OF TECHNOLOGY SCOPE the functions that are directly responsible for new products and processes and must be
integrated in the process of introducing new products.
The project approach provides the means for integrating these functions. Products
Figure 1.1 shows a five-phase continuum for managing technology. This is a simpli- and processes are generally developed through some form of project approach. But
fied version but is presented here to show what MOT includes. At the present time it is those activities are seldom integrated. While research and development may be work-
difficult to find organizations that manage technology as an integrated function and ing on a new product, the remaining functions in phase 3 may be sitting on the side-
holistically. The 5 phases are arbitrary because in reality there could be 20 or more lines waiting for something to happen. They are part of the project in name only.
different phases. In this scenario each function would represent a phase. Much of what Approaches such as concurrent engineering have attempted to resolve some of the
is described as MOT is generally a phase I effort involving some overlap with phase issues, but with relatively little success.
2. Managing research and development usually receives the greatest amount of atten- Successful implementation of phase 3 requires a new way of thinking and a new
tion in reference to management of technology. These two functions also overlap with model. It begins with a clearly defined approach as to what is required in project man-
what is often referred to as managing engineering. I purposely eliminate the use of agement. This type of project management has nothing to do with planning or pro-
"managing engineers and/or engineering" because engineers are not the only special- gramming systems. It has nothing to do with control of costs or schedules. The model
ists involved in research and development-there are many scientists and science deals with the up-front work that must be performed by all the functions. It involves
majors working in these two functions. Phase 1 does not involve managing technolo- inputs from all associated functions relative to an understanding of the resource capa-
gy. It is, pure and simple, management of research and management of development bilities, an evaluation of the infrastructure, a definition of the decision criteria, a well-
since these functions are often only loosely connected. developed statement of purpose, a project specification, and an evaluation and valida-
Phase 2 adds design and manufacturing to research and development and at least tion of assumptions. All these requirements must be integrated through manageable
links the product side of the business with the process side. Little by little organiza- and enforceable feedback loops to take into account the possibilities and limitations as
tions have learned that designs must eventually be transformed into some form of established by each function. What must emerge from the dialogue is a business unit
tooling and eventually to a manufacturable product that meets certain quality and reli- plan that raises the issues as to the factors that define the success of the project. The
ability standards. Phase 2 requires integration of these four functions into a cohesive issues for which no solution exists must be placed on the table. Contingency
group. approaches must be clearly stated. The approach that says "we don't have the right
people for this project, but we'll get it done somehow" does not work.
Implementing a phase 3-or-beyond approach to MOT requires certain specific
operational characteristics:
A level of integrity (call it honesty or ethics; it must be practiced) far above what is
generally practiced.
The ability to face up to the unresolved and potentially unresolved issues; problems
cannot be hidden.
Continuous sensitivity to issues that may in some way modify the initial assump-
tions; if original assumptions have changed, recognize those changes and act
accordingly.
Phase 4 adds the administrative functions to the integration process. These include
the major functions such as human resources, finance, purchasing, patent and legal,
public relations, and general administration. Phase 5, the ultimate level of integration,
adds customers, suppliers, and other internal and external influencers.
These five phases represent one approach for considering management of technolo-
gy as a model for managing. Attempting to reach phase 5 is not an easy task when
research shows that most organizations operate someplace between phase I and phase
2. In reality management of technology begins in phase 3, where integration of the
concept to commercialization process begins.
1.4 SYSTEM MODEL: RESOURCES, resources; the successful use of technology depends on the availability of the other 10
INFRASTRUCTURE, AND ACTIVITIES resources. This is not a profound discovery, yet organizations ignore these relation-
ships. As an example, intellectual property is a resource, but the not-invented-here
(NIH) approach flourishes-start at the bottom of the learning curve, do not build on
Discussing MOT as an abstract concept does not provide much insight into the com- what is known-reinvent the wheel. Time is a vital resource. It cannot be replaced. It
plexity of practicing the basics of MOT. Management of technology is practitioner- includes total time, cycle time duration, and timing. Information is a resource, but the
based. In that sense MOT is complicated by the fact that it involves interaction of peo- sources and integrity of the information must be known. Organizational characteristics
ple with their strengths, weaknesses, foibles, biases, aspirations, and so on. But the are a resource and include more than culture. Even from the limited perspective of
difficulties in exploiting MOT come from a narrow description of the resources of an culture, it is a resource. But when characteristics are described as those principles and
organization, a lack of consideration of the business infrastructure, and little, if any, practices that differentiate one organization from another, the importance as a resource
consideration for the specific activities that are assigned the resources. Resources
is even more profound.
include more than people, plant and equipment, and money.
1.4.2 Infrastructure
1.4.1 Resources
The business unit infrastructure elements listed in Fig. 1.2 are equally important and
Figure 1.2 is a model relating business resources, infrastructure, and activities. It lists determine the viability of the resources. Infrastructure plays a major role in business
the primary elements related to each. This classification is one used by the author to performance. The utilization and viability of resources depend on the supporting infra-
expand the range of the elements involved when dealing in real-life situations. structure. Purposes (mission), objectives, and strategies must flow down to the people
The classification of available resources, while broad in scope, will consist of who make things happen-those responsible for doing the work. Organizational struc-
many subcategories depending on the particular business unit under consideration. ture-the real operative organizational structure, not the rectangular boxes on the orga-
People, plant and equipment, and finance are the traditional resources. These are inad- nization chart-must meet the needs for a particular activity. Guiding principles, poli-
equate in a technology environment. As an example, intellectual property, information, cies and practices, and management attitudes determine how people respond to the
organizational characteristics, time, and customers and suppliers are seldom consid- organization's purposes, objectives, and strategies. The breadth of management exper-
ered as resources. These resources are inside or outside the organization and all are tise and knowledge provides the underlying understanding for effective decision sup-
interdependent. No single resource, by itself, provides any beneficial business result. port and decision making. Managers who do not understand what they are managing
In the leftmost column of Fig. 1.2, technology is highlighted as one of 11 and play the role of administrator make good candidates for the profit-prevention
department. If the infrastructure does not support innovation and accept the associated
risk, none will surface. And finally, the manner in which the organization communi-
cates-not just from the top down, but from the bottom up-and laterally-determines
how this infrastructure is perceived by those who are asked to respond.
1.4.3 Activities
Resources and infrastructure do not reside in a vacuum. They are applied to some type
of activity and can be classified in many different ways. The point is that it is neces-
sary to differentiate among them in consideration of the resources and infrastructure.
Each of these activities will be impacted differently by the resources and the infra-
structure. There is a continuum from almost totally ignoring the other relationships to
being totally dependent on them. An individual person involved in an activity may
ignore the other resources and infrastructure. This will depend on the individual's
proactive qualities, independence of thought, past track record of accomplishment,
self-confidence, and the other personal attributes that allow an individual to function
as a creative and contributing maverick.
Activities that involve more than one person enter a totally different domain that
must take into account the supporting resources and infrastructure. Consider, as an
example, the specific activity related to a project. In this situation exploitation of all
the resources is essential. The infrastructure must support the objectives of the project.
The project must meet the requirements of the purposes, objectives, and strategies of
the organization. An acceptable organizational structure must not impede the forward
progress; the guiding principles and the policies and practices cannot unnecessarily
restrict the freedom to act. Management attitudes and expertise will avoid micro man-
aging yet allow for constructive involvement based on past knowledge and experi-
ence-perhaps even some wisdom. Without management's support for innovation and
acceptance of the associated risk, the project will provide limited benefit. The use of
teams or teamwork has been intentionally excluded from this listing of activities. All
the categories listed under activities except "individual" involve some type of team
effort coupled with individual proactive initiatives.
1.4.4 Technology as a Resource
The relationship of the elements of this model relating resources, infrastructure, and
activities is complex. But then, there is no reason to think that managing is a simple
process. It may appear so from a macro perspective or when quantified in a two by
two matrix in two dimensions, but the real world is more complex.
In Fig. 1.2, technology is highlighted as one of the resources. But technology as a
resource is effective only if it is applied to some specific activity and within the con-
fines of a particular infrastructure. The same is true for every other element of the
resources. People without technology, without available time, and without input from
customers do not enhance performance. People without a supporting infrastructure do
not enhance performance. People without assigned or self-generated activities do not
enhance performance.
1.5 INTEGRATED AND HOLISTIC MODEL
Management of technology is explained with the aid of Fig. 1.3, which shows a model
of what I describe as the tripartite organization. It includes the same 17 functions
shown in Fig. 1.1, phase 5. It includes three main internal organizational units: prod-
uct genesis, distribution, and administration, and a fourth unit, supporting influences,
that is external to the organization.
1.5.1 Product Genesis
Product genesis provides the creativity and innovation for new products. It includes
research, development, design, and manufacturing. The conventional wisdom of dis-
cussing R&D as a unified function leads management to some erroneous conclusions.
For that reason I differentiate between research and development and add the addition-
al function of design.
It may be good public relations to focus on R&D expenditures, but in most organi-
zations the "R" is a relatively small part of the total-most of the expenditures are
allocated to "development." Most organizations allocate a minimum of resources to
what would be classified as research. Most of what is classified as research involves a
search for a solution to some unknown requirement of a product or process develop-
ment program-generally only some small segment of the total project. These projects
usually deal with knowledge that is integrated in some new way or processed in some
new way in order to meet a product specification. The process basically involves
packaging existing knowledge in new ways. This is not to minimize the creativity
required by design and development. On the contrary, that creativity is vital but sel-
dom yields new discoveries.
after service, and finally and the most forgotten: to bring the customer feedback to the
organization in a timely manner. The distribution function also provides a rich source
for new-product ideas.
1.5.3 Administration
Administration technologies are more difficult to identify than the technologies of the
product genesis and distribution functions. When it comes to administration, many
questions are raised at the suggestion that these functions utilize specific technologies.
While science and engineering, in the strictest and classic sense, may not be involved
in these administration functions, they have their own technologies. The use of infor-
mation systems as technology in these administration functions is accepted, but skep-
ticism arises when the word technology is attributed to the related administration func-
tions. I suggest that each of these administrative functions has its own set of
technologies, keeping in mind that technology is defined as "a means for accomplish-
ing a task."
Human Resources. Human resources technologies include personal appraisal forms,

flexible scheduling, compensation based on performance, the behavioral science base,
educational technology, and all the work processes used in meeting their objectives.
Financial. Financial and accounting departments also use specific technologies. The
processes used to justify investments in capital equipment, research, new-product
development, and the miscellany of business operations are all technologies. issues, catastrophes, and so on. The advanced technologies will play a major role in
Additional technologies come into playas financial departments attempt to make a developing new communication models.
clear distinction between project justification and project evaluation. Are balance
sheets and profit/loss statements a result of processes and technology? How many Purchasing. Purchasing plays a major role in project success. Its processes deter-
decades did it take the financial and accounting functions to recognize that traditional mine whether projects are completed on time, within specifications, and within cost
accounting methods did not meet the needs of manufacturing organizations? estimates. Restrictive policies and procedures, methods of selecting vendors, and lim-
iting access to vendors solely by purchasing or with a purchasing representative create
Information. Information, as a function, is generally considered to involve technol- delays. These processes are a type of technology.
ogy. But this is primarily because of the extensive use of computer hardware and soft-
ware. As in the other functions, process plays a major role in managing information- General Administration. General administration functions comprise a group of sub-
if not, it must. Just think about how much data you receive and how little information. functions that are essential in support of the organization's objectives. Figure 1.4 pro-
The techniques by which information departments make decisions are technology. The vides examples of some of these administrative subfunctions where technologies exist
eventual use of expert systems or artificial intelligence provides additional examples but may not be self-evident.
of information technologies.
Patent and Legal. Patent and legal, which in recent years has expanded to protect- 1.5.4 Product and Service Organizations
ing the intellectual property of the organization, uses processes which are technolo-
gies. Contracts, agreements, and other legal documents are a form of technology. This tripartite organizational structure of Fig. 1.3 applies to product as well as service
Pareto's 80/20 rule (80 percent of the work performed in 20 percent of the time) is a industries. A close look at the differences between product and service businesses
technology. It is a "means for accomplishing a task" more effectively. It may substi- clearly shows that both are similar, if not identical.
tute using the tools for evaluating situations to determine the degree of risk rather than An accounting firm, generally considered a service industry, sells a product. That
dotting every "i" and crossing every "t" and still ending up in litigation. product is information in the form of a report. It utilizes all the functions-research,
development, design, and manufacturing-of the tripartite organization shown in Fig.
Public Relations. Public relations uses technologies to convey the interests of the 1.3. You may accept research, development, and design as part of an accounting firm's
organization. Those interests usually revolve around content and focus attention on functions but probably question the use of the term manufacturing in this accounting
process. The process by which private (individual) knowledge and public (communi- example. In essence, the work effort to prepare the contents-the mental work-of
ty) knowledge are differentiated plays a major role, whether related to products, social that report falls into the classification of production. It is necessary to expand the use
of the word manufacturing only to include information products and recognize the 1.6 STRATEGIC, OPERATIONAL, AND
high level of knowledge, skill, and intellect required to produce them. MANAGEMENT ISSUES
The fast-food industry, at the opposite end of the intellectual spectrum, is classified
as a service industry, but it embodies all the elements of the tripartite organization. The underlying elements of any organization include its purpose or purposes, its
There is probably no dispute that the functions of research, design, and development vision, its objectives, its strategies, its operations (doing the work to achieve its pur-
apply, but the word manufacturing probably raises some concerns-however, every poses, vision, and objectives), and its management of the process from purposes to
fast-food establishment has its own production facilities-the kitchen. customer satisfaction. A view of MOT from the perspective of strategy, operations,
These two examples, with accounting at one end of the spectrum and fast-food and management shows the extent to which MOT in reality is congruent with manag-
establishments at the other end, require only a new view of what manufacturing
ing the enterprise.
includes. At the accounting end of the spectrum the product is information developed
by highly educated and skilled professionals-at the fast-food establishment the prod-
uct is food in one form or another provided by lower-level education and skills.
What are the appropriate limits for management of technology? The comprehen- 1.6.1 Strategic Issues
sive and holistic approach described around Fig. 1.3, of the tripartite organizational The strategic issues of MOT require greater attention by managers involved in devel-
.structure, may be considered idealistic, but the gap between the present segmented oping business unit strategy. Consider the following strategic issues:
approach to technology management and the comprehensive approach must be closed.
The past malpractice in technology management was prologue. The failure of pro-
Understanding the scope of managing technology
jects to meet the specifications, the schedule, and the cost projections provides suffi-
cient evidence that not only are the technologies related to science and engineering Managing technology-different levels
and information mismanaged but the supporting technologies in the many support Technology managers-who manages technology?
functions are totally ignored.
The media more than adequately cover major and publicly oriented project fail- Adding value with technology
ures. In recent times the Denver airport and the Chunnel (underwater Channel tunnel) Developing a technology policy
connecting England and France are but two major examples. In both cases the time Bridging the gap between technology policy and results
schedules and the costs far exceeded the original projections. But the thousands of Precursors to technology strategy
projects in industry, academia, and government that miss their projections seldom
Including technology in business strategy
make the headlines. In many cases managers rationalize their organization's misman-
agement with a shrug of the shoulder and "we can't expect perfection." But what is Rationalizing strategy and operations
the cost? Managing the decision-making processes
Probably less than 5 percent of all projects meet the projected specifications, Systems thinking-the imperative
schedules, and costs. For those of you who question this statement, look back at the
work effort for the last I to 5 years in your own organization and determine how many Negative impact of single-issue management
projects met the original projections-no excuses for anything, no fudging-the pro- The role of technology in achieving competitive advantage
jections were either met or not met. There are lessons to be learned from such an exer- Managing technology in a dynamic environment
cise, and that investigation will show the lack of managing technology-not just man-
aging the science- and engineering-related aspects but all the technologies relevant to Figure 1.5 details the sub elements of these issues involved in integrating technology.
the business unit. As an example, think of the potential impact of human resource During the strategic-planning craze, technology was essentially ignored. Elaborate
technology if creativity and innovation became a dominant factor. Human resource strategic plans were developed without any strategy. Volumes were prepared but were
technologies need to be thought of in a new way. They require a shift in the basic seldom reviewed after approval. Strategic-planning processes yielded volumes of data
human resource model. instead of information, an interjection of operational detail but insufficient as an oper-
The new model expects creativity and innovation from human resource profession- ational plan, and prepared on a basis of at least questionable, if not false, assumptions.
als at all levels and in all assignments. That new way of thinking requires understand- Those assumptions included the assumptions of a static rather than a dynamic environ-
ing processes and determining the impact of those processes before attempting implement, were based on a questionable premise of an annual event, dealt with data rather
mentation. At the very least, the model demands examination of the effectiveness and than information, focused on analysis without comparable emphasis on synthesis,
the efficiency of human resource activities. The model also requires determination of failed to translate the strategy in meaningful terms throughout the organization, and
the levels of creativity and routine. What benefits arise from the multi page annual or ignored technology that affects over 75 percent of the sales value of production.
semiannual appraisals? What purpose do they serve? Why use them? Would a blank The degree to which each item in Fig. 1.5 affects performance will depend on the
sheet of paper with the individual's name at the top suffice? Do managers really know organization's purpose(s), industry linkage, and current competitive position and the
how to appraise performance? This new model demands dissatisfaction with the status activities required to attain the objectives. One point is certain-technology cannot be
quo. The same model applies to all business unit functions, including finance, market- ignored and cannot be given short shrift. That strategy begins with an understanding
ing, and so on. of the basics of MOT and the role of technology in the business enterprise.
This list of strategic issues may be considered too extensive and too difficult to
consider or implement, or you may flip the coin to the other side and ask, "What's
new?" But in that process you also must make a decision as to which elements are not
important. Can decision processes be discounted? Can systems thinking be replaced
with single-is sue-management? Can rationalizing strategy with operations be eliminat-
ed? Can technology continue to be ignored in the process of developing a strategy? Is
there a viable technology strategy? Is the process of including the technology issues in
business strategy essential? Absolutely, yes.
1.6.2 Operational Issues

The operational issues of MOT present a similar vast array of topics that must be
defined in the context of the business. It is even more extensive than the list of strate-
gic issues. Consider the following major categories of operational issues that must be
resolved:
Idea and concept generation

Forecasting
Evaluating
Justifying investments
Planning management
Managing the project management process
Managing discontinuities
Descriptions-how, where, and why
Resolving problems and exploring opportunities
System cycle time management
Technological intelligence
Innovation
Entrepreneurship
Technology transfer
Information
Functional integration
Investing in research
Organizing for effective product development
Market-pull and/or technology-push
Introducing new processes
Introducing new products
Selecting, monitoring, and terminating projects
Integrating technology, products, and markets
Linking purposes, objectives, and strategies
Focusing on value-adding activities
Resolving the information paradox
Effectiveness, efficiency, and economic use of resources
ment, while appearing totally unrealistic in the eyes of manufacturing, did provide the It is not important that an organization use this classification. It is important, how-
necessary impetus to obtain better results. Managers should not be averse to setting ever, to develop some format for classifying technologies in a manner that is meaning-
difficult targets provided they do not become overly concerned about some arbitrary ful to the specific organization. Management seldom faces up to the realities of tech-
targets but look for the actual realistic gains. nology classification. Too often technologies used by competitors are considered as
The issue of raising expectations requires serious attention. Consider the situation proprietary, the list of supporting technologies is limited because they are known,
associated with raising the expectations of engineers and scientists. Only one question every technology seems to be a leveraging one, the list is too long, the list is too short,
needs to be answered to demonstrate that these professionals spend probably less than and so on. In reality, most organizations depend totally on known technologies and
50 percent of their time in their professional endeavors. The other 50 percent involves may only be combining them in creative ways. Some realism must be applied to this
routine work well below their level of expertise. Decisions regarding this topic as well classification process. Every technology is not a proprietary technology. Every tech-
as others must be made consciously. Assumptions must be validated and qualified. nology is not a core technology. Many commonly known technologies are not leverag-
Information should not be accepted without questioning the validity and the integrity ing technologies. This classification of technologies must be rationalized in some way.
of the assumptions. As an example, is there a proper ratio for these technologies:
Now consider linking these operational issues with the strategic issues and subse-
quently with the management issues. What results is a continuum from strategic to State-of-the-art
operational to management, to strategic or operational, and so on in a continuous feed-
Proprietary
back loop. A change in one requires a change in the other. You may argue that strategy
is a management issue. It may have been at one time, but people at low levels in the Known
organization make strategic technology decisions. A relatively young engineer can Core
make some major technology strategic decisions in the product or process develop- Leveraging
ment area. A young marketing or sales representative may provide creative input for
future market development, new-product requirements, or needs of customers. Supporting
Pacing
Emerging
1.7 CLASSIFICATION OF TECHNOLOGIES Scouting
There is some ratio of these technology classes which determines where organizations
Technology is technology is technology, and so on. Not true. Managing technologies
invest their resources. Those percentages will vary significantly not only within orga-
requires some delineation of the technologies into categories. There are no agreed-on
nizations but also within organizations in the same industry. The purpose for identify-
approaches for classification. Technologies can be classified according to any of the
following categories: ing these classes is to recognize where those resources are being applied. For example,
some resources must be applied to scouting new technologies, but a relatively small
State-of-the-art-technologies: those technologies that equal or surpass the competitors percentage. Yet many organizations fail to recognize the need to allocate some
resources to this class.
Proprietary technologies: those technologies protected by patents or secrecy agree-
The classification allows putting technologies into perspective. While the core
ments that provide a measurable competitive advantage
technologies may be considered the most important, the other classes cannot be
Known technologies: those technologies that may be common to many organiza- ignored. Competence in supporting technologies may be just as important as the core
tions but are used in unique ways technologies. Work on emerging technologies must be planned on the basis of busi-
Core technologies: those technologies that are essential to maintain a competitive ness unit strategy. Scouting technologies that flow into the emerging technologies and
position then into other categories represent future technological opportunities. The future
demands consideration of the long-term technology needs. Technology classification
Leveraging technologies: those technologies that support several products, product
lines, or classes of products can also be viewed from the perspective of proprietary technology that provides com-
petitive advantage and state-of-the-art technology which may be available to competi-
Supporting technologies: technologies that support the core technologies tors.
Pacing technologies: technologies whose rate of development controls the rate of Technology classification will also be modified by the type of product or process
product or process development under consideration. As an example, new products and processes can be classified as
Emerging technologies: technologies that are currently under consideration for
future products or processes "Me, too" products or processes
Minor product or process improvement

Scouting technologies: formal tracking of potential product and process technolo-
gies for future study or application Major product or process improvement
Idealized unknown basic technologies: technologies that, if available, would pro- New-to-the-market products or processes
vide a significant benefit in some aspect of life Breakthrough products or processes
Of course, each organization must describe just exactly what terms such as "me, developing another generation of technology managers who cannot provide the neces-
too," "minor," "major," "new to the market," and "breakthrough" really mean. It is sary technological leadership-that leadership requires making a creative and innova-
difficult for organizations to acknowledge that their products fall into the me, too cate- tive contribution to the enterprise; thus we develop another generation of technology
gory. administrators rather than technology managers. MOT, a multidisciplinary as well as
There are no generalized rules that describe the relation between types of technolo- interdisciplinary discipline, is a practitioner's discipline. Academia must focus on rel-
gies and their application to different types of products or processes. At one end of the evance and at the same time not ignore the theoretical foundations where they apply.
technology continuum, a breakthrough product or process could involve state-of-the- Those contemplating attending a course in MOT must ask some questions. For
art or proprietary technologies. But a similar breakthrough product or process could instance, is the purpose to obtain a degree or to gain an understanding of the issues in
involve known technologies but combined in a unique way. management of technology? With a bias, I suggest that the purpose is to develop an
understanding of the principles of MOT. MOT involves managing with the systems
approach. Without hesitation, I say accounting or economics majors will not manage
1.8 EDUCATION IN TECHNOLOGY technology. Nothing against accountants or economists. They playa major role in
MANAGEMENT business management, but they do not have the background to manage technology.
MOT is a hands-on profession. It demands a broad understanding of technologies
related to the specific business.
Some universities offer courses in the management of technology. These usually take
the form similar to an executive M.B.A.-every other weekend on alternate weeks or
some such part-time arrangement. Most of these programs lack substance and focus
more attention on a graduate degree than on the content. Awarding a master's degree 1.9 SUMMARY AND CONCLUSIONS
when the subject matter is often at the undergraduate level gives false impressions of
the educational value. A review of many curricula reveals no clear understanding of Management of technology provides firms with many opportunities for improving per-
purposes, objectives, and strategies. MOT courses are another product offered in the formance. But gaining that additional effectiveness and efficiency comes with a price.
smorgasbord of master's-level programs. The cost of entry requires a change in thinking, a new management model, a focus on
There is no simple process for delineating the differences of the objectives of vari- the integration of the pieces of the system, and ignoring the quick fixes promoted by
ous MOT programs. One analysis, from a study by Kamm, * shows that course objec- the latest management guru. MOT is not a quick-fix approach. Figure 1.10 summa-
tives show a great deal of diversity in thinking about what MOT should include in the rizes the discussion of the description, scope, and implications of MOT.
curriculum. My analysis of Kamm's study shows that if the verbs used throughout the The summary of MOT illustrated in Fig. 1.10 brings together the phases of MOT,
discussion of academic curricula in MOT are identified, some interesting conclusions the primary elements, the business issues, and the tripartite organization. Each of these
can be drawn. The verbs have been classified in relation to "objectives for whom." Do integrators interacts with all others. At a minimum, at least 10 interact at anyone time.
these verbs relate to professors, students, or both? Here are the findings: This is based on the fact that in the phases of MOT, only one phase would be involved
at anyone time. The complexity of these interactions is further magnified by the num-
Professors: clarify, design, develop, give, help, introduce, offer, present, promote, ber of subcategories involved. As an example, a phase 1 approach to MOT involves
provide, utilize resources, infrastructure, activities, management, strategy, operations, and the three
Students: acquire, come to understand, gain, overcome, study, understand major segments of the tripartite organization. If a systematic management process is
practiced, the number of these interactions will not pose a major problem. At the same
Professors and students: consider, examine, explore, identify, recognize
time, those interactions cannot be ignored. They are real, and that is why MOT
requires their consideration as part of the system.
Course objectives described by these verbs convey the idea of transmitting data and
For a moment consider the cost in correcting the malpractice in management due to
possibly information as contrasted to providing opportunities for gaining knowledge.
not meeting project requirements and specifications, not completing projects on
There is a distinct difference between information and knowledge.
schedule, and not meeting projected costs. When less than 5 percent of all projects are
The objective-related verbs are weak-in essence, professors give, and students
completed within specification, on schedule, and on time, it is certainly time to reap-
receive. The objectives of MOT courses must emphasize "doing something" of signifi-
praise the ways of managing. These corrections will not be made using the single-
cance that will lead to knowledge rather than data or information. This approach of
issue management model, in which every function attempts to build walls around its
acquiring data and information ignores the basic requirements of MOT: creativity and
empire. That kind of activity is totally unproductive in a competitive economy. So to
innovation. It appears that those studying MOT need not be the idea generators and
introduce MOT to your organization, consider some of the following suggestions.
the innovators, but will manage the idea generators and innovators. This approach by
the academic community in teaching MOT is unfortunate. It places us on the road to
Competitiveness begins inside the organization. More importantly, it begins with
the individual. Compete with yourself, your past performance, and not with some
external competitor .
*Judith Kamm, Bentley College, Waltham, Mass. Report on academic programs in the management of
technology. Presented during a business meeting of the Technology and Innovation Management Division of Recognize the role of process-not methods or methodology but process-process
the Academy of Management, August 1991. with substance, and not just going through the process.
and process development and to capital investment but to all work in the adminis-
trative functions. Technology can be justified if it provides a benefit. If it does not,
it should not be implemented. That benefit, however, must be measured qualitative-
ly as well as quantitatively. Clearly delineate the benefits from the investment.
Emerging technologies-whether related to product, process, manufacturing, or
other activities-should be treated as unknowns. Even scaleup of processes requires
research.
Establish criteria for investing in new technology. Objection by a single individual,
regardless of management level, cannot be justified. Decisions to invest must be
based on business needs and not only on financial analysis.
Raise the levels of expectation for every person from the CEO to the lowest level.
Emphasize activities that increase the value added for the effort expended.
Technological literacy becomes an absolute must for MOT. Obviously the level
depends on the need. But people involved in making technology-related decisions
(at least those of significant scope) must understand exactly what the decisions
involve.
MOT is not a mystery. It requires following fundamentals of management. It
requires taking a systems approach. It requires including more than the activities of
scientists and engineers. MOT involves the complete organization.
Managers at all levels and in all professions must recognize that people generally
do not buy technology-they buy performance in some form or another.
Man is limited not so much by his tools as by his vision.
PASCALE AND ATHOS
The Art of Japanese Management, 1981
2.1 TECHNOLOGY MANAGEMENT AS AN

EMERGING DISCIPLINE
Technology management is rapidly emerging as a discipline combining the elements

of business management and engineering. In support of the meaning of technology
management one description views this discipline as
the research and education on how to:

Manage the technology component of individual product life cycles,
Capitalize on process technology to gain a competitive advantage, and
Relate and integrate product and process technologies.
Technology management is applicable to every phase of technology-oriented business-
es (in either application or development) such as marketing (services) and planning
activities as well as R&D, product development, and manufacturing.' Major elements
referred by the National Research Council Task Force Report on Management of
Technology include
1. Research management
2. Product planning and development
3. Project management
4. Integrated manufacturing processes
5. Production control
6. Quality assurance
7. Information systems design and use
2.1
2.2 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY
BUSINESS ARCHITECTURE 2.3
8. Software development
9. Product vendoring 2.1.3 Managing the Chain
10. Corporate technology Managing these steps, effectively and efficiently, is often met with some difficulty.
Problems emerge in implementing functions that are needed to achieve the acceptance
11. Integration of technical [disciplines] with business and financial decision making
criteria. The management practice is "sometimes ineffective resulting in lack of sched-
ule integrity and resource drains,"4 thus impacting the improvement of the total devel-
"Formal knowledge of technology management is valuable, not only for managers of
opment process.
R&D, but also for manufacturing, marketing, financial, and general corporate manage-
An assessment criterion that allows management to make functionally sound and
ment. "2 Therefore, it is important to view the management of technology not only
less costly decisions often is lacking. The cost of lack of commitment to schedule and
across all disciplines and industries but also in a global environment in a rapidly
the drains on resources of the firm result in a poor "payout" to the development pro-
shrinking society. Both manufacturing and services industries are in need of this
knowledge today, although the latter is just beginning to be cited with frequency. ject.
2.1.1 Goals and Strategies of a Firm 2.1.4 Use of Technologies
Technologies can be used as a component, module of a product, or a part of a process.

A firm's goals and strategies represent the aggregate of its products, technologies, and
An example of a technology within a product is the automatic gear that is an intrinsic
services. "For such goals to be credible they must be linked directly to the set of
part of an automobile. An example of a technology that is part of a process is the lami-
development projects the firm intends to undertake [or are in-process or in the market-
nating process in metallurgy to produce sheet metal. The ideas behind technologies
place]."3 Therefore, a business architecture in technology management follows for
such as these are often applicable to other uses and can be expressed in the form of
new development projects and their functions. It identifies what business parameters
derived demand.
to address to make a good business decision regarding key problems encountered in
achieving the objectives and goals of the strategies of a new development project.
These problems occur at different steps in the strategic and development processes.
2.1.5 Decision Problems in the Use of Technology
2.1.2 Development Chain The decision as to whether to use a technology can be problematic for a variety of rea-
sons. The technology within a product may not be responsive to customer needs in
quality, function, or performance. Or the technology chosen for a process may be dif-
The development of any product or service can be described as a chain of acceptances
ficult to implement or lead to poor and costly results. Also, it is possible that an alter-
by management in its travels from idea conceptualization to the marketplace.
nate technology is the right one rather than the technology selected. In addition, the
Essentially, each acceptance step is a gate that allows one to proceed to the next major
technology may lack synchronization with the committed schedule, the engineering
step. Concurrent engineering has allowed one to accelerate this process, but the over-
changes may be excessive, the wrong product may be produced (i.e., unresponsive to
all business decisions related to acceptance are essentially the same. This chain of
acceptance steps is described later, but is defined below to include the customer's needs), the development resources may be displaced to other products
for various reasons, or the technology transferred may be changed by product develop-
1. The research and development of an idea or invention ment to the degree that the technology no longer resembles the technology which it
2. The competitive evaluation of the idea represents or for which it was originally intended. There are many other reasons why
wrong decisions and actions can cause problems in managing technology.
3. The research required in technologies to develop the idea
4. The transfer or purchase of a selected technology for support of a process, a com-
ponent of a product, or a further development of the technology for its own mar- 2.1.6 General Development Steps
ketability
5. The acceptance of a proposal to develop the product It is necessary to look at the general development steps (shown later in Figs. 2.2 and
2.3) and identify key checkpoints in decision making that relate to business parame-
6. The acceptance of the design of the product and/or technology ters.
7. The acceptance of the product's manufacturability, i.e., at the volumes and specific These steps have a business assessment criteria associated with them for which
quality levels required there must be a payout or payoff. Payoff, in economic theory, often is expressed in the
8. The acceptance by the customer of the product that is marketed form of a matrix and is "the interaction between arguments or conditions exemplified
in terms of firms or people."5 The payoff is the interaction between the accepted
2.4
PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY
development steps and the required business parameters. In reality, these business
parameters, aggregately, contribute to the business strategy of the firm. The action to 2.2.2 Understanding the Architecture (Process)
respond to this payout can be a benefit to both firm and customer alike, or can be an
To understand any process, it is necessary to identify its goals and the strategies used
improvement in the operational cost of the business. The effective managing of tech-
to achieve these goals. It is said that a goal "should focus on significant areas of orga-
nology in the business decision-making process directly entails the evaluation, use,
nizational need."6 A strategy is "a guide to action or a channel of thinking,"7 i.e., a
and consequences of technology. Therefore, technology management requires an
general direction employed to achieve specific goals. There can be more than one
architecture (a structure of interfaces) that contains a technical and business decision-
making process recognizing these technological impacts. strategy to achieve the same goal. For example, let us say that a computer manufactur-
er is to develop information-handling products that will be responsive to customers'
needs in the office environment. One solution is to automate the office using worksta-
2.1.7 tions, printers, and intermediate-size computers to respond to those needs. One manu-
Technical and Business Views
facturing strategy may be to build these products using the company's resources.
Another manufacturing strategy may be to use vendors in place of the firm's own
Technology management puts into perspective the ways of advancing technology for
manufacturing facilities. The goal is still the same. In the same fashion, a technology
the benefit of its recipients. To survive, a business must be profitable. If the firm is
is developed with function, quality objectives, and performance as its goals. One strat-
profitable, it must be responding, positively, to the demand of its products and ser-
vices. egy may use a particular innovation as the technological solution, yet another strategy
may consider a completely different innovation as a solution.
Therefore, it is necessary to be cognizant of both the technical and business views.
From a product development viewpoint, management is faced with many choices in
technology. Technologies are researched, developed, or procured for the products
intended in the marketplace. These technologies must be coupled to the payout of the 2.2.3 An Example in Technology Research and Transfer
business.
As an example, technology research and transfer is used in Fig. 2.1 to show the prac-
From a business viewpoint, the products result in profitability to the firm and bene-
tice of technology management in responding to the business. The model shows a
fits to the customer. Effective management of technology is achieved when the prod-
process that identifies major development steps beginning with technology research
ucts that the firm markets are profitable and the processes that are developed to build
and technology transfer, followed by product development, and market segmentation
them are cost-effective. Technology is the means of solving the customer's problems
leading to an ultimate customer payoff. Correspondingly, on the business side, there is
for two primary reasons: to help them become more efficient and to help them grow.
also a process which shows projects funded on the basis of customer requirements
Also, the firm's processes for supporting these products can produce cost-effective-
(wants and needs), funding priorities, the strategy of the business, and the contribution
ness and time savings through the improvement of productive yields.
that the projects must respond to achieve revenue and profit objectives. Successful
correspondence between development steps and payout to business objectives through
decision making gives the ultimate successful result.
2.2 INTRODUCTION TO THE BUSINESS
ARCHITECTURE
2.2.4 Phases of the Architecture
The architecture that follows shows the major functional steps in research and devel- The overall architecture is in two phases: the research-and-technology phase shown in
opment with their corresponding examples of business parameters. These steps are Fig. 2.2 and the product development phase shown in Fig. 2.3. It is stated that "The
those used in the industrial sector and describe the technology and product strategy product development process represents the crucial interface between applied
processes employed in the development process. Analogous steps exist in the service research, development engineering, and the market groups."8
sectors but are not addressed here.
2.2.1 Definition of a Functional Step 2.3 RESEARCH-AND- TECHNOLOGY PHASE
Each critical step in the process, from research to the marketplace, is identified and The research-and-technology process phase begins with research and closes with suc-
mapped to corresponding business factor(s) that provide a return or payoff. The busi-
cessful technology transfer to the product development phase. The goals of the tech-
ness architecture, consisting of a technology and product development chain, is nology strategy are represented often by quality objectives, performance objectives,
mapped against the corresponding business factors; these business factors, in turn, and function(s). The steps include
form a chain which is defined. Each functional step invokes one or more processes
and, if managed effectively, responds favorably to the business factor(s) of the enter- The research and development of the idea or concept
prise. A functional step generates other steps for which business decisions must be
made. These subordinate steps may be identified only to make a point. An analysis of competition that relates to the idea
The creativity and innovation to develop technology(ies) derived from the idea
The technology research, including technology forecasting, selection, and the trans-
fer of technology to development
2.3.1 Research and Development (R&D)
One standard definition states that research is an undirected basic science or a directed
or applied science.9 Development in research can result in innovative products and
processes from either of these sources. Research differs from development of a prod-
uct in that it is an exploration of ideas rather than a tangible output to be marketed.
There is no guarantee that a new idea will be successful. R&D must provide a high
2.8 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY BUSINESS ARCHITECTURE 2.9
degree of insurance so that future gaps can be closed to meet corporate goals, such as Preproject stage, including inside and outside R&D communications of what may
profitability. Therefore, many innovations are necessary and should be allowed to pro- be of interest to the firm and networking ideas with peers
liferate to assure the achievement of these goals. "Invention is an idea that must next Project possibilities: what could be useful to the customer
be reduced to practice, i.e., one must show the technical idea is feasible and can be
Initiation of the project: managing the idea with the marketplace
demonstrated." I0
Industry analysis is one step used by business strategists to examine the external Execution: managing the innovative project
environment to assist in establishing business goals. Thus, a payout to industry analy- Outcome evaluation: evaluating the development of the innovation
sis can be achieved through the practical results responding in invention. For example, Project transfer: transferring the development to the next point for further work on
the invention of semiconductors was well received and was a handsome payout to the
the project.
industry providing a new generation of computers.
As simply as this is stated, the important point is that innovation as differentiated from
creativity has a constant reference to the marketplace because that is where the oppor-
2.3.2 Competitive Analysis tunity (return on investment) and the risk for success or failure lie. Risk analysis
assesses creative and innovative ventures in technology to determine technologies that
Competitive analysis verifies that the innovation is valid, timely, and responsive to are worth considering. Many risk analyses are common tools for the entrepreneur who
competition. This analysis is portrayed by asking four questions: exploits the opportunity to get the maximum return on investment. For example,
Marconi, who did not invent the telegraph, exploited the opportunity with risk and
"What are the implications of the interaction of the probable competitors' moves
received a handsome payoff from the return on investment.
that have been identified?
Are the firm's strategies converging and likely to clash?
Do firm's have sustainable growth rates that match the industry's forecasted growth 2.3.4 Technology Research
rate, or will a gap be created that will invite entry?
It is stated that there is a technology paradox which concludes that all technologies are
Will probable moves combine to hold implications for industry structure?"]]
fated to be replaced, eventually; however, most attempts to replace them will fail.
It is fair to say that technology management is instrumental when applied through "Starting with the beginning step-a bright new idea-those that survive all the way
forecasting, assessment, and implementation of technologies for competitive advan- to application are probably less than 1 per cent."IS This statistic calls for the primary
tage. Competitive advantage views technology as a way of improving a process, thus task of technology forecasting to be performed as a required part of technology
reducing costs, or providing customers with a best-of-breed benefit. In addition, for research in this process.
example, consider analyzing a manufacturing process. A competitive advantage Technology forecasting is defined "as a collection of formalized processes or meth-
against a competitor can be achieved by assessing a best-of-breed process of any firm ods of future technology evolution caused by developments in science and society, and
regardless of whether the process is a competitor's or from another industry. the interactions between these developments." Note that
Scientific phenomena are precursors to technology. All technologies are based on

2.3.3 Creativity and Innovation exploiting the possibilities of guiding the selection of the courses of natural events and
states of a phenomenon .... The discovery of a scientific phenomenon is a precondition to
"Creativity by thought is invention and that inventiveness is a quality usually required the utilization of that phenomenon for a technology-a precursor to technology forecast-
and always desirable in all phases of the innovation process."12 Formulation of "the ing.16
creative process contains the following stages:
There are two major types of technology forecasting: exploratory and normative
The perception of the problem (coming from the R&D process) with its idea(s), technology forecasting. Exploratory forecasting begins with today's knowledge and is
Frustration of the inability to solve it, oriented to the future. An often-cited example is the succession of techniques used for
Relaxation or sleeping on the problem, the function of lighting, in which the 1860s' paraffin candle progressed to Edison's
first lamp, followed by the cellulose filament, tungsten filament, sodium lamp, mer-
Illumination or sudden inspiration, and
cury lamp, fluorescent lamp, and white light (and now the halogen lamp).17 This is a
Solution and verification."13 deliberate evolution.
Normative technology forecasting first assesses future needs of society and market
Innovation exploits opportunity to seek a return on investment. Creativity provides the potential and analyzes these for their technological potential. An example of this type
forum for innovation by being one of the requirements for the successful entrepre- of forecasting is the automatic gear shift. To expand the demand for driving automo-
neurs in their quest to innovate. Six stages are outlined in the innovation process: 14 biles to a significantly greater number of users, it was necessary to satisfy a need for
2.10 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY BUSINESS ARCHITECTURE 2.11
"ease of use" with a much simpler and less intimidating technology by embedding the A product proposal
gear shift within the product and providing "automatic" control to the driver. Design of the product with its relevant technologies
Surveys find that "innovation shows clearly that normative technology forecasting
Capabilities of the manufacturing or software processes to build and support the
has a [greater] potential for success than exploratory technology forecasting."'8 Still
another approach to technology forecasting is viewed as a creative problem-solving product
process with techniques which can be used equally well to stimulate group creativity. The marketing (and servicing) of the product to potential customers
An example of this was "the completion of the lunar mission with astronauts requires
These steps constitute the major gating factors for delivering products and services.
the completion of a number of inventive problem-solving steps that can often be
These steps, like the ones in the research and technology phase described in Sec. 2.3,
approached in a number of different ways."19 Customer requirements help identify
constitute the major checkpoints for delivering technologies to product development
technologies that are needed to assist in solutions for customer operations or to help
customers grow. or for process implementation of the product.
Accordingly, "some people, especially economists outside the steel industry,
already saw clearly the need for major technological change that would convert steel-
making into a chemical flow process. This temperature-conserving flow process 2.4.1 Product or Technology Proposal
would have a significant impact on the economy and did."20
A product proposal is a common instrument used by management to review and con-
sider new products or major enhancements in the product line. This proposal is best
described with the following content:24
2.3.5 Technology Transfer
An opportunity analysis which analyzes the characteristics of demand and competi-
The technology transfer step results in the transfer of a technology from its develop-
ment to product development and manufacturing. It can be considered as part of a tion
component or module in a product, or a product itself for derived demand, or it may The sociotechnical environment which assists in defining the opportunity
be used to support or implement a process. The feasibility and capability requirements of the firm's engineering, manufactur-
There are two major concerns in technology transfer viewed in two dimensions: ing, and marketing resources which relate to the potential product solution
technology and people. The first dimension is "the problem of transferring informa-
A market structure and market segmentation evaluation of the competitive econom-
tion about physical phenomena, equipment, analytical and manipulative techniques,
ics, and the design and communication alternatives
terminology, etc. associated with the technology."21 The transferal of information can
introduce ambiguities in specifications, misinterpretations of meaning, and lack of on- The overall firm's line of business policies and strategies as they relate to the new-
the-job training to understand the technology and its interdependencies and architec- product opportunity
ture. The second dimension "concerns the feelings and attitudes in both organizations
[of] R&D and product development engineering [regarding] the two sets of people Using this as the background of the proposal, the outline of key parts to its contents
with different skills, values, and priorities to become successful in passing the baton must be a part of the business case and include
from one to the other."22 This is often a problem in management style and practice.
Funding is needed in the technology transfer process to support the transfer of critical The product's business objectives such as revenue and customer demand from ben-
technology for inclusion in a product or process. For example, there is "an important efits derived from the product or technology
property of technological innovations for full-scale production settings that remain to A description of the product or technology
be considered and that is the impact of learning effects on unit production costs and
pricing of an innovative product."23 The market channel to be used
The segment(s) of the marketplace being addressed
Preliminary market tests with their results to determine the usefulness for the prod-
2.3.6 The Payoff uct, if possible
A description of the market opportunity, e.g., what the market is and who the com-
The payoff of a timely technology can make a firm gain a market edge by lowering
peti tors are
price, even with a strategy that places it below production cost. The expectation is that
increased sales would ensure future cost reductions from increased volume of output A description of the product opportunity from the firm's viewpoint
due to increased sales. The opportunity sizing, e.g., how large is the opportunity in the market sought after
and how much is anticipated for this product
The financial risk and summary of measurements such as return on investment, cus-
2.4 PRODUCT DEVELOPMENT PROCESS PHASE tomer value, and return on assets
Work schedules, resources required, and expected time for completion and delivery
In most manufacturing firms the critical product development steps are similar. These
On review and acceptance of the proposal the product is funded, dropped, or returned
functional steps include
parameter for producing effective results. The morphology presented identifies busi-
to the "drawing board." The positive response to the business case to the proposal is
ness objectives as the practical considerations of the firm. Without that, significant
the payoff. If the analysis of the opportunity shows a potential for the proposed prod-
costs can be experienced. What is demonstrated here are the examples of business para-
uct, then a reasonable business case can be developed and a proposal accepted.
meters and their relationship to critical functional acceptance factors in the "value
chain" of the enterprise from research to the marketplace. Technology is the lead factor
and, to be managed successfully, requires a progression of decisions from a business
2.4.2 Product Design and Technology perspective. Without that, it can become a costly venture. These numerous examples in
this architecture demonstrate the need for technology management to realize the firm's
In this step, the design specifications, which include the technologies to be incorporat-
ed, are developed. Design and product engineering reviews and modifies these specifi- profitability and customer satisfaction as the ultimate payout to the firm.
cations for manufacturing implementation. The acceptance of the design and technolo-
gy is reached after the models of the product design and the technology are developed
and the product is stress-tested for design limitations and in compliance with customer
requirements. Shortcomings to that compliance must be assessed to determine the
2.6 REFERENCES
impact to anticipated demand. To arrive at the best design point, the design and tech-
1. The Technology Management Field: Definition and Scope, unpublished communication, MIT
nology of a product must respond to customer requirements. Managing the technolo-
Sloan School, Cambridge, Mass., no date, pp. 1-2.
gy, for instance, in computer-assisted design or in the packaging of a product with
2. National Research Council, Management of Technology: The Hidden Competitive Advantage,
human factors is the payout to customer wants and needs.
National Academy Press, Washington, D.C., 1987, p. 13.
3. Kim B. Clark and Steven C. Wheelwright, Managing New Product and Process
Development, Free Press, New York, 1993, p. 100.
2.4.3 Manufacturing and Software Development
4. Don Clausing, Improved Total Development Process, unpublished communication, MIT
On completion of the verification for design, manufacturability must be assured School of Engineering, no date, p. 3A.
through stress testing for capability of assuring function objectives, volumes, perfor- 5. Paul A. Samuelson and William D. Nordhaus, Economics, McGraw-Hill, New York, 1985,
mance, and quality objectives. Software, as required, must be in place and fully tested. p.554.
At this point, these actions must be capable of achieving the proper return on assets 6. George A. Steiner, Strategic Planning, Free Press, New York, 1979, p. 280.
and intended minimal cost and capital expenditures compared to expected revenues.
7. Ibid., pp. 348-349.
The payoff from return on assets is not realized, for example, in managing technol- 8. Modesto A. Maidique and Peter Patch, "Corporate Strategy and Technological Policy," in
ogy in a computer-integrated manufacturing (CIM) environment unless it is cost-effec- Readings in the Management of Innovation, Michael L. Tushman and William L. Moore,
tive in relationship to the revenues that result. eds., Pitman, Boston, 1982, p. 284.
9. J. J. Verschuur, Technologies and Markets, Peter Peregrinus, Ltd., London, 1984, pp. 2-3.
10. Frederick Betz, Strategic Technology Management, McGraw-Hill, New York, 1993, p. 23.
2,4.4 Market Release,Marketing, and Servicing Products
11. Michael E. Porter, Competitive Strategy, Free Press, New York, 1980, p. 71.
The final step that leads the product to the marketplace is a market release process and 12. Michael J. C. Martin, Managing Technological Innovation and Entrepreneurship, Reston,
the implementation of the marketing plan to market the product or technology, Final Reston, Va., 1984, p. 134.
plans to market a new product through marketing programs and selected market chan- 13, Ibid., p. 137.
nels are put into place. A marketing program, for example, can include advertising in 14. Edward B. Roberts and Alan R. Fusfeld, "Critical Functions: Needed Roles in the Innovation
the press, TV exposure, or promotions using trade journals. Market channels can range Process," in Managing Professionals in Innovative Organizations, Ralph Katz, ed., Ballinger,
from mail order to selling the product directly to companies. The sales strategy for the Cambridge, Mass., 1988, pp. 102-104.
product should be in place. A program to service the product through either direct 15. Lowell W. Steele, Managing Technology, McGraw-Hill, New York, 1989, p. 44.
installation or installation aids, as required, should be developed. In addition, a pro-
gram to service and maintain the product may also be part of a firm's objectives. This 16. Verschuur, op. cit. (Ref. 9), p. 16.
is highly desirable in the case of complex and high-tech products. The ultimate payoff 17. Ibid., p. 18.
is customer delight and satisfaction, and the revenue derived through market accep- 18. James M. Utterback, "Innovation in Industry and the Diffusion of Technology," Science,
tance and increased demand. This can be successful only with the right technology 183: 622, 1974.
and product responding to the correct market segment. 19. Martin, op. cit. (Ref. 12), p. 87.
20. Peter Drucker, Innovation and Entrepreneurship, Harper & Row, New York, 1985, p. 33.
21. Steele, op cit. (Ref. 15), p. 158.
2.5 SUMMARY 22. Ibid.
23. Martin, op. cit., p. 2.
A business architecture for technology management is fundamental to understanding 24. Edgar A. Pessemier, Product Management, Strategy and Organization, Krieger, Malabar,
the relationship between functional disciplines and managing technology as the causal Fla., 1986, p. 343.
CHAPTER 3
THE IITECHNOLOGY CYCLE"
APPROACH TO TECHNOLOGY
MANAGEMENT
Dr. David J. Sumanth
Professor and Founding Director,
UM Productivity Research Group
Department of Industrial Engineering
University of Miami
Coral Gables, Florida
John J. Sumanth
Research Assistant
UM Productivity Research Group
University of Miami
Coral Gables, Florida
3.1 INTRODUCTION
Eight years ago, Peters (1987) warned us with some alarming statistics about what he
called the "accelerating American decline":
The U.S. per capita gross national product (GNP) slipped below Japan in 1986.
The average wage for a 25- to 34-year-old white male declined by 26 percent from
1973 to 1983 in constant dollars, and the comparable figure for 35- to 44-year-olds
declined by 14 percent.
The average business productivity (output per worker-hour) barely crept along at 1
percent since 1973 (compared to the 2 percent during 1965-1973, and 3 percent
during 1950-1965). Manufacturing productivity grew at only 2.5 percent per year
from 1950 to 1985, contrasting with Japan's 8.4 percent, Germany and Italy's 5.5
percent, France's 5.3 percent, Canada's 3.5 percent, and Britain's 3.1 percent.
As compared to 10 banks toppling in 1981, in 1986 188 banks failed-the largest
number in one year since the Great Depression.
3.1
3.2
THE "TECHNOLOGY CYCLE" APPROACH 3.3
As many as 30 million people have been dislocated by the "restructuring" in manu-

facturing during the last decade. Since 1980 the Fortune 500 companies have shed the means by which results are achieved. Because of the incredible pace at which
a staggering 2.8 million jobs. technologies are being introduced into the market nowadays, the technologies we des-
ignate as "high-tech" today might be primitive and antiquated from the standpoint of
In 1986, even the trade balance in high-technology goods went into the red (into people just a few years or decades from now. Consider the fairly recently introduced
debt).
486 microprocessor personal computer technology and today's Pentium microchip.
A formidable $41 billion positive trade balance in the services in 1981 has aU but The latter is more high-tech in our perception although the former has been in the
disappeared.
open market for only about 7 years. The term market indicates that there must be a
demand or need. The terms tangible and intangible in this definition are purely rela-
Other authors also subscribe to Peters' assessment of America's deteriorating eco- tive in nature. The distinction between these terms takes on relevant meaning in
nomic condition, including manufacturing competitiveness: appropriate context. A few years ago, a famous university on the U.S. West Coast used
goats to graze the grass on its campus, as a cost-effective "technological substitute"
It is estimated that it takes 55 years for 90 percent of U.S. manufacturers to adopt a for more expensive lawnmowers. Certainly, in this context, there was a need to mow
new technology, compared with 18 years in Japan (Focus, 1991).
the lawns, and goats were an alternative technology, producing a tangible product-a
Japan's use of numerically controlled machine tools is estimated to be one and a mowed lawn! The use of animals in today's highly technical, computerized world
half times the U.S. rate. Japanese manufacturers use industrial robots at seven times stands out as an aberrant and somewhat awkward occurrence. Yet, it should also kin-
the rate of U.S. manufacturers (Shapira, 1990). dle us into thinking, "Why limit technology to just inanimate objects?" For centuries,
we have used animals to accomplish tasks that our size made us incapable of doing.
As these statistics show, the United States has still not responded well to these Even today, in some Far Eastern countries, elephants are used to move huge logs of
growing concerns, while being shackled with vast trade deficits, and an inability to lumber, as substitutes for forklift trucks. Dolphins were even used by the U.S. Navy
be competitive in the foreign markets. In 1989, while the U.S. trade deficit was some years ago to detect and uncover potentially dangerous mines in the Persian Gulf.
approximately $125 billion, Japan enjoyed a trade surplus of $58 billion, and Aren't dolphins an example of a cost-effective substitute for sophisticated mine-
Germany reached $71 billion (Tenner and DeToro, 1992). Many other authors had detecting devices? As these examples show, technology comes in more forms than just
warned before of the necessity for improved U.S. competitiveness, including microchips and hardware. With this argument in mind, we can be led into a broader
Eckstein et al. (1984), Scott and Lodge (1984), Hayes and Wheelwright (1984), and thinking on the subject of technology management. In order to improve our competi-
Thurow (1985). Clearly, the U.S. competitiveness has been challenged severely in tive power, we need to better understand the complexity of managing work, technolo-
recent years. Because of this lack of competitiveness (and possibly other political gy, resources, and human relations (Stephens, 1977).
considerations), Japan has tried to keep American products from being imported into Two other terms, innovation and invention, must be clarified for the purpose of
its markets, resulting in a bitter trade war between the two economic powers. Al- our discussion here. Although these two terms are normally used interchangeably,
though the Japanese administration recently has agreed to liberalize the import poli- there is really a distinct difference in the two meanings. Schmookler (1966) pointed
cies, to reduce the perceived inequalities in the trade, the competitive issues for the out that
United States still remain. Apart from the trillions of dollars in national debt and bil-
lions in trade deficits, there are many other reasons for the lack of competitiveness in
Every invention is (a) a new combination of (b) preexisting knowledge which (c) sat-
the U.S. industry. However, since our objective here is to prescribe a technology
isfies some want. When an enterprise produces a good or service or uses a method or
management approach that enables companies to enhance their competitiveness, it is input that is new to it, it makes a technical change. The first enterprise to make a given
sufficient to say that we need some new, but relevant thinking, to make our enterpris- technical change is presumably an imitator and its action imitation.
es more competitive. We now present one such approach in the context of managing
technology.
On the other hand, innovation is seen by Schonberger and Knod (1991) as
3.2 BASIC DEFINITIONS technological breakthroughs-new products, services, and techniques-when they
occur, but is more often the result of modest, incremental, improvements to existing prod-
ucts, services, and operations (the "tinkerer's tool box").
The terms technology management and management of technology (MOT) are used
interchangeably here. For our discussion, we define technology in a broad sense.
According to Michiyuki Uenohara, research director at NEC Corporation, innova-
Technology is the means by which a tangible or intangible product (or service) is tion is "the result of tiny improvements in a thousand places" (Gross, 1989). John P.
produced (or offered) in the "market." Thus, the use of technology can be seen even as
McTague, vice president for research at Ford Motor Company, expounds on the point,
far back as the times of primitive humans, whose technologies included stones to cre-
saying, "The cumulation of a large number of small improvements is the surest path,
ate fires, bows, and arrows to kill animals for food, canoes carved out of tree trunks to
in most industries, to increasing your competitive advantage" (Port, 1989). Utterback
cross lakes, etc. Although these technologies have now been cast aside in favor of
(1986) and Bienayme (1986) also discuss the dynamics of innovation in sufficient
more developed tools, the purpose for which they were used has not changed-simply
detail.
3.3A SYSTEMS APPROACH TO TECHNOLOGY

MANAGEMENT
Over the years, many concepts have been developed in managing technology.
However, Malaska's work (1987) comes close to a systems view, through a conscious
development of technology, by a principle he proposed:
The use of natural forces, matter and space on terms set by man and directed by him,
must be adapted to the ecological entity of which it is a part, and must be carried out
according to the principles which ecological development has shown to be correct. The
recycling of matter and the many-stage use of energy must be established into the techni-
cal way of life and requisite exchange of entropy with the ultimate environment must be
safeguarded.
A systems view, idealistic as it may be, is a necessity today, particularly in view of

the fact that today's businesses are forced to operate in an international arena in order
to preserve their market shares and economic stability. The world market is not only
going to be a forum for the flow of goods such as cars, computer chips, and corporate
bonds, but also, as Johnson (1991) sees it, a world market for labor. In fact, those
economies that do not "play" their business game in the international arena generally
limit their domestic growth as well. The total systems approach challenges enterprises
to be aware of all the available resources (including animals!) and to make the most of
those available, while designing technological systems.
3.4 THE "TECHNOLOGY CYCLE" AND THE

"TECHNOLOGY FLOW PROCESS"
David Sumanth, in his earlier work (1988), proposes a total systems approach to tech-
nology management (TSTM) through what he calls the technology cycle (TC) (Fig.
3.1). He contends that the management of technology in enterprises is not just a one-
shot deal, but rather a continuous process, involving five distinctly different phases of
technology: awareness, acquisition, adaptation, advancement, and abandonment.
1. Awareness phase. This is the first phase of the technology cycle, in which a
company has a formal mechanism to become aware of emerging technologies relevant FIGURE 3.1 The technology cycle (TC), showing the five basic elements of technology management
at any given level (product, service, function, work center, plant/division, corporation, industry, nation-
to the company's needs. Some companies form "think tanks" with engineers and sci- al. or international) applicable to deal with an existing or new technology. The dashed lines represent
entists, who research from around the world, and gather information through computer "analysis." (Copyright Dr. David J. Sumanth, 1988. All rights reserved.)
bulletin services, journals, magazines, books, conferences, international product exhi-
bitions' etc. This information is synthesized and put in short internal report form for
the benefit of corporate strategic planners and technology policy makers. example, a major computer equipment manufacturer acquired an IBM 7535 robot in
2. Acquisition phase. This phase involves the actual acquisition of a particular the early 1980s, assuming that it would replace an injection-molding operator.
technology. To go from the awareness phase to the acquisition phase, a company's However, because of inadequate and inappropriate economic feasibility, the company
technology group, in collaboration with the industrial engineering group, would do a found that the robot was costing more than the savings projected. After a few months,
technical feasibility study, as well as an economic feasibility study, before justifying the company put aside the robot and brought back the human operator! Sometimes
and acquiring a new technology. Of course, companies which do not spend much time major plant relocation decisions are made, overriding both technical and economic
and effort in either the technical feasibility study or the economic feasibility study feasibility recommendations. At times, these decisions have nothing to do with techni-
usually face serious repercussions down the road through a rapid technological obso- cal factors, but rather, are the result of someone's personal bias while making a policy
lescence, or throu!:ih the acquisition of an inappropriate technology for their needs. For decision in a boardroom.
3. Adaptation phase. Virtually every enterprise ends up adapting an acquired

technology for its particular needs. Of course, if the homework is done correctly, the
transition from acquisition to adaptation becomes much smoother and less expensive.
Conversely, if sufficient time and effort have not gone into studying the relevance of a
particular technology to a company's present needs, a great deal of rework and adapta-
tion result. This not only frustrates the people acquiring the technology but also, and
more importantly, slows down the assimilation rate, causes major productivity losses,
and results in severe quality problems. Clearly, good planning and preparation before
acquiring new technologies ensures the expected greater economic returns. This
becomes a more dominant problem when companies import technologies from else-
where. For example, a Far Eastern company once brought in a western fertilizer plant
without first studying what not to bring. Because of its lack of preparation, the compa-
ny did not know that the technical collaborator was using that part of the equipment
because of the cold, snowy climate it was operating in. Thus, the company was
installing equipment which was inappropriate for the humid tropical climate in which
it operated.
4. Advancement phase. When capital is limited, as has become the case for
many companies today, one cannot indiscriminately purchase and abandon technolo-
gies with scarce money. Therefore, it becomes imperative to improvise the acquired
technologies for one's home needs. Companies like Lincoln Electric have taken this
thinking to a new height. They are a world leader in electric arc-welding equipment,
and generate most of their process technologies internally, eventually patenting them
because they cannot find equipment out among the vendors. For the most part, it
advances its technologies through the efforts of its design and development engineers.
A company which buys stator-winding machines from a company like Lincoln
Electric, within the legally permissible limits, may be able to improvise the feed rates,
the winding patterns, and other such features in order to enhance the original techno-
logical capabilities of the equipment. Similarly, an automotive company, which might
spend several billions of dollars to retool for new models, might have to create
advancement features for its basic tooling in order to reduce the overall tooling costs.
5. Abandonment phase. This last phase of the technology cycle is probably one
of the most critical ones, because this is where decisions are made concerning the
obsolescence of a particular technology. With the rapid discarding of existing tech-
nologies (product-based, process-based, information-based, and management-based),
timing for new technologies is critical for winning in the business game, let alone for
survival. Posturing for new technologies involves many interdependent variables,
including the competition's product entry timing, the customer's ability to absorb and
invest in new technologies, the technical knowledge and skills needed, the spare-parts One or more of these factors may be more important than the others in each of the
management program, and the marketing and advertising channels available. Bad tim- five phases, and for each type of technology under consideration. For example, in the
ing in prematurely abandoning a product could result in lost revenues on one hand, but acquisition phase of the TC, a developing-country enterprise, which has a limited for-
on the other hand, waiting too long to abandon might also result in lost revenues eign exchange to buy sophisticated equipment, will consider the economic factor to be
because a customer has found a better alternative in competition. There doesn't seem relatively more important. Accordingly, the company may opt for self-generation
to be an easy formula to make the selection-it is still an art-but it can be done with rather than transfer of technology, by designing and building machinery of its own. In
greater input of information from different areas of the company such as research and a multinational company, external factors, including the political and cultural factors,
development, marketing, and production. sometimes may become more dominant in relative importance than the economic and
technical factors. For example, prior to the 1990s, some Japanese multinational com-
The TC fits within the broader technology flow process (Fig. 3.2), in which all
panies were wise to offer their technology and know-how in India without demanding
technologies that are abandoned after being marketed, or inventions not commercial-
a 51 percent share, but rather settling for 45 percent, because of an understanding and
ized to start with, are archived for a certain period of time, ranging from a few days to
appreciation for the political and cultural requirements prevalent and imposed by the
possibly several decades.
Indian government. Thus, they gained entry to some vital markets well before others
Central to the TC concept is an analysis of the external and internal environment
factors in each of its five phases. Figure 3.3 is a summary of 12 such factors. in the West did.
enterprise to operate within a TC framework. They recognize that short-term treat-

ments of any issue in general, and technology management in particular, are at best
suboptimizations, and so, will not lead to more long-lasting solutions in adapting and
advancing technology. Let us take some time now to discuss these principles in detail.
3.5.1 Value diversification is a poor substitute for MOT.
Value diversification refers to the improvement of stockholders' investments in a com-

pany through quick-fix solutions on paper, such as mergers, acquisitions, and other
stock-enhancing strategies. Unfortunately, this traditional approach to value enhance-
ment results in mostly short-term gains and long-term pains. Every company ought to
identify core technologies and core competencies, and then hone them to get the most
out of those for innovating products and/or services. When IBM acquired ROLM
Corporation many years ago, IBM was trying to complement its core technologies in
mainframe computers and personal computers with the core technology of ROLM,
communication systems. Unfortunately, this did not work out very well, and IBM
eventually sold ROLM. In the early 1980s, McGraw-Hill, whose core technologies are
in publishing, books, journals, and related products, went into the personal computer
business with Odyssey with a totally different core technology that didn't work, either.
Another example of a questionable, huge investment was the Ford Motor Company's
purchase in 1989 of the British automobile company Jaguar for $2.5 billion, rather
than investing in next-generation technology (Luttwak, 1993). Because of Jaguar's old
technology, poor workmanship, inferior quality, and outdated manufacturing process-
es, at least another $1.5 billion in investment has had to go into raising the company to
only today's standards (Flynn and Treece, 1994). Acquisitions and mergers for the
sake of financial leverage can backfire significantly if the core technologies involved
are not inherently complementing to each other. MOT has a formal focus to nurture
and cultivate core technologies and core competencies. As Prahalad and Hamel (1990)
argue, "In the long run, competitiveness derives from an ability to build, at lower cost
and more speedily than competitors, the core competencies that spawn unanticipated
products." This is a painstaking, long-term process and not a quick-fix solution. A
thoughtfully monitored technology management results in long-term gains, in terms of
both financial considerations and product longevity.
All five phases of the TC are equally important. Depending on the type of product
and technology, the magnitude of activities and analysis might vary with time. For
example, in a multinational corporation that is operating in a highly oligopolistic mar-
3.5.2 Manufacturability must keep pace with inventiveness and
ket, where new product introduction is very common (such as in the personal comput-
marketability.
er market), the level of activity is usually high in the advancement and abandonment
phases of the TC, on account of the need for rapid changes in technology, both at the In industries in general, and manufacturing companies in particular, people in manu-
product level and in the process stage. Technology management must be viewed as a facturing functions often find themselves coping with increasingly aggressive market-
broader umbrella for productivity and quality management. When total productivity is ing strategies and design strategies. Manufacturing in the United States is being trou-
optimized, technology management takes on a more systemic meaning (Sumanth, bled by intense competition from the Pacific Rim and European trading partners, who
1984).
are developing new and better technologies and techniques to increase their advantage
in product design and manufacturing process (Gold, 1994). Yet, in today's globally
competitive marketplace, it is not only a necessity for manufacturability to be in step
3.5 TEN BASIC TENETS FOR THE with marketing and design strategies but also a luxury, serving as an important
MANAGEMENT OF TECHNOLOGY (MOT) weapon to chip away the market share of the competition. Timing in designing, manu-
facturing, and marketing products and/or services has become extremely crucial. This
calls for what we call "modular technologies," which enable a company to have a
A tenet is a principle based on observation, intuition, experience, and in some cases, tremendous flexibility to quickly package together innovative products and/or services
empirical analysis. Ten (10) tenets are proposed next, as guiding principles for an to beat the competition, let alone to survive the fierce global competitive game.
3.10 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY THE "TECHNOLOGY CYCLE" APPROACH 3.11
3.5.3 Quality and total productivity are inseparable concepts in managing 3.5.5 Technology must be the "servant," not the "master"; the "master"
technology.
Is still the human being.
In the 1970s, here in the United States, productivity was of major concern, particularly Until recently, we used to be the masters of technology, our servant. We used to drive
after the 1973 Oil Embargo, and the ensuing Japanese "automobile attack." In the technology, but today we have become technology's servant, and technology is driving
1980s, after the famous NBC documentary, "If Japan Can, Why Can't We?," emphasis us. We believe that we have crossed a "technology threshold," whereby our response
on quality reemerged with great ferocity and intensity. The total quality management to technology has become one of catching up. Many companies are unable to cope
(TQM) movement made quality a common prerequisite for ensuring competitiveness, with the dramatic changes taking place in the very nature of technologies. This, in
even in the domestic markets. With the onset of the information superhighways in the turn, puts a company in a reactive posture, rather than a proactive one. Companies
late 1980s, and the rapidly changing global communication technology panorama, which are learning the art of managing new technologies have a better chance at being
time has become a third crucial strategic variable in a company's drive to be competi- a technology master instead of a technology servant. The chaos that companies face
tive. The nontraditional total productivity management approach (Sumanth, 1981, today in responding to "rapid technologies" can be harnessed as a positive strategy to
1984, 1995) to competitiveness forcefully argues that quality, price, and time are the create opportunities for new products and/or services. The recent bill passed by the
three competitive dimensions which must be simultaneously created and monitored for U.S. House of Representatives to deregulate the broadcasting and communications
companies to be long-lasting. Quality and total productivity are like two sides of the industry will no doubt spin some companies into utter chaos. On the other hand, the
same coin or two rails of the same track. Companies that have excellent quality and proactive ones will create technology strategies involving the creation of altogether
competitive prices still cannot do well unless they can bring products of highest value radically new products and services. It will not be too long before we see integrated
to the marketplace in the least time possible. Information technologies have made it communication systems, combining technologies related to television sets, computers,
possible today to order products 24 hours a day from the luxury of one's home VCRs, telephones, and fax (facsimile) machines. Cable companies will soon be in the
through the Home Shopping Network (HSN) and others, where the customer expects a computer business; and computer companies, in the telecommunication business. It is
rapid response rate. In fact, Thurow (1992) predicts that in the twenty-first century impossible to even conceive the extent of the technological integration revolution we
there will be high-tech and low-tech final products, but almost every product in every will be facing even before we enter the twenty-first century. Our wristwatches might
industry-from fast food to textiles-will be produced with high-tech processes. become microcomputer devices, working as remote-control units and information
Therefore, product technologies and process technologies must be managed carefully retrieval systems. We might see a series of technology thresholds bombarding us in the
to ensure that all these three dimensions of competitiveness are working together to years to come, and every time we cross one of them, companies have an opportunity
enhance market share and profitability. to convert technological chaos into economic opportunities.
3.5.4 It is management's responsibility to bring about technological 3.6.6 The consequences of technology selection can be more serious than
change and jOb security for long-term competitiveness. .xpected because of systemic effects.
We have seen, particularly in the last 5 years, that American management has gone on This principle has major impact on the economic viability of the twenty-first-century
a downsizing binge in the name of streamlining and cost cutting. From 1987 through organization, because we will be selecting multiple technologies with a rapidity that is
1991, five million jobs in 85 percent of the Fortune 1000 firms had been affected by hard to comprehend at this time. Product technologies will become obsolete in such
this process (Cascio, 1993). Often, technological improvements have been associated .hort periods of time that they will resemble the toy industry, where the average shelf
with such downsizing. Unfortunately, this is a poor business strategy because it under- life of a product may be only one season, or sometimes only a month. We are already
estimates the employees' ability to manage not only existing technologies that their beginning to see personal computers fall into this category. In the early 1980s, when
company has but also their creative capabilities to create and perfect new ones. the personal computer was something new to all of us, the average shelf life was
Employees must feel that they have job security, particularly when they are responsi- approximately 4 to 5 years for a model to become obsolete. Today, just 13 years later,
ble for suggesting and implementing new technologies. They feel betrayed after they the average shelf life has been whittled down to less than 1 year. By the time a compa-
spend hours of hard work designing a technologically advanced environment for ny decides to update its PC technology to state of the art and acquire it, that technolo-
greater competitiveness, only to find themselves victims of their own making. This IY has just about become obsolete. In anticipation of even greater obsolescences, com-
need not be the case. Companies often spend millions of dollars trying to mitigate the panies will usually wait for newer models in both hardware and software. The rapid
negative effects of low morale, job dissatisfaction, and consequent low productivity, turnover in both of these categories of technologies makes it even more difficult to
following a layoff or cost-cutting measure, right after a major technological change. A Implement newer ones. However, the penalty for not updating can also be severe in
smart approach to managing technology is to look at the competitiveness challenge as terms of lost revenues. As the technology cycle demonstrated previously in this chap-
a holistic one. The Japanese have been excellent in taking such a systemic view while ter. selection of any technologies must be carefully planned and executed, taking into
managing all their basic technologies. consideration as many system variables as possible.
3.5.7 Continuous education and training in a constantly changing

workplace is a necessity, not a luxury.
Companies have traditionally slashed the education and training budgets during times
of economic downturn. Today, this would be a foolish strategy, because most employ-
ees know how to use process and information technologies to the fullest extent.
Having spent millions, and sometimes billions of dollars in such technologies, it
would be most uneconomical not to get the most out of these expensive technologies.
Sometimes, a million-dollar piece of equipment has a 20 percent downtime, costing
hundreds of thousands of dollars in lost revenues, simply because operators and engi-
neers have not been trained in all aspects of its operation. The more the education and
training for managing technologies, the greater the utilization rates would be, and
hence, the greater the economic leverage. For example, in a multinational bank, such
as Citibank, the technology group strives hard for customers to do worldwide banking
in anyone of 14 languages. The company spends much time and energy educating and
training the personal bankers, the customer service representatives, and others, in an
effort to offer their clients the ever-increasing portfolio of products and services in a
competitive manner. Citibank creates its own technologies for almost everything,
ranging from its ATMs (automatic teller machines) to its banking terminals. Because
of the sophisticated nature of today's technologies, continuing education budgets keep
rising in well-managed companies. In the years to come, we can only see greater rates
of such continuing education, to enhance knowledge and skills in using technologies
to their fullest extent possible.
3.5.8 Technology gradient is a dynamic component of the technology

management process, to be monitored for strategic advantage.
The term technology gradient refers to the technical advantage an enterprise enjoys
with respect to its licensees and its competitors. Normally, most sensible multination-
als maintain a sufficiently high technology gradient with respect to their licensees,
particularly if the latter are even remotely associated with a product line that competes
anywhere in the world. This is particularly true when the technologies are radically
new, for example, biotechnology, global networking technology, etc. Technology gra-
dient, which is the subject of another chapter in this handbook, is a powerful concept
for managing the technological advantage that the company enjoys with respect to its
competition worldwide. Briefly, a company monitoring its technology gradient can be
in one of four postures: technology leader, technology follower, technology yielder, or
technology loser. Depending on the technology advantage a company wishes to enjoy,
it must consciously position itself as one of these. Obviously, the company would
want to be in one of these areas, depending on which phase of the technology life
cycle it is in. For example, if a company is in the declining phase of a product life
cycle, no matter how hard it tries to be a technology leader in that phase, the returns
on its technological investments will be so marginal that it is better off being a tech-
nology yielder during that stage for short periods of time. Ideally, however, a company
must overlap its technologies so as to minimize the technology yielding positions and
maximize the technology leadership positions.
that within 24 hours they can have a part made available to any retailer around the
world. In such situations, this tenet has even greater relevance and respect. These 10
tenets are summarized in Fig. 3.4, for a ready reference.
enter the exciting, yet challenging twenty-first century, to avoid the temptations of
3.6 CONCLUSIONS suboptimization and its costly consequences. Although a systems approach to technol-
ogy management is prescribed in this chapter, the effort needed to implement it, in
terms of time, money, and patience, is great and often arduous. However, the benefits
As companies are increasingly faced with decisions impacting not only their competi- of a successful implementation of this approach greatly outweigh the costs, and make
tors, but the global market as well, a greater need will arise for swift, yet calculated the time and effort spent well worth it. The advantages and disadvantages of this
decision making on the part of top management. With that added pressure and respon- approach are highlighted in Fig. 3.5. It is hoped that enterprises would revisit the fol-
sibility, economic enterprises will be thrust into the dilemma of choosing between two
lowing basic points when practicing technology management:
basic strategies: (1) achieving the "ideal" goal at a high sacrifice level or (2) going for
the most practical solution at the least cost possible in terms of time and effort. 1. Technology is not merely machinery and advanced electronics, but rather any
Unfortunately, when the choice is for the latter strategy, the long-term outcomes often
means to accomplish a purpose in a broad, holistic sense.
convince the enterprise that it should have gone with the first one, even if all of it
could not be achieved. Companies might be wise to adopt a motto such as "Excellence
2. The management of technology is not an exclusive practice, independent of other
is our starting point and perfection our ultimate goal." Even though it is not practical variables, but rather, is a complex, interconnected systemic process.
to define "perfection," the mental target to achieve it helps to develop a set of guiding 3. Suboptimal solutions are created when an enterprise focuses solely on the easiest,
philosophies that are well thought out, long-lasting, and consistent, even when uncer- and most logical remedy to the problem, failing to see a broader proposal of wor-
tainty looms large. thy solutions from a systemic standpoint.
This chapter has attempted to provide a technology management perspective that is
centralized around a systems approach to management. Technology can no longer be At a time when product innovation strategies in Japanese companies like Sony,
considered as just fancy machines and computer chips. It is a vital, growing agglomer- Nippon Instrument Manufacturing, and Pioneer are becoming more and more integra-
ation of earthly resources fashioned by human ingenuity, and steered by a vital force, tive between technology and humans (Tanaka, 1987), it is increasingly evident that
namely, a systems perspective. This is due to the rapidly changing, technological age enterprises have no choice but to develop more systems-oriented thinking to manage
we live in today, in which every technology that we adopt or discard has a systemic technologies for maintaining and enhancing their competitive position in the ever-
effect on the process of an organization. Great aims and preparations are needed as we complex, ever-growing globalism.
Schmookler, J., Invention and Economic Growth, Harvard University Press, Cambridge, Mass.,
3.7 SUMMARY
1966.
Schonberger, R. J., and E. M. Knod, Operations Management-Improving Customer Service,
As we approach the twenty-first century, there are rapid changes taking place in Irwin, Boston, 1991.
social, political, economic, and intellectual atmospheres that are characterizing today's Scott, B. R., and G. C. Lodge, U.S. Competitiveness in the World Economy, Harvard Business
complex and sophisticated companies with much shorter product life cycles than ever School Press, Cambridge, Mass., 1984.
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from which to draw. Multinational companies are, and foreseeably will be, the prime Economic Policy Institute, 1990.
channels for free enterprise in the near future because of the global business dynam-
Stephens, J. C. Managing Complexity: Work, Technology Resources and Human Relations,
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Thurow, L. C., The Zero Sum Solution, Touchstone Books, New York, 1985.
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2(2):263-278, 1987.
Peters, T., Thriving on Chaos-Handbook for Management Revolution, Knopf, New York, 1987.
Port, 0., "Back to Basics," Business Week Special Report on Innovation in America, pp. 14-18,
1989.
Prahalad, C. K., and G. Hamel, "The Core Competence of the Corporation," Harvard Business
Review, pp. 79-91, May-June, 1990.
.1 INTRODUCTION
Technology-based organizations are constantly confronted with dynamic and unpre-
dictable changes in markets, products, and technologies. How do they stay competi-
tive in a rapidly changing environment? Obviously, such companies compete on the
basis of their technological strength, but what is this strength? And what makes one
company stronger than the other in terms of technological capabilities? The compa-
ny's physical assets and its financial resources are obviously parts of the answer, but
they are hardly sufficient. The success of a technology-based company depends cru-
cially on what we call its technological base, 1 namely, its ability to exploit technology
IS a core competency, to invest in future technology, to incorporate better technology
in its products and services, and to do so in a shorter time period, with lower costs,
and with better performance than competitors.
What, therefore, exactly is the technological base of a company? In this chapter we
define and discuss the technological base concept and its relevance to assessing the
technology-based company's strength. Several examples of successful and unsuccess-
ful firms illustrate the scope of our concept:
When IBM finally decided, in the early 1980s, to enter into the personal computer
(PC) business, it certainly had the skilled computer and electronics people. But a
key ingredient was missing: IBM realized that it did not have the appropriate struc-
ture for this new product line. An effective PC business would need to be much
more agile than most of IBM's core businesses. So IBM structured the new division
for the PC business as an independent business unit, more autonomous than most of
IBM's divisions from corporate control. This allowed the unit to make the essential
quick decisions and develop its new product exceptionally fast. Nevertheless, IBM
found it necessary to use external help, relying on a tiny company called Microsoft,
to develop the complementary operating system software for its new computer.
4.1
When Swiss watchmakers faced the introduction of digital watches by American

and Japanese companies in the early 1970s, most discovered belatedly that they
were not prepared for the new electronic era. Most Swiss watch companies knew
very little about the technology of either integrated circuits or digital displays
embedded in digital watches. Moreover, they had neither the right organizational
structure for developing electronic devices nor the appropriate project management
processes and decision-making procedures to deal with the much faster pace of
technical, product, and market change. The world preeminence of the Swiss watch
industry was destroyed in 10 years.
More recently, following the demise of the Soviet Union and the end of the Cold
War, the American defense industry was left with a vast surplus of engineering
design, systems development, and production capabilities. Only a few companies
were able to adapt quickly to this change; many others did not. Some companies
stayed focused on defense activities, while undergoing considerable downsizing
and turmoil. The companies that succeeded often found it necessary to establish
joint ventures with commercial sector partners who could help them adapt their
defense-related products and technologies to new types of customers. A notable
example was GM-Hughes Electronics. The firm was able to exploit its satellite
communication capabilities in a joint venture with Thompson-RCA and move into
the consumer market of small-dish "direct TV."
Organizational assets. These are the factors that allow the firm to create and exploit
As these examples show, whether a technology-based company is contemplating a new technologies. They include five elements: the skill profile of the employees
strategic change or evaluating its existing strategy, it must critically examine its capaci- and managers, the procedures for decision making and information sharing, the
ty to exploit change. The technological base concept is a framework for assessing this organizational structure, the strategies that guide action, and the culture that shapes
capacity. In the following sections we will define the elements of a company's techno- shared assumptions and values.
logical base and identify some key managerial issues for evaluating and reshaping it.
External assets. These are the links between the firm and its environment-a net-
work of connections the organization establishes with the external world. They
include relations with current and potential partners, rivals, suppliers, customers,
4.2 COMPONENTS OF THE TECHNOLOGICAL professional associations, research and educational institutes, consultants, political
BASE actors, and local communities.
Development processes. Two key processes5 are critical to technology-based firms.
The technological base of a company is the ability of an organization to develop an First, the product and process development process generates the actual output of
the company and creates value for customers. Second, and fueling the first, the
ongoing stream of new products which meet the market needs, to manufacture these
products while maintaining appropriate levels of quality and cost, to develop or adapt technology development process creates the next generation of technologies which
new technology to meet future needs, and to respond promptly to unexpected competi- eventually become part of the core technological assets.
tive moves or unforeseen opportunities. This functional definition of the technological Complementary assets. Even successful technology-based companies need more
base implies that in addition to caring for its current products, processes, and projects, than technology to compete effectively. Complementary assets may be needed in
the organization must look into the future.2 Among other things, it must consider marketing, distribution, manufacturing, field service, or information systems.
whether it is technologically equipped to sustain a competitive advantage over a peri-
od of years. Is it able meet or initiate new opportunities and threats created by its envi- To illustrate these components and analyze the key managerial issues involved in
ronment and its competitors, and is it able to change and adapt quickly to new situa- each, we will refer to cases from companies who have successfully utilized elements
tions and circumstances?3 of their technological base and achieved competitiveness in the face of dynamic
What kinds of questions should managers ask themselves as they attempt to assess change.
their company's technological base? Our framework groups the elements of this
assessment into five distinct but interacting components. Each contributes to the orga-
nization's technological capability in a different way (see Fig. 4.1):
4.3 CORE TECHNOLOGICAL ASSETS
Core technological assets. This is the technical-and most obvious-part of the
technological base. Such assets are the heart of the organization's core competen- The company's core technological assets reflect the collective learning in specific
cies.4 They constitute the set of technologies embedded in products and processes technical areas and the resulting reservoir of technology know-how across various
that are key to the company's present and future competitiveness.
THE TECHNOLOGICAL BASE OF THE COMPANY
4.5
business units. They depend on the accumulated experience in developing technolo- aies might be ones for which the organization is not currently generating any project
gies, as well as exploiting them in new products and processes. proposals. 10
Superior technological assets are based on a commitment to working across inter- The state of the firm's core technological assets can be evaluated along two dimen-
nal boundaries. Technological assets are not derived from a single product, nor are sions. First, and most obviously, each business needs to assess its technological
they normally confined to a single business. They should be nurtured and exploited strengths and weaknesses relative to the external world-to its competitors and to the
across many functions, product lines, and business units. evolving technological frontiers. Here the technology life-cycle notion is very use-
One of the most successful companies in focusing and exploiting its core techno- ful.ll In some industries (such as chemicals), patents are a powerful competitive lever,
logical assets is Sharp Corporation of Japan. This company has defined itself-among and an assessment of the firm's relative patent position is needed. In other industries,
other things-as an optoelectronics company, centered on optosemiconductors which other indicators of competitive technological standing need to be developed. Second,
act as converters between light and electricity. It developed the world's largest solar the organization needs to assess its ability to deal with the interdependencies between
cells for a lighthouse in the early 1960s, and further research led to the development technologies and its current and projected product portfolio. Technologies developed
of solar cells for satellites in the 1970s. Sharp also developed the technology of elec- should become the entire company's asset, and potentially contribute to every relevant
troluminescent (EL) displays and liquid crystal displays (LCDs).6 LCDs were incorpo- product or process.
rated into what was then "the world's thinnest calculator" made by Sharp in the early
1970s. This development led to a stream of products, all based on the same core
assets. Sharp introduced an alphabetical LCD for calculators in the late 1970s and a
large monochrome LCD for personal computers and word processors in the 1980s. 4.4 ORGANIZATIONAL ASSETS
Using a new thin-film transistor (TFT) active-matrix technology, the company then
developed a 3-in color LCD with faster response and a higher picture quality, and a Core technological assets are the tip of the iceberg; it is the firm's organizational
14-in color TFT LCD. On the basis of these LCDs, the company introduced in the assets that create these competencies and position the company to exploit them to
early 1990s a number of first-in-the-world products, such as the lIO-in color LCD competitive advantage. Organizational assets can be divided into five key elements:
video projector, a 8.6-in wall-mount LCD monitor, and the ViewCam camcorder with skills, procedures, structure, strategy, and culture.
a 4-in color LCD monitor.
Canon and 3M also exemplify this concept. Canon has developed its position in
miniature mechanics and fine optics for its camera business. It combined this capabili- 4.4.1 Skills
ty together with a separate competence in microelectronics to develop a myriad of
business lines and additional products, such as electronic cameras, videocameras, ink- To assess its skills, an organization should have a clear map of both the managerial
jet printers, laser printers, faxes, calculators, and copiers. And the Minnesota-based and the technical skills of managers, engineers, and scientists, as well as those of tech-
3M Company exploited its capabilities in coated abrasives, adhesives, and tapes, in a nicians and nontechnical personnel.
wide variety of products-well beyond its famous Post-it notes. Two dimensions of the technical skill mix need careful study:
A detailed assessment of an organization's core technological assets should encom-
pass both product and process technologies. The first step is to develop a list or "map"
1. What types of skills does the organization have? To which professional groups do
of relevant technologies.7 In diversified businesses, such mapping may confront two the staff belong? What types of degrees do they possess?
challenges. First, the organization must find the appropriate aggregation level for the 2. What levels of skills can the firm tap in these domains? What is the mix of educa-
many discrete relevant technologies. Strategic planning cannot encompass more than a tionallevels? Of experience levels? Of real expertise?
dozen or so major groups. Second, and more difficult, is the challenge of identifying
the right dimensions along which to aggregate. The best mapping is rarely given by 'IYpes and levels are both difficult to assess. As with technological assets, the more
the academic disciplines (mechanical vs. electrical, etc.) or by the organizational chart Challenging part is classifying the relevant types of skills. Typically this cannot be
(one business or function vs. another). It typically takes several iterations before an determined from the organizational chart or from the personnel classifications. These
organization can develop a technology map that is neither too detailed nor too aggre- may serve as a first cut; ultimately, however, the organization needs to refer to its
gated, and one that is neither too functional nor too product-oriented. But these itera- strategic direction and the external environment to know whether to classify engineers
tions are extremely valuable not only for the map they produce but also for the com- as mechanical versus electrical, or product versus process designers.
mon understanding and vocabulary they create between technologists and managers.s The next step in assessing technical skills is to determine what types and levels
One dimension of aggregation that has proved useful is the distinction between will be needed in the future, and then act on the current/needed gap. Texas
base, key, pacing, and emergent technologies. Base technologies are necessary for Instruments, for example, one of the leading semiconductor companies today, did not
being in the game; however, they do not provide any competitive advantage. All Invent the transistor, nor did it have any previous knowledge in semiconductors.
industry players have equal access to these technologies. Key technologies are critical However, during its early years, TI decided to move from being a geophysical service
to competitive advantage since they offer the opportunity for meaningful product or company to becoming a transistor manufacturer. As part of its new strategy, the com-
process differentiation. Pacing technologies are not currently deployed in the industry pany found it necessary to hire a group of experts, many of them from Bell Labs,
but have the proven potential of becoming key technologies. And emerging technolo- where the transistor was originally invented. It also sent its executives and researchers
gies are on the horizon, as yet unproved, but potentially important.9 Pacing and emerg- to attend seminars on transistors offered by Western Electric as part of a licensing
ing technologies are extremely important. The most strategically significant technolo- agreement. 12
THE TECHNOLOGICAL BASE OF THE COMPANY 4.7
Of particular importance is an assessment of the management team's technical

skills and conversely, the technical staff's managerial skills. Managers lacking the encourage the right mix of creative bottom-up initiative and rigorous review, or alter-
needed technical skills can remedy the situation by some individual knowledge build- natively it can become a bureaucratic deterrent, creating unnecessarily formalistic hur-
ing or by finding a technologist capable of translating between the business and tech- dles and politicized project promotion games. Texas Instrument's OST system is a
nical worlds. The technical staff's managerial skills are critical to an organization's case in point. Its objective, strategies, and tactics (OST) system is a systematic, hier-
technical performance. Does the organization have sufficient people to provide leader- archical procedure to plan for the future and encourage innovation. It was intended to
ship to its engineers and scientists? Does it have experienced project managers who focus attention on the more important but less urgent activities that ensure an organi-
have sound technical judgment and intuition, who can make the needed tradeoff deci- zation's future: long-term planning, new-product development, and new major strate-
sions, and who can lead cross-functional teams and advanced complex projects? Does gic thrustS.16 But in later years, it degenerated into a bureaucratic minefield. The
it have managers on the factory floor who understand how to implement new manu- degree of formality and detail was not an issue; the way it was used was.
facturing automation? The company must also look for a balanced mixture of "critical
functions" to the innovative process. Does it have enough idea generators, gatekeep-
ers, champions, project leaders, and sponsors. 13 The lack of one or more of these func- 4.4.3 Structure
tions may seriously reduce the chance of successful innovation.
Finally, an assessment of the skills area must consider the skill development capa- Structure in the present context is the way businesses organize their activities into
bilities of the company. Does the company provide employees with sufficient opportu- divisions, plants, and subunits. It is how they divide the work among functions,
nities, guidance, time, and other resources to develop their skills and knowledge? departments, and projects, as well as between local and overseas operations. The
This assessment should be made for both the technical and managerial fields. Does structure of the organization has a great impact on its ability to meet new challenges in
the company help the professional staff to deepen their knowledge in their original technological development and project management.
skill area? Does it help them obtain advanced degrees? And does it encourage them to The basic dilemma in organizational structure is between (I) the need to keep peo-
move into new areas? And for managers, does it help them develop the proper mix of ple who are focused on the same types of tasks or disciplines together, to ensure that
technical, human, administrative, and strategic skills?14 they remain up-to-date in that functional field, and (2) the need for cohesiveness in
key business processes that run across different functions, to ensure that projects do
not suffer for lack of timely information or appropriate incentives. Central determi-
4.4.2 Procedures nants of the appropriate structure are the rate of change of the functional knowledge
base (faster change indicating great reliance on the functional dimension), subsystem
Procedures are the managerial routines and criteria guiding the way in which the organi- interdependence in the projects, and the duration of the project assignments (with the
zation is making decisions and disseminating information. Decision-making procedures last two indicating greater reliance on the product dimension).l?
most relevant to the technological base involve planning, control, and problem solving. Organizations need to attend to both dimensions simultaneously. Formal forms for
They either support the organization's main business processes or are related to other doing this are called matrix structures. There are many organizational and behavioral
internal service or administrative processes. Planning includes selecting technologies, barriers to the effective operation of a matrix structure,18 and many managers are
products, and markets, as well as organizing, staffing, budgeting, and resource alloca- therefore reluctant to adopt this form. However, whether formalized or not, matrix
tion. Control procedures include personnel evaluations, organizational performance cri- forms are unavoidable; and instead of backing away from the matrix, organizations
teria, and project control mechanisms. Problem-solving procedures include both routines should accompany its introduction with complementary adaptation. In fact, most
for technical problem solving and mechanisms for resolving management conflicts. cross-functional teams in product development projects are based on the matrix con-
Information dissemination procedures govern the flow of technical and business infor- cept. 19New management skills and procedures are often needed, as well as modified
mation. Any assessment should encompass all these types of procedures. compensation and reward systems, and greater strategic consensus and cultural inte-
The difference between good and badly designed procedures influences greatly the aration.
ability of the organization to develop and exploit technology. Take a ubiquitous exam- One could also include under structure a second component: geographic location
ple: meetings. People spend a lot of time in meetings, starting from the board and top- and proximity of groups and people. The physical layout of the organization plays a
management meetings, and down to the working-level meetings. Effective meetings key role in enhancing or impeding the informal flow of information between groups,
concentrate on the real issues, are efficient and productive, enhance motivation, both within and across functional units.20 Indeed, some firms achieve the goals of the
empower people, and increase cohesiveness in the organization. Meetings will be per- matrix by having an exclusively functional chart, but dispersing the functional people
ceived as a waste of time when nothing significant gets done or if things get done too Into co-located product groups. Here the informal communication created by co-loca-
slowly. The formal and informal procedures for preparing and conducting meetings tion balances the formal communication channels of the reporting structure. An exam-
can contribute greatly to any organization's effectiveness. Managers may consider ple is the Ford Motor Company, which decided in the early 1990s to combine its pre-
whether the issues to be discussed are equivocal and ambiguous enough to warrant the viously scattered product development efforts into multifunctional development
use of "rich media" such as face-to-face meetings, or are perhaps straightforward, and centers. To enhance efficiency, each development center will be responsible for devel-
even large amounts of information can be exchanged through less costly mechanisms oping one type of car; this type will be sold by all Ford dealers across the globe.21
such a periodic written reports. IS There is typically no one correct organizational design. Every design has its
The key criterion for assessing procedures is whether they facilitate or impede strengths and weaknesses. The key aspects of the influence of the structure on perfor-
organizational learning. A project selection procedure, for example, can be designed to mance are information and incentives; namely, is the structure facilitating or impeding
the communication flows, and is it creating useful or counterproductive incentives?
THE TECHNOLOGICAL BASE OF THE COMPANY 4.9
4.4.4 Strategy off until the 1980s. Similarly, it continued research in gallium arsenide (GaAs) laser
diodes long after most competitors had abandoned their research in this area. This
Strategy is the way the organization attempts to outperform its competitors. It is those strategy paid off with the big market growth for CD players in the 1980s. Sharp
things at which it tries to excel. Different companies pursue different strategies, such became the world leader in supplying the laser diode "optical needles" for the growing
as being first in the market, imitating successful leaders, product customization, or market of compact disksY
delivering the lowest cost. Each strategy requires a distinct alignment of other organi-
zational assets and a long-term process of learning.
Effective strategies are hard to formulate and even harder to implement. The orga- 4.4.5 Culture
nizational processes of formulating and implementing strategy, and the substantive
content of that strategy, are typically deeply embedded in the organizational fabric of Culture is usually the most difficult organizational asset to evaluate; but it is also the
the business. As a result, they are typically not amenable to particularly rapid most powerful. Culture is the shared and relatively enduring pattern of basic values,
change-top management's desires notwithstanding. It is true that some organizations beliefs, and assumptions in an organization.28 It is "the way we do things around here"
put a premium on strategic flexibility, and in some environments such flexibility may and the collection of norms, behaviors, and values that guide action without manageri-
be particularly valuable.22 However, flexibility is only one criterion among others for al intervention. Culture provides implicit guidance for desired behavior; it frames
assessing the strategic element of the technological base. right and wrong, and highlights the things for which individuals are most admired and
We can identify at least two other criteria. First, an effective strategy is one that recognized.
has been effectively "deployed" down into the various functions and layers to ensure The culture at 3M, for example, is one of continuous innovation. In this organiza-
an operative fit between different units' priorities. Many firms have learned how to tion's environment, introducing new products is the most important criterion for suc-
elaborate explicit business strategies; only a few of them have learned, however, how cess and accordingly, the most valued activity. The company worships stories of new-
to formulate and implement strategies for specific functions such as engineering or product successes and how new innovations came about. Stories such as the famous
manufacturing, and even fewer have learned the art of cross-departmental strategizing Post-it legend are diffused widely and shared from one generation to the next. The
for managing critical assets such as technology and human resources. Obviously, the company conducts continuous training of its engineers and managers in the character-
technology strategy sub element is of particular importance to the technological base, istics of innovation and how to enhance successful innovations. At 3M, even if man-
but it will be of little use unless it is well integrated with both the business strategy agers tried to change strategy and deemphasize innovation, the culture would probably
and the relevant functional strategies. Functions that are most relevant to defining and sustain innovative behavior for many years.
implementing the technology strategy are R&D, manufacturing, information systems, Culture can work either for or against competitive advantage. Culture was the main
and marketing.23 driving force behind the development-and failure-of Texas Instruments' home com-
Apart from flexibility and fit, a final assessment criterion is worth highlighting. Is puter in the late 1970s. In this case, the strong "know it all" and "not invented here"
the form of these strategies that of a detailed itinerary or a compass heading? The itin- (NIH) culture pushed the company into developing a computer around its failed 9900
erary form can be an effective guide only if the environment is stationary and well microprocessor. This 16-bit microprocessor was introduced ahead of its time, when
known.24 Fewer and fewer industries offer such easy environments. In a dynamic envi- the market was just tasting the previous generation of 8-bit microprocessors. When
ronment, characterized by a lot of uncertainty, flexibility may be very valuable; but Texas Instruments was unable to leap-frog the rest of the industry with this micro-
the organization still needs to trace substantive lines of development for itself, and in processor, it launched the development of a home computer which incorporated the
a dynamic environment these lines of development can be specified only as an overall poor-selling microprocessor. Although many engineers advocated the use of a cheaper
compass heading. This requires building real insight into the nature of the organiza- microprocessor, TI's culture insisted on using the more expensive, and not-yet-utilized
tion's current and projected capabilities and into its fit with the evolving market needs. 16-bit microprocessor. After enjoying some initial success in the early 1980s, TI was
The need for such insight explains the value of "strategic intent"25 and business unable to stay competitive against the lower-priced VIC-20 computer, made by
focus-a clear sense of what the organization needs to master and what it can afford to Commodore. This rival product was based on a lower-cost 8-bit microprocessor. The
let others do for it-as opposed to unconstrained and unrelated diversification. outcome for TI was painful and resulted in the greatest loss in the company's history.29
Strategic focus and the quality of insight are key criteria for evaluating the strategy In assessing culture, Schein's approach is particularly useful.3o He distinguishes
component of the technological base. The greater the focus and insight, the more three layers of culture. First, the visible and most tangible layer is made up of the arti-
effective is the strategic planning and the longer is its time horizon.26 facts of the company's culture such as pay scales and office space. Second, underlying
Sharp Corporation's technology strategy is a good example of such insight. Their these artifacts are the normative values of the organization. Third, beneath these val-
strategy was directed at investing in technologies which would serve as the "nucleus" ues, and typically invisible, are shared assumptions about how the world works. An
of the company in the future. Such technologies should have powerful relevance to assessment of the cultural element of the technological base should explore all three
many products. For example, Sharp kept investing heavily in LCD factories in the layers.
1990s, believing that this technology could be leveraged into several end products in In identifying and trying to influence culture, managers should be aware of the six
the future. Conversely, Sharp avoided direct random-access memories (DRAMs), areas in which culture can be recognized:
capacitors, and resistors as commodities readily available from competitive suppliers
and focused on specialties such as masked read-only memories (ROMs). Once it chose Vocabulary-words and phrases typically expressing important values and ideas.
to develop a technology, Sharp committed to it for the long run. It pursued, for exam- Sony, for example, by emphasizing its leadership is using the phrase "BMW,"
ple, LCD research throughout the 1970s, although the market for LCDs did not take meaning "beat Matsushita whatsoever."
4.10 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY THE TECHNOLOGICAL BASE OF THE COMPANY 4.11
Methodology-the established norms under which an organization gets things done. on the firm's processes and internal activities. This component of the technological
For example, do we use internal task forces or external consultants? base should therefore be assessed in terms of the appropriateness of internal compli-
Rules of conduct-the unwritten do's and don'ts that guide day-to-day behavior, ance policies and the productivity of relations with the regulators.
from the appropriate dress code, to situations in office protocol, to decision making Finally, in some industries, the political environment can play an important role in
and etiquette. shaping the firm's technological base. Recent years have seen industry players mobi-
lize to seek protection from foreign competition-including technology-based compe-
Values-such as the belief in being the best, the belief in the importance of people
tition-and to seek government support for domestic technology development. Other
as individuals, the belief in superior quality and service.
types of societal issues, such as ecological concerns, can also influence the organiza-
Rituals-such as types of announcements, holiday parties, or the way people are tion's technology agenda, and an assessment of relations with the relevant social
introduced.
movement is often necessary.34
Myths and stories-who are the heroes, and who is the butt of the jokes? What do
people from the lab talk about after a few drinks together? Are the stars acknowl-
edged to be those making positive contributions, or are they people beating the sys-
tem? Is it good or foolish to work hard and long hours? 4.6 DEVELOPMENT PROCESSES
For technology-based firms, the two key processes are the product and process-gener-
ation process and the technology-generation process. The latter generates the organi-
4.5 EXTERNAL ASSETS zation's future technological assets that are used as inputs into the former. Both
processes span the entire innovation cycle, from idea to commercialization-including
External assets are a crucial component of the organization's technological base. The idea generation, formulating and screening proposals, conceptual and detail develop-
ability of the organization to find, build, and exploit technology depends on its net- ment, and internal or external sales. Like other business processes, development
work of partnerships, contracts, and business relationships. Equally important are the processes require the cooperation of different departments within the company.35
informal linkages established by employees with their peers and colleagues outside One way to structure the evaluation of this process is to divide it into three broad
the organization. This includes networks of professionals, managers, and executives in phases: preproject, project, and postproject. The preproject phase encompasses the
local, national, and international associations. assessment and mapping of technology and products36 as well as setting the "structural
A first category of external assets is composed of downstream links to customers. context"37 and the "strategic context" for innovative projects. These preproject activi-
Companies should ask: How many customers do we know that can provide ideas for ties focus the organization's attention on ideas and opportunities, and thus playa criti-
new products or new uses? And how well does the organization learn from these lead cal role in shaping the subsequent outcomes.
customers ?31 The key factors for effective idea generation and identifying opportunities are
A second category is composed of upstream links to materials and component sup- maintaining links to external knowledge sources and across internal boundaries. 3M,
pliers, equipment vendors, and subcontractors. The organization should assess whether for example, in addition to continuously collecting customer feedback and ideas, has
it has appropriate links with the best people at the best companies and whether these established a method of articulating radically new product proposals without explicitly
relations are sufficiently collaborative to sustain a long-term two-way commitment. getting customer requests. Often in cases of radical innovation customers simply don't
Links to competitors can also be critical. They are a source of knowledge, experi- know what they need, until they see or have it (and then, most likely, they "can't live
ence, and lessons to learn. They also fuel the organization's momentum by providing without it").
drive and excitement. Porter discussed the role of "good" competitors in improving The key tasks within the project phase are product definition, project definition,
competitive advantage, industry structure, market development, and entry barriers. and project organization. Product definition involves positioning the product as a
Through these means, a firm's competitive base can be enhanced.32 It is therefore breakthrough, next generation, or derivative.38 It also involves transforming customer
important to assess the quality and configuration of competitors as well as the efficacy requirements into product attributes and specifications. For this purpose companies
of the organization's ties to its competitors. Seeing competitors as assets rather than employ techniques such as quality function deployment (QFD), as developed by
hindrances, companies in related businesses can create forums to share ideas and pur- Toyota,39 or conjoint analysis, as used by Sunbeam.4O
sue benchmarking.33 Once the product is defined and specified, the organization needs to define the pro-
Building and maintaining external links requires an appropriate set of internal ject-its type, scope, schedule, and budget. Projects can be classified according to
organizational assets. Managing downstream linkages, for example, requires skills to their level of technological uncertainty (from low to high, or superhigh)41 and accord-
interpret customers' comments, procedures to ensure the systematic collection and ing to their system scope (assembly, system, or array).42 Depending on the nature of
analysis of field information, organizational structures to ensure that results of this the project, different organizational forms, team structures, and leadership approaches
analysis flow to the appropriate people and that these people have some incentive to are needed.
act on it, a strategic framework that focuses people's attention on learning from users, Modern project management techniques are getting special attention as companies
and a cultural context that avoids the NIH syndrome. come under increasing pressure to shorten their time to market. Companies are creat-
In some industries, regulations have a considerable impact on product innovation ing a reservoir of project management tools, program applications, planning and con-
(e.g., FDA approval for new drugs) or on the organization's internal operations (e.g., trol methods, and documentation formats, in an attempt to learn how to manage their
EPA or OSHA regulations). Both types of regulation can have a considerable impact projects more efficiently.
4.12 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY THE TECHNOLOGICAL BASE OF THE COMPANY 4.13
The postproject phase governs what the organization will learn from past projects Special attention should be given to manufacturing capabilities. Often an innovator
for its subsequent activity. Does the organization systematically conduct postproject would produce the first and second generations of an innovative product, and then
reviews? Does it collect data that enables it to compare this project's performance fully or partially outsource manufacturing to a low-cost manufacturer with reduced
against that of comparable projects in the past? How objective is the assessment? The labor costs or overhead expenses. Although such a decision may make economic sense
key factors for effective postproject activities are the expectations communicated by in the short term, it may result in surrendering key technological assets in the long
senior managers and the culture that rewards good decisions and not just good out- run. This was clearly the case for color TVs and other consumer electronics products.
comes. The organization's development processes can truly become a part of the tech- Many of them were invented by American companies, but these firms later lost market
nological base if management commits the organization to "learning across pro- share or entire businesses to off-shore manufacturers who started their involvement by
jects."43 Reengineering the company's project management processes has become an joint manufacturing with American producersY
important learning thrust in organizations seeking to reduce cost and improve quality Complementary assets are product-, industry-, and innovation-specific. When
of service to their customers.44
assessing a specific innovation, a company must identify all the necessary capabilities
which are needed to successfully develop, produce, market, distribute, and maintain
the product or service in the long run. Ownership of the relevant complementary asset
4.7 COMPLEMENTARY ASSETS is clearly an advantage, but it comes at a cost. Strategic partnerships are an increasing-
ly common alternative. (Such partnership then becomes part of the company's external
assets.) When GM-Hughes planned its move into the commercial TV reception busi-
Generating profits from technological innovation often requires a collection of sup- ness, it had sought external help in securing required complementary assets. Although
porting capabilities. Complementary assets, such as information technology, distribu- it was relatively easy for the company to build a new generation of commercial satel-
tion, after-sales services, field support, and manufacturing, can create the difference lites, making the consumer components-the home decoder boxes and reception dish-
between temporary and long-term success. es-was another story. For building this part, Hughes found it necessary to distance
The most critical complementary assets are those which exhibit a strong depen- itself from its attitude as a long-time Pentagon contractor who is known for high qual-
dence on the specific innovation. This was the case in Mazda's failed attempt to com- ity-and even higher costs. Hughes was also looking for entries into a completely new
mercialize its rotary-engine automobiles. Specialized repair facilities to support the market: the consumer arena. Although Hughes engineers were eager to build the elec-
new type of engine were simply nonexistent. Similarly EMI, which invented and tronic home components, the company chose RCA- Thompson as its partner. RCA
developed the first generation of computerized tomography (CT) scanners, was unable assured Hughes it would build the consumer units while meeting the price target of
to sustain its market position since it lacked the required chain of service, support, and $700, and its 1l,000-dealer retail network guaranteed distribution.48
in-hospital sales access. Eventually, it lost its market share leadership, first to
Technicare, and then to GE-both possessing the complementary capabilities.45
In certain cases, information technology is a critical complementary asset.
American Airlines, a major transportation service provider, was able to achieve sub- 4.8 ADAPTING THE TECHNOLOGICAL BASE
stantial advantage from its advanced automated ticketing, routing, and reservation sys-
tem, SABRE. Sometimes a company may possess the main technology embedded in Management may often initiate a change in the company. Such a change may be need-
its innovation, but it is unable to commercialize the final product without an additional ed to better adapt the organization to its environment or to be able to carry forward the
support technology. IBM's reliance on Microsoft's MS-DOS operating system is a typ- company's strategic decisions such as moving into a new group of products, a new
ical example. Without this help IBM could not have developed its first PC in a record technology, or a new type of market. The technological base provides a framework,
development time of one year. And when Cray Research markets its supercomputers, not only for assessment but also for implementing change and for analyzing the diffi-
or Sun Microsystems its workstations, they essentially give away supporting software culty involved. Of the five elements we have identified, it is usually the organizational
to enhance the sale and use of their advanced hardware.
assets that prove to be the limiting factor. Furthermore, if the organizational assets are
Securing control of complementary assets may be a key factor in sustained success. effectively managed, one can positively control the other four elements. Among the
Large companies are more likely to possess the relevant assets. Small firms may not
elements of the organizational assets we can often find a hierarchy:
have the time or resources to develop the required capability. They must then create
alliances with owners of the specialized assets, thus creating potential future competi-
tors. However, even large corporations often find it necessary to join forces with oth-
Skills. The most direct determinant of the organization's ability to derive benefits
from new technological opportunities is the skill base of the organization. Do the
ers to speed up development or reduce costs. When the personal computer industry personnel have the skills required to effectively select, develop, operate, and main-
began to move from desktop toward laptop computers, most U.S. firms found them-
tain the technological capabilities?
selves sourcing critical technologies such as flat panel displays from Japanese com-
petitors: Compaq from Citizen, TI and AST from Sharp, AT&T from Matsushita, and Procedures. Whether skills are effectively deployed will depend on prevailing pro-
IBM from Toshiba. Another way to gain access to complementary assets is by acquisi- cedures-in particular, the procedures for decision making, personnel selection, and
tion. That was IBM's motivation in its move to acquire Lotus with its network human resources development.
GroupWare software. In considering an acquisition of this type, companies must Structure. Whether these procedures-which prescribe certain roles-are effective-
assess, however, the short-long-term diversification test: Does the acquisition add true ly implemented or degenerate over time will depend on their congruence with the
sustainable value?46 incentives and information flows created by the organizational structure. What spe-
cialized units have been established? To whom do they report? And how do they
contribute to the development processes?
Strategy. These structures, in turn, will evolve to reflect the priorities embodied in
the organization's strategy. What are the competitive priorities of the firm? How are
these formulated? How are they translated into resource allocation?
Culture. Behind these priorities, we often find culture-the values and assumptions
that bind the organization and give it continuity over time.
This hierarchical order helps us understand the dynamics of change in the organiza-
tion. The five components can be seen as five levels of organizational learning in two
senses. First, the greater the magnitude of change in technology or market that the
organization seeks to effect, the higher in this hierarchy the organization needs to
make adaptations. Simple technological or market changes typically require modest
changes in skills and procedures. More radical changes, on the other hand, typically
call for organizational changes not only in skills and procedures but also in structure
and strategy. Revolutionary technological changes, such as those required by the
defense industry in its conversion to commercialization, usually call for changes in all
five levels-including culture.
These five elements also form a hierarchy in another sense: the lower levels of
organizational learning are typically amenable to faster change than higher levels. The
higher levels are more "viscous" and resistant to change. New skills can be recruited
in a matter of weeks or months. New procedures typically take several months to Dynamics of organizational change. (Source: P. S. Adler and A. Shenhar, "Adapting
FIGURE 4.2
develop and implement. New organization charts can be drafted overnight, but getting Your Technological Base: The Organizational Challenge." Sloan Management Review. 25: 25-37.
the organization to work effectively in the new framework usually takes 6 months to a 1990.)
year. New strategies can be decreed, but effectively mobilizing the organization to
internalize and implement them typically requires a year, and often longer. And finally
culture, if it is manageable at all, usually takes several years to change (see Fig. 4.2).
were located in Manhattan, where there is a large pool of experienced financial indus-
The remaining components-external assets, development processes, and comple-
mentary assets-may also be targets of change. They cannot be changed, however, try experts.
This exception thus "proves the rule" that companies that wish to capitalize on
without an appropriate adjustment in some of the organizational assets. External
technology's ability to make a contribution to their performance-rather than seeking
assets, for example, can be changed, but that will typically require new procedures for
merely to minimize technology change's negative impact-need to carefully assess the
information gathering, and perhaps even a cultural change to open the organization to
strengths and weaknesses of their technological base as well as the time it takes to
the external world. This was the case for General Electric, which directed itself to
become a "global, borderless company." The process of change took more than 10 remedy those weaknesses and build new strengths.
years, and even then some elements of the "old culture" were stilI evident throughout
the company.49 Similarly, development processes can be changed, but doing so typi-
cally requires changes to skills, procedures, and sometimes to structure and culture,
too. Finally, complementary assets can sometimes be developed in-house, but that typ-
4.9 REFERENCES
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an in-house capability, the company must resort to external help, and must again take Challenge," Sloan Management Review. 25: 25-37,1990.
the time to build the strategic alliance with its new "external assets."
2. C. K. Prahalad and G. Hamel, Competing for the Future, Harvard Business School Press,
There are, of course, exceptions, but rapid change in the organizational fabric can
only be effective in peculiar circumstances. In the mid-1980s, a large, New Boston, 1994.
3. E. B. Roberts and C. A. Berry, "Entering New Businesses," Sloan Management Review, pp.
York-based financial services organization had been plagued by poor processing per-
formance. The company realized the urgency of completely overhauling its back- 3-17, Spring 1985.
office technological competencies and organizational assets and reassessing its new 4. C. K. Prahalad and G. Hamel, "The Core Competence of the Corporation," Harvard Business
system development project capability. They could see that the magnitude of change Review, pp. 79-91, May-June 1990.
they were seeking would necessitate not only equipment, skill, and procedural changes 5. M. Hammer and J. Champy, Reengineering the Corporation, Harper Business, New York,
but also a major transformation of their structures, strategy, and culture. So they 1993.
decided to replace the entire operations top-management team, nearly half of the other 6. Sharp Corporation, "Corporate Strategy," Harvard Business School, HBS-9-793-064, Jan.
managers, and one-third of the employees. The change proved highly effective, but it 1994.
still took 2 years to payoff. Even this 2-year time span was possible only because they
THE TECHNOLOGICAL BASE OF THE COMPANY 4,17
37. R. A. Burgelman, "A Process Model of Internal Corporate Venturing in the Diversified Major
7. J. D. Jasper, "Inventory Your Technology for Increased Awareness and Profit," Research
Management, 28(4): 16-20, 1980. Firm," Admin. Sci. Quart .. 28: 223-244, ]983.
8. G. R. Mitchell, "New Approaches for the Strategic Management of Technology," in 38. Wheelwright and Clark, op. cit. (Ref. 19).
Technology in the Modern Corporation, M. Horwitch, ed., Pergamon Press, New York, 1986. 39. J. R. Hauser and D. Clausing, "The House of Quality," Harvard Business Review. pp. 63-73,
9. A. D. Little, "The Strategic Management of Technology," Eur. Management Forum, Booz- May-June, 1988.
Allen and Hamilton, Cambridge, 1981. 40. A. L. Page and H. F. Rosenbaum, "Redesigning Product Lines with Conjoint Analysis: How
Sunbeam Does It." J. Product Innovation Management, 4: 120-137,1987.
10. P. A. Roussel, N. Saad, and T. J. Erickson, Third Generation R&D, Harvard Business School
Press, Boston, 1991. 41. A. J. Shenhar, "From Low to High-Tech Project Management," R&D Management. 23(3):
II. R. Foster, Innovation-the Attacker:S Advantage, Summit Books, New York, 1986. 199-214,1993.
42. A. J. Shenhar and D. Dvir, "Managing Technology Projects: A Contingent Exploratory
12. M. Jelinek and C. Schoonhoven, The Innovation Marathon, Jossey-Bass, San Francisco,
Approach," Proceedings of the 28th Annual Hawaii International Conference on System
1993.
Sciences. IEEE, Computer Society Press, Washington, D.C., 1995.
13. E. B. Roberts and A. Fusfeld, "Staffing the Technology-Based Organization," Sloan
43. R. H. Hayes, S. C. Wheelwright, and K. B. Clark, Dvnamic Manufacturing, Free Press, New
Management Review, 22(3): 19-34, 1981.
York, 1988.
14. A. J. Shenhar and H. Thamhain, "A New Mixture of Management Skills-Meeting the High-
Technology Managerial Challenges," Human Systems Management. B( I): 27-40, 1994. 44. Hammer and Champy, op. cit.
45. D. J. Teece, "Profiting From Technological Innovations: Implications for Integration,
15. R. L. Daft and R. H. Lengel, "Organizational Information Requirements, Media Richness
CoUaboration, Licensing and Public Policy," in The Competitive Challenge: Strategies for
and Structural Design," Management Sci., 32: 554-571, 1986.
Industrial Innovation and Renewal. D. J. Teese, ed., School of Business Administration,
16. M. Jelinek and C. Schoonhoven, op cit. (Ref. 12). University of California, Berkeley, 1987.
17. T. J. AUen, "Organizational Structure, Information Technology, and R&D Productivity," 46. M. Porter, "From Competitive Advantage to Corporate Strategy," Harvard Business Review,
IEEE Transact. Engineering Management, 4: 212-217,1986.
pp. 43-59, May-June 1987.
18. P. R. Lawrence, H. F. Kolodny, and S. M. Davis, "The Human Side of the Matrix," 47. R. A. Bettis, S. P. Bradley, and G. Hamel, "Outsourcing and Industrial Decline," Acad.
Organizational Dynamics. Summer 1977. Management Executive. 6(1): 7-22, 1992.
19. S. C. Wheelwright and K. B. Clark, Revolutionizing Product Development, Free Press, New 48. Business Week, pp. 66-68, March 13, 1995.
York, 1992.
49. N. M. Tichy and S. Sherman, Control Your Destiny or Someone Else Will, Currency-
20. A. J. AUen, Managing the Flow of Technology, MIT Press, Cambridge, Mass., 1977.
Doubleday, New York, 1993.
21. Business Week, pp. 66-68, March 23, 1995.
22. A. Bhide, "Hustle as Strategy," Harvard Business Review, pp. 59-65, Sept.-Oct. 1986.
23. P. S. Adler, D. W. McDonald, and F. McDonald, "Strategic Management for Technical
Functions," Sloan Management Review, 33(2): 19-28, 1992.
24. R. H. Hayes, "Strategic Planning: Forward in Reverse?" Harvard Business Review, pp.
IIJ-1J9, Nov.-Dec. 1985.
25. Prahalad and Hamel, op. cit. (Ref. 4).
26. R. A. Burgelman, "Strategy-Making as a Social Learning Process: The Case of Internal
Corporate Venturing," Interfaces, 18(3): 74-85, 1988.
27. Sharp Corporation, op. cit. (Ref. 6).
28. M. A. Von Glinow, The New Professionals, Ballinger, Cambridge, Mass., 1988.
29. J. Nocera, "Death of a Computer," Infoworld, pp. 59-63,63-65, June 4, IJ, 1984.
30. E. H. Schein, "Coming to an Awareness of Corporate Culture," Sloan Management Review,
pp. 3-16, Winter 1984.
31. E. Von Hippel, The Sources of Innovation, Oxford University Press, New York, 1988.
32. M. E. Porter, Competitive Advantage, Free Press, New York, 1985.
33. F. G. Tucker, S. M. Zivan, and R. C. Camp, "How to Measure Yourself Against the Best,"
Harvard Business Review. Jan.-Feb. 1987.
34. I. H. Ansoff, Implanting Strategic Management, Prentice-HaU International, Englewood
Cliffs, N.J., 1984.
35. Hammer and Champy, op. cit. (Ref. 5).
36. C. H. Willyard and C. W. McClees, "Motorola's Technology Road-map Process," Re.\earch
Management. 30(3): 13-19, 1987.
5.1 INTRODUCTION
How should the corporate board be involved in management of technology (MOT)?

Many executives would wonder about the relevance of this question, arguing that it is
not the traditional role of the board to be involved in MOT at all. Many would agree
with Steve Lohr of the New York Times in his description of the ceremonial role of the
board. t
It used to be so easy, so civilized, more a social ritual than a chore. The members of
the corporate board would fly in the night before, dine with their old friend, the chief
executive, sharing after-dinner brandy and camaraderie. Each director would receive a
slender binder of briefing papers that, typically, got a cursory read before the formality of
the next morning's board meeting. The chief executive called the tune, the board hummed
along.
This is no longer the case. At present corporate boards are rethinking their roles.
Financial reporters and academic authors are taking a hard look at the role and func-
tions of the board and are detecting subtle shifts in expectations and perceptions.
These could alter significantly the role of the board in many areas. 2-5
Coincidentally with the changing role of the corporate board there is a growing
interest in MOT. One of the strongest trends in evidence in society today is that of
increasing technification. Technology is a large and growing part of most people's
daily experience. Not only do we see the emergence of new materials, products, and
"Financialsupportby the HumanSciencesResearchCouncilis gratefullyacknowledged.The Councildid

not initiate this research and does not necessarily agree with the findings. The role of the Honeywell
Foundationin supportingthe Centerfor the Developmentof TechnologicalLeadershipis acknowledgedwith
appreciation.
5.1
5.2 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY SECTION 1 THE CORPORATE BOARD 5.3
information systems, but many activities that in the past were performed by people are
5.3 CORPORATE BOARDS INCREASINGLY
being increasingly performed by technological entities. The technological landscape
INVOLVED IN STRATEGY
within which we all live is mutating and evolving continuously. This rapid evolution is
the direct result of the massive investments in science and technology that all the eco-
nomically advanced countries of the world are committed to. Each year 2 to 3 percent But if boards are becoming more active and involved, what are they becoming
of global financial resources are allocated to research and development (R&D). At the involved in? In a series of interviews of corporate board members, many members saw
leading edge technological change is measured at over 50 percent per annum. This strategy as their major responsibility. "Almost two out of three board members inter-
poses particular challenges to the corporate board which carries the mandate to ensure viewed identified 'setting the strategic direction of the company' as one of the jobs of
the profitable survival of the corporation within this changing technological environ- the board. The percentage is probably an understatement. When asked directly at
ment. another point in the interview, 'Are you involved in setting strategy for the company?'
On the basis of preliminary evidence, this chapter suggests four propositions con- only one in five answered no."8
cerning the role of corporate boards in MOT: This impression is reinforced by the results of a formal survey of board members
attending an exec uti ve course at the International Institute for Management
Corporate boards are taking on more active roles. Development (IMD), Lausanne, Switzerland. The results are outlined in Fig. 5.1.
Corporate boards are becoming increasingly involved in strategy formation. Other activities included in the survey but not reported separately here include
ensuring compliance with corporate law and regulations; providing a broad view;
The strategic dimension of MOT is receiving increasing emphasis.
monitoring the environment; handling shareholder relationships; and setting overall
Corporate boards will be increasingly involved in MOT. culture, ethics, and image.9
Clearly, if there is one activity that board members regard as their legitimate
While each proposition needs to be more fully researched, certain implications for domain, it is strategy. They feel they are involved in managing the destination of the
boardroom procedure may already be discerned. In the following sections the grounds corporation and in ensuring its survival as a viable entity.
for each proposition will be set out and the implications for boardroom procedure This evidence gives rise to the second proposition put forward in this chapter:
investigated.
Corporate boards are becoming increasingly involved in strategy formation.
5.2 CORPORATE BOARDS TAKING MORE

5.4 STRATEGIC DIMENSION OF MOT RECEIVES
ACTIVE ROLES
INCREASING EMPHASIS
May we detect a change in the dominant mode of operation of corporate boards? Do As a consequence of the technification of society there is a growing interest in the for-
we note a shift in position? In a recent study Demb and Neubauer address this very mal management of technology (MOT). MOT is that part of management concerned
question. The authors differentiate three modes of operation: 6 with exploring the potential of new technologies and developing the technological
base of the corporation to utilize this potential. New developments in product, process,
The watchdog. The role of the board is that of monitor. "This implies a post-factum and information technologies have to be monitored, evaluated, and-possibly-uti-
assessment, primarily in terms of how successfully the organization conducts its lized. These decisions require a subtle understanding of the interplay between technol-
business."
ogy, economics, and the environment, as well as a sound understanding of the impact
The trustee. The board serves as the guardian of the assets. "Implicit in this role is of technology on corporate functions.
the sense that the trustee is responsible for evaluating what the corporation defines
as its business, as well as how well that business is conducted."
The pilot. The board takes an active role in directing the business of the corpora-
tion. "A pilot board is active, gathers a great deal of information, and takes on the
decision roles the other archetypes leave solely to management."
It would appear that corporate boards can occupy different positions on a broad spec-
trum of possible modes of operation. We may describe this spectrum as ranging all the
way from a review-and-react (RR) mode that is somewhat uninvolved and nonpartici-
pative, to an envision-and-enact (EE) mode that is highly involved and participative.
What do Demb and Neubauer find? They come to the conclusion that, in the future,
"The board will have more to handle, a bigger portfolio, and there will be a need to
shift emphasis more toward the conduct arena."?
This provides us with the basis for the first proposition: Corporate boards are tak-
ing on more active roles.
SECTION 1 THE CORPORATE BOARD 5.5
This interest in MOT is of very recent origin. One indication of the relative youth- integrating technology into corporate strategy,14 and no wonder that ETMI has chosen
fulness of the field is the short history of professional recognition. The Technology as its theme for the Fifth International Forum on Technology Management: Closing
the gap between technology and corporate strategy. IS This evidence provides grounds
and Innovation Management Division (TIM) of the Academy of Management was
for the third proposition: The strategic dimension in MOT is receiving increasing
formed only in the late 1980s. The European Technology Management Initiative
(ETMI) was launched soon after. The International Association for the Management of emphasis.
Technology (IAMOT) was established in 1992. Most academic courses in MOT are
very young, and only a handful of universities have track records dating back for more
than a decade.
A particular feature of MOT is the way in which it permeates the entire business 5.5 CORPORATE BOARDS INCREASINGLY
setting. It is relevant to many functional areas and to all levels in the corporate hierar- INVOLVED IN MOT
chy. In a recent study of science and technology policy in the European Economic
Community (EEC), MOT was characterized as the area "where long-term visions and If MOT is becoming increasingly strategic in nature, and if corporate boards are
short-term improvements meet."10 MOT is concerned with both operational and strate- becoming increasingly involved in strategy, it follows, by way of inference, that cor-
gic issues. porate boards will be increasingly involved in MOT. Do we have any evidence that
More specifically, MOT is concerned with: this is happening already? At this stage, not too much. There is some evidence that
leading-edge companies are assigning technology to a specific board committee. One
The level of nuts and bolts-i.e., the design, making, and maintenance of individual example is that of Medtronic Inc. in the United States. As early as 1974 while most
products boards had only an "audit" and a "compensation" committee, Medtronic established a
The level of corporate functions-e.g., managing operations, marketing, R&D "research committee." In 1977 the name of this committee was changed to "research
and technology." In 1987, the name was changed again to "technology and quality,"
The level of corporate strategy-i.e., as part of managing the "destiny" of the cor-
signifying the board's commitment to the quality concept. Furthermore, in addition to
poration
financial data, Medtronic's board receives reports on the strategic outlook of the com-
pany which covers indicators such as market share, customer surveys, and technologi-
5.4.1 MOT at the Functional level cal comparisons with competitors. 16
Similarly, Motorola has seven committees of the Board of Directors, one commit-
The concern with MOT at the functional level is widely understood. It is the area that tee of which is responsible for technology. This committee "identifies and assesses
naturally comes to mind when the term management of technology is used. The links significant technological issues and needs affecting the company."17
with operations, manufacturing, R&D, material development, product design, process This evidence provides grounds for the fourth proposition outlined in this chapter:
reengineering, TQM (total quality management), and productivity are actively pur- Corporate boards will be increasingly involved in MOT. This proposition has far-
sued. reaching consequences for boardroom behavior and the responsibilities of individual
When viewed at this level technology forms a natural alliance with science and members. Board members will have to develop an interest in and a familiarity with
engineering. It reflects the area of the specialist. It logically extends the domain of technological matters. Technology will have to be an explicit item on the boardroom
influence of the engineering division or the laboratory. agenda.
5.4.2 MOT at the Strategic level

5.6 IMPLICATIONS FOR BOARDS
The role of MOT at the strategic level is not that immediately apparent. Few manage-
ment procedures exist involving MOT at this level. It is rarely addressed in manage- What does an increasing involvement in MOT mean for the corporate board? Of late
ment education. much has been written about the responsibilities of boards and about guidelines for
While the literature concerned with MOT at the functional level has, in the past, proper corporate governance. Underlying most of the discussions is the criterion of
constituted the largest part of the writing on MOT, recent years have seen a significant "due diligence." Board members are expected to apply their minds to the task at hand
increase in the writings concerned with strategy. Together with the growing emphasis and inform themselves adequately of the issues they are dealing with. New arrange-
on the strategic dimension in MOT, there is also a growing belief that corporate strate- ments are being experimented with in the boardroom to enable boards to perform the
gy (CS) and MOT are inextricably linked and should be managed as such.II12 functions set for themselves. Examples include the greater use of nonexecutive direc-
Evidence has also been advanced that present approaches to strategy and technology tors, the allocation of areas of responsibility, and the appointment of dedicated com-
are "fatally flawed" and in need of revision. In short, the frequently advanced view that mittees.17,18
the technological interests of an organization are dictated by its mission is seriously In the case of MOT it will be necessary for boards to access the necessary sources
challenged. It is too limiting. It is the technological insight of the strategic managers of information, to develop the relevant literacy, and to introduce appropriate proce-
that should determine and shape the corporate mission, not the other way around.D dures to discharge their responsibilities.
No wonder a recent review article on MOT emphasizes anew the importance of
5.6 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY SECTION 1 THE CORPORATE BOARD 5.7
5.6.1 Information An outline of an executive short course covering these aspects is dealt with in Sec. 2
of this chapter.
Corporate boards should require adequate information on the changing technological
landscape. Just as economists and other strategic analysts of the macro setting are
invited into the boardroom to present economic outlooks, political perspectives, and 5.6.3 Procedures
other relevant backdrops, so competent technology analysts should be employed to
give a technological outlook. To an extent this does happen already. But more often The corporate board should clearly define its role in the strategy formation process.
than not, discussion of the technological scene is limited to the predefined and imme- This is not easy. Strategic planning is undergoing a major revision at present, and pre-
diate technological interests of the corporation, not the entire technological setting viously accepted procedures are being probed and questioned. One approach is to
within which the organization will have to survive and prosper. Board members involve board members in the strategic-scanning process. This can be done by means
should insist on an overview of the entire technological landscape to provide them of an explicit exercise devoted to the surveillance of the corporate environment,
with an appropriate structure to view and comprehend technological change. including the technological landscape. 28
Within the strategic-scanning approach an interactive procedure is followed involv-
ing a dialogue between the corporate board and technology analysts. Major trends are
5.6.2 Expertise explored and a number of "landmark technologies" identified which reflect the most
outstanding features of the technologicallandscape.29
In a recent article Lorsch emphasizes the importance of knowledge to enable directors
to function properly. "Knowledge is the appropriate word here instead of the more fre-
quently used information, because the director's real problem is not lack of informa-
tion but its content and context.'''9 To meet this objective, board members may wish to
take steps to enhance their technological expertise. In this respect technological exper-
tise does not necessarily mean an in-depth and detailed understanding of particular
technologies. It goes far wider. It means a comfortable familiarity with the whole
spectrum of technologies.
Where would board members turn to for training of this nature? Unfortunately, the
field is not very well served at this stage. Many authors have suggested approaches to
such a comprehensive technological field. Examples that come to mind include a sys-
tems theory of technology,20 technometrics,21.22 a functional approach to technology,23
technology analysis,24 technocology,25 and a comprehensive theory of technology.26
There is a challenge to develop appropriate educational programs in this area. It is
expected that business schools, centers for the development of technological leader-
ship, and associations of corporate directors (such as the National Association of
Corporate Directors in the U.S.A. and the Institute of Directors in the U.K.), as well as
international associations of professionals (such as the International Association for
the Management of Technology and the European Technology Management Initiative),
will respond to this challenge. In this respect a recent survey by the American
Assembly of Collegiate Schools of Business on resources available for courses in the
management of innovation and technology provides a useful point of departure. 27
In selecting appropriate courses directors should ensure that the following topics
are covered:
How to identify an appropriate unit of analysis when dealing with the phenomenon
of technology
How to understand different technologies by using a common analytical framework
How to classify technologies for management purposes
How to track technological trends
How to observe and forecast technological fusion
How to chart potential breakthrough zones
How to evaluate technologies in terms of social preferences
access to the essential features of all technologies without attempting to grasp every
detail.
5.7.2 Defining Technology
There are many definitions of technology. For the purposes of this handbook, the fol-
lowing one is convenient:
Technology is a "set of means" created by people to facilitate human endeavor. In the

briefest possible terms technology may be viewed as "created capability."
This definition is very cryptic and leaves many subtleties unsaid. Some elucidation is
necessary:
The emphasis on means. This is the essence of technology; it is not an end in itself.
The use of the term created. Technology is not natural. It is made by people and is
therefore artificial.
The size of the "set of means." This can be limited or universal, depending on the
focus of the analyst.
Facilitate human endeavor. This is normally taken to mean to enhance human per-
formance or enable tasks beyond human capability. However, in many cases tech-
nology can render human endeavor obsolete.
The boundaries of the definition have been drawn to include technology in all its man-
ifestations, such as (1) emerging versus established technology and (2) high technolo-
gy, conventional technology, intermediate technology, and subsistence technology. It
excludes the social and environmental impact of technology, specifically, technology
assessment.
5.7.3 Choosing a Unit of Analysis
To select a unit of analysis we need to answer a key question; Where does created
capability reside? Where can we observe it and take its measure?
There are many possible answers to this question. For instance, technology could
reside in the minds of people-they have the potential for creating goods and services.
On a more mundane level, technology may be observed in the many artifacts used by
society, such as materials, tools, machines, devices, and procedures. And there are
more. What we are after is a concept for technology studies which corresponds to the
concept of organism in biological studies-i.e., a recognizable unit that can become
the focus of the analyst's attention, that can be subdivided into discernible parts that
exist within a larger community. For the purpose of this chapter, the unit of analysis
chosen is a technological entity-an uncommon name for a complex cluster of hard-
ware, algorithm, and human skills. One or more such technological entities constitute
the "set of means" referred to in the definition.
The entity concept is illustrated in Fig. 5.2.
In practice technological entities are embedded in an organizational framework,
sometimes referred to as orgware. The notion of technological entity is very flexible.
It can be large or small, simple or complex, concrete or abstract, old or new-its spec-
ifications will depend on the focus of the analyst.
SECTION 2 TECHNOLOGY ANALYSIS 5.13
Processing-to receive inputs and to work with them and to produce outputs of
another kind Complexity is a key dimension in dealing with structure. To help describe complexity
it is useful to refer to the so-called technological hierarchy, which distinguishes
Transporting-to receive inputs and to send them a certain distance
between various levels of technological entity:31
Storing-to receive inputs and to hold them for a longer or shorter duration
Supersystem
The nouns are a little more difficult to standardize. So many different things can be
Product group
processed, transported, or stored. However, it is possible to define three broad categories:
Product
Matter-that which has mass or volume Component
Energy-that which can cause work
Part
Information-meaning conveyed in structured signals Material
By using the three nouns and the three verbs outlined above, it is possible to introduce The higher up in the technological hierarchy that an entity is located, the more com-
a large measure of standardization into our description of function. 20 plex it is in that it embraces more subsystems. The greater the linkage between sub-
systems, the greater overall complexity.
5.8.3 The Principle of Operation

5.8.6 Material
Unfortunately, there is no standardized way of describing principles of operation.
Individual technology analysts will have to use their judgment and intuition. One In describing the material the technological entity is made of, it is useful to distinguish
example may serve to illustrate the presence of different principles. It concerns signal between functional and structural features.
processing. This can be done manually where a hand sign can indicate the presence or The functional features of a material reflect its special attributes such as photo-
absence of a certain condition. It can be done mechanically, electromechanically, elec- voltaic, superconducting, shock-absorbing, and elastic. The structural features nor-
tronically, or photonically. Each of these ways of signaling employs a different princi- mally refer to general attributes such as strength and rigidity. Sometimes the function-
ple of operation for an entity performing a given function. al and structural features are referred to as primary and secondary attributes,
respecti vel y.31
5.8.4 Performance
There are probably as many measures of performance as there are technological enti- 5.9 CLASSIFYING TECHNOLOGY
ties. The technology analyst should seek measures which recur frequently. Four may
be identified: The Need for Classification
5.9.1
Efficiency-measured as the ratio of output to input Classification is at the heart of management. Each functional area employs a classifi-
Capacity-in processing and transporting entities, measured as the output per unit cation that we take for granted. In the case of accounting, we classify entries into
of time; in storing entities, as the output stored over time meaningful accounts. In the case of marketing, we use the marketing mix to help us
understand various possible marketing initiatives. In the case of technology, which is a
Density-a measure of output in relation to the space required by the entity produc- new area of involvement for management, standard classifications have yet to emerge.
ing that output
This has not been an area of much research. The major ideas are summarized below.
Accuracy-a measure of preciseness or resolution which reflects the clarity or
exactness with which an output may be produced
5.9.2 Various Approaches to Classification
5.8.5 Structure Homer recently undertook a major survey of various approaches to classification.
These belong to two major families:32 a bibliographic approach and a taxonomic
There is no standard prescription for describing structure. Technology analysts usually approach.
refer to three aspects of structure: A bibliographic approach looks at what has been created and attempts to put these
creations into meaningful categories. When many items have been created in one cate-
Shape
gory, that is a large category. If no items are created, no category is required. A taxo-
Configuration nomic approach uses a more formal structure. It suggests a number of cells of equal
Complexity value. Some of these cells may be crowded, some empty.
Teichmann suggests five categories, all taxonomic:33
Characteristics of historical development

Natural laws or scientific concepts, embodied
Branch of production
Function within a branch or process of production
Principles of construction
There have also been a number of more pragmatic approaches to classification. The
most recent is that by Farrell, who suggests seven "kingdoms" of technologic species:
shelter, health, communication, tools, packaging, raw materials, and transport. 34
5.9.3 Approach Adopted in Technology Analysis
In attempting to do a technology scan or a technology audit it is necessary to find a

system of classification that meets the following criteria:
It should start with a simple distinction such as a twofold or threefold one.

It should be capable of further expansion.
It should be intuitively appealing.
It should fit on to a one- or two-page format.
After considering many options, this author finds a basic twofold categorization use-
ful. It distinguishes between materials and technological entities.
The subclassification of materials involves the distinction between (1) basic mate-
rials and (2) composites. Basic materials can hardly be classified into a limited num-
ber of categories. The size of the periodic table of the elements bears witness to that.
The following classification is based on Ashby's published theory and is suggested as
a first approach:35
Metals
Polymers
Ceramics
Carbons (pure)
Composite materials are classified in terms of the type of composition:
Matrices (weaves)
Laminates or bonds
Alloys
Technological entities can be classified in terms of many schemes. The five approach-
es of Teichmann would be one possibility, while any of the elements used in the
description of individual technological entities would be a valid candidate.
In the absence of a generally accepted format the functional classification is sug-
gested as a simple and practical basis classification. It can be used to categorize any
technology, whether simple or complex, large or small, modern or ancient. This classi-
fication scheme is illustrated in Fig. 5.3.
When using the nine-cell table the technology analyst has to obtain clarity on
5.16
Ingestion refers to transporting outputs from without to within, distribution refers to

moving inputs internally, and extrusion refers to carrying outputs from within to
without.
5.9.5
Refinements for Dealing with Information-Handling Entities
In the case of information-processing entities, Miller distinguished between associat-

ing and deciding. Associating is concerned with "forming enduring associations" in
information received. Deciding is concerned with receiving inputs from other parts,
manipulating them in terms of given criteria, and then sending information to certain
parts.
Miller also introduces further subtleties with respect to information handling and
describes the roles of
Input transduction
Output transduction
Decoding
Encoding
These are very useful concepts in certain specialized applications. They are not
explored further in this text.
The author of this chapter identifies the following elements in a message to help in
description and classification:
Content-the meaning of the message

Code-the format in which meaning is expressed
Carrier-the physical elements (matter or energy) which bear the code
Channel-the guideways along which the carriers move
Construct-the overall structure of the message
Count-the size of the message (usually expressed in bits)
5.9.6 Use of the Nine-Cell Functional Classification
The nine-cell functional classification is not in widespread use-in fact, there is no

standard classification of technologies in general use. However, it is becoming
increasingly popular as companies gain experience with it and discover its flaws and
its strengths. Examples exist of four practical applications:
To structure a technology audit, i.e., to classify core technologies within an organi-

zation
To structure a technology scan, i.e., to provide a basis for reviewing emerging tech-
nologies in the global technological environment
To study interactions between various technologies
To provide an overview of the portfolio of projects of a research organization
At level 4, technological change is viewed as a decrease in real unit cost per unit
output when employing the particular technological entity.
At levelS, technological change is viewed as an increasing share of the technologi-
callandscape occupied by the entity concerned.
5.11.3 Graphing Technological Change
It is possible to plot these changes by using three types of graphic presentations:
Curves of technological parameters

Cost curve
Substitution and diffusion curve
Curves of technological parameters are used to depict changing material characteris-

tics or changing performance levels. Mostly they exhibit a pattern of successive S
curves (denoting successive generations of materials, or successive generations of
technological entities). The S curve derives its shape from the pattern of increasing
increments as technological development takes off, followed by a period of decreasing
increments as the effect of some constraint makes itself felt. Cost curves are typically
decay curves. Please note that they are expressed in real terms. Substitution and diffu-
sion curves help describe the pattern of competition between existing technologies and
new technologies, as well as the pattern of diffusion of a new technology. Frequently
an orderly pattern emerges, with new technologies gaining an increasing share of the
market, but at a decreasing rate as market saturation occurs.
5.12 CHARTING TECHNOLOGICAL

BREAKTHROUGH ZONES
5.12.1 The Notion of Breakthrough Zones
Most technology managers would be interested in areas where breakthroughs are

imminent. Can we identify and chart such breakthrough zones? To define a break-
through zone we have to clarify the concept of technological constraints.41-43
5.12.2 Technological Constraints
For the purposes of technology analysis, constraints have been classified into three
categories.
Constraints of the First Order. These constraints are temporary barriers that may be
transcended with the process of technological evolution. Barriers are caused by limita-
tions set by particular material characteristics, by the nature of the technological prin-
ciple employed, or by the structure or size of a technological entity. Barriers are usual-
ly specific to a particular technological entity or class of entity. A barrier is overcome
when a new material, principle, or structure is successfully introduced into an existing
technological entity.
IS. European Technology Management Initiative, "Closing the Gap between Technology and
Corporate Strategy," Brochure for 5th International Forum on Technology Management,
Espoo, Finland, 1995.
16. N. Spaulding, Medtronic, Inc., Case N2-494-096, President and Fellows of Harvard College,
Harvard Business School, Boston, 1994.
17. Motorola, Inc., Notice of Annual Meeting of Stockholders, Schaumberg, III., 1995.
18. R. 1. Tricker, "The Board's Role in Strategy Formulation. Some Cross Cultural
Comparisons," Futures, 26(4): 403-415,1994.
19. Jay W. Lorsch, "Empowering the Board," Harvard Business Review, pp. 107-117, Jan.-Feb.
1995.
20. G. Ropohl, Eine systemtheorie der Technik, Carl Hanser Verlag, Munich and Vienna, 1979.
21. H. Grupp and O. Hohmeyer, "A Technometric Model for the Assessment of Technological
Standards and Their Application to Selected Technology Intensive Products," Techno/.
Forecasting Social Change, 30(2): 123-138, 1986.
22. D. Sahal, "Foundations of Technometrics," Technol. Forecostinl{ Socia/ Chanl{e, 27( I):
1-38, 1985.
23. H. Majer, "Technology Measurement: The Functional Approach," Technol. Forecastinl{
Social Change, 27(2/3): 335-351,1985.
24. R. J. Van Wyk, "Technological Analysis: An Imperative for Modern Management," Futures,
19(3): 347-349, 1987.
25. M. K. Badawy and A. M. Badawy, "Directions for Scholarly Research in Management of
Technology-Editorial Commentary," J. Engineering Technol. Management, 10(1/2): I,
1993.
26. C. Farrell, "A Theory of Technological Progress," Technol. Forecasting Social Change, 44:
161-178,1993.
27. W. R. Boulton, Resource Guide to the Management of Innovation and Technology, American
Assembly of Collegiate Schools of Business, St Louis, Mo., 1993.
28. R. J. Van Wyk, "When Eagle-Eyed Strategists Scan the Technological Landscape," Working
Paper no. I, Center for the Development of Technological Leadership, University of
Minnesota, Minneapolis, 1994.
29. R. J. Van Wyk, "A Standard Framework for Product Protocols," in Technology Management,
vol. I, T. Khalil, et aI., eds., Interscience, Geneva, 1988, pp. 93-99.
30. G. De Wet, "Technology Space Maps for Technology Management and Audits," in
Management of Technology, vol. III, T. M. Khalil and B. A. Bayraktar, eds., Institute of
Industrial Engineers, Norcross, Ga., 1992, pp. 1235-1243.
31. N. Waterman, "Materials for the 80s and 90s," Materials Design, 5: 121-125, June-July
1984.
32. D. S. Horner, "Frameworks for Technology Analysis and Classification," 1. Information Sci.,
18: 57-68, 1992.
33. D. Teichmann, "On the Classification of the Technological Sciences," in Contributions to a
Philosophy of Technology, F. Rapp, ed., Reidel, Dordrecht, 1974.
34. Farrell, op cit. (Ref. 26).
35. M. F. Ashby, Materials Selection in Mechanical Design, App. C, Pergamon Press, Oxford,
1992.
36. J. G. Miller, Living Systems, McGraw-Hill, New York, 1978, pp. xxiii-xxix, 3.
37. V. Mahajan and Y. Wind, "Innovation Diffusion Models: A Reexamination," in Innovation
Diffusion Models of New Product Acceptance, V. Mahajan and Y. Wind, eds., Ballinger,
Cambridge, Mass., 1986, pp. 3-25.
TECHNOLOGY, STRATEGY,AND COMPETITIVENESS 6.3
masonry arch, or even the typewriter have been around long enough to no longer
appear "technical," but rather "invisible."
The present fascination with "reengineering"9 implicitly recognizes the quasi-tech-
nical nature of business operations, using an industrial engineering perspective from
which such technologies are identified, improved, and organized. Some are simply
"ways of doing things" or particular operational methods: sticking pins in a wall-
mounted calendar for scheduling, clever document storage and filing systems, provid-
ing an extra invoice copy to accounting, etc. Such invisible technologies can be espe-
cially vulnerable and are frequently outside the purview of managements until used by
some competitor. Retail and fast-food chains seemed comfortably "low-tech" until
certain companies began effectively employing information (and other) technologies
for competitive advantage.
"Visible" technologies like telecommunications, personal computers, electronic
white boards, or computer-based management control systems almost always replace
older invisible technologies-conventional PBX systems, typewriters, chalkboards,
wall calendars, etc.-and will, in turn, become invisible as they become more familiar.
These particular examples are part of the information technology (IT) explosion. But
that depends on advances in silicon chip, display, software, materials, and other tech-
nologies which represent an even more dangerous type of invisible technology.
Managers, including IT managers, tend to ignore these until too late, when they sud-
denly become visible well up on the technological food chain.
6.2.3 Technology Changes
There have always been areas of uncertainty, art, and craft in technology. Success has
invariably depended on individual intelligence, insight, and skill. But even allowing
for traditional "fuzziness," the frontiers of today's sciences are fundamentally differ-
ent and more subtle, pervasive, and complex. From early probings with simple instru-
ments and techniques by investigators like Maxwell and the Curies, our superior
understanding of nature is now driven by esoteric approaches: from sunlight and
prisms to massive particle accelerators, from crude dissections to gene splicing, from
test tubes to simulating complex chemical reactions on supercomputers. In addition,
technology drives the industrial metamorphosis from producing "things" to producing
"knowledge"l0 with ever less tangible firm outputs.
6.2.4 Benefits and Threats of Technological Change
One cannot manage technology without understanding its socioeconomic impacts. On

one hand, technology is widely viewed as a primary benefactor of humankind and a
source of material, and even aesthetic or spiritual, advancement.I1 Vannevar Bush,
who spanned government, industry, and academia with singular grace, called technol-
ogy the cornerstone of American economic life and national security.12 Perhaps the
most cogent protechnology academic arguments, first effectively advanced by Joseph
Schumpeterl3 and later reinforced by SOlOWl4 and others, view such development as
the engine which drives economic progress. On the other hand, resistance to change is
commonplace, and technological change is particularly feared; the dark side of tech-
nology is a popular theme.
There is a also resurgence of historical concerns about "ordinary" workers. Perhaps
MarxlS best articulated technology's potential to deskill the worker, to isolate him/her
from the means of production, and to diminish worker power and influence. The con-
cerns of nineteenth century manufacturing workers are now those of professionals and
PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY TECHNOLOGY, STRATEGY, AND COMPETITIVENESS 6.5
6.4
managers threatened by (partly technology-driven) reengineering, restructuring, and [strengths, weaknesses, opportunities, threats] analysis all fall apart when the dynam-
downsizing.16,17 Ironically, resistance to technology introduction in the workplace may ics of competition are considered."23
be growing,18,19 even as we learn how to use it to provide greater employee empower- In today's complex, shifting world, all actions are relative, all actions are really
ment and richer work environments. Meeting such challenges requires technologically interactions, and each significant action requires evaluation of its long-term evolution
informed management. and path.24 Traditional concepts and tools focus attention on strategy, but can no
longer fully encompass its formulation and implementation.
6.2.5 Management's Missing Dimension Traditional Strategy Setting. Traditional synoptic (rational) strategic management
starts with "vision," something that is often dismissed as a soft-headed or idealistic
Managing technology represents a missing dimension in management theory, educa- concept or a mere surrogate for CEO ego. Perhaps "foresight"2 is better, but under any
tion, training, and practice. This is not surprising since "professional management" is label there must be a clear view of where the firm is headed and what it is to become.
largely an American development, and U.S. technological dominance in the post- Lack of vision plagues public and private sector organizations from small shops to
World War II period readily provided "spinoffs." Also, there was little serious foreign giant conglomerates, and CEOs from sole proprietors to U.S. presidents.
competition in technology-rich products like electronics and automobiles into the Strategic management then identifies and defines specific key factors such as
1970s. finance, markets, channels, or competitor characteristics (sometimes including techno-
These factors, and relative U.S. institutional stability from about 1955 to 1980, logical issues), usually through comprehensive environmental "scanning." This
gave rise to certain management precepts. First, a generalist orientation at business includes analyzing (I) relevant elements of the firm's sociopoliticoeconomic-technical
schools promoted the assumption that firm-level competitiveness could be ensured by environment; (2) structural characteristics of its industry; and (3) the firm's internal
well-trained managers who could manage anything with the help of specialists. characteristics, strengths, weaknesses, and interrelationships. While time- and
Second, analytical management frameworks which relied on mainstream economic resource-intensive, there is no substitute for environmental vigilance.
theory came into widespread use. Unfortunately, that underlying theory employs equi-
librium concepts where technological change is essentially ignored. Thus, technology Traditional Strategy: Fit vs. Stretch. A basic question is "fit" vs. "stretch."2
became an exogenous variable beyond primary top-management concern, Scanning results are contrasted with the firm's vision, strengths, and weaknesses and
Also, logical positivism in much of social science, business, and economics the threats and opportunities it faces. Conventional strategic management, perhaps
research displaced an earlier structural-institutional perspective. As global competition reflecting traditional risk aversion, is biased toward strategic goals and objectives that
ignited an increasingly acerbic debate on U.S. competitiveness,20,21 this older and fit within firm strengths and capabilities, subtly restricting its choices. Fit/stretch deci-
valuable framework was largely overlooked, deflecting and exacerbating arguments sions are individualistic and situational. They involve subtle and complex risk-benefit
that now extend to the nature of the debate itself.22 tradeoffs. However, accepting an inherent "tilt" toward fit, while perhaps less risky in
the short term, can prove fatal over the longer run.
Traditional Strategy Implementation. In the conventional hierarchical approach to

6.3 STRATEGY AND MANAGEMENT strategic management (Fig. 6.1), the firm's vision is reflected in the strategies it for-
mulates, in its strategic goals (long-term and general), and in its specific objectives
Mainstream management, especially strategic management frameworks and models, (shorter-term, measurable, time-based). Strategies are implemented, and results moni-
evolved largely during a more stable era. Rapid change along technical, economic, tored and controlled by familiar mechanisms such as policies, practices, procedures,
demographic, political, cultural, and other dimensions may well erode their legitima- budgets, schedules, audits, and reports, which provide guidance, information, and
cy. However, those same forces make idiosyncratic, reactive, intuitive, or "seat of the restraint mechanisms that keep the firm on course.
pants" management less viable. Shifting markets, shorter product lifespans, capital Influence is bidirectional along the structure. Vision drives strategies, which, in
intensification, and expansions of scale and scope amplify the likelihood and costs of turn, drive all supporting elements and activities. At the same time, each underlying
uninformed management blunders. Successfully navigating a firm and its employees element must be consistent with and supportive of that above it. Thus, practices
through such environmental turbulence demands a strategic viewpoint, effective uphold policies which further objectives which are consistent with strategic goals, etc.
change management, supervision transcending command and control, and at least rea- These vertical relationships must also be consistent horizontally through the organiza-
sonable understanding of the nature and impacts of technological change. tion's structure.
However, this introduces dilemmas. First, environmental changes outside the firm
(the economy, competitive or market shifts, political changes, new technologies, etc.)
6.3.1 Strategic Management or within the firm (new skill sets, loss of key personnel, worsening financial perfor-
mance, etc.) dictate virtually continuous monitoring, scanning, and (probably) adjust-
Strategic management drives the firm; it sets the overall direction of the firm; it cre- ment. Second, rigid imposition of strategic conformity can be counterproductive;
ates competitive advantage for the firm (or impairs that of its competition). coherence can inhibit innovation, responsiveness, and needed change.25 Thus, there
Approaches range from formal and rational (synoptic) to reactive and adaptive (not must always be balances among consistency and adaptation, control and empower-
quite including seat of the pants), but all are being questioned. As d' Aveni says, ment. Monitoring and control mechanisms must be structured and operated for respon-
"Strategic concepts such as fit, sustainable advantage, barriers to entry, long-range siveness and flexibility, and strategies must incorporate controlled adaptation (strate-
planning, the use of financial goals to control strategy implementation, and SWOT gic incrementalism).
TECHNOLOGY, STRATEGY, AND COMPETITIVENESS 6.15
6.14
which has its own sets of rules, regulations, procedures, codes, cultures, knowledge,
cal dimensions. But, while it also covers at least the basics of conventional manage- routines, technologies, beliefs, paradigms, etc. Institutions do not exist in vacuum, but
ment, it suffers from management's lack of an integrative approach to technology. are parts of larger structures: suites of institutions or, perhaps more accurately, suites
Typical engineering school curricula also ignore or underemphasize key issues such as of structural arrangements.54 Firms and industries exist within, and are highly influ-
standards setting, institution building and management, interplay between public poli- enced by, complex, interacting, and sometimes competitive groups, suites, and sets of
cy and technology, technology forecasting, or management of specialized personnel. institutions like markets, insurers, government agencies, investor groups, standards
In addition, graduate science and technology education encourages narrower and groups, media, etc. Educational systems are rooted in different kinds, levels, and com-
deeper specialties, not the broader perspectives required of technology managers; pro- binations of institutions. Governments (at various levels) include incredibly complex
ducing those is mostly incidental. groups and suites of, again interacting and sometimes competitive, institutions of
varying forms, levels, and types.
6.7.3 Business
6.8.2 Management and Institutions
Technology management needs have scarcely perturbed "professional management" in
most U.S. firms. Assumptions persist that managers are interchangeable within and Management teaching underemphasizes structure and institutions, although there are
between firms, industries, and businesses, despite conglomerate and other disasters. some excellent studies on innovation and technological change,41 important contribu-
Managers are frequently recruited from one industry into another with very different tions like the dominant-firm concept58 (technology, markets, and industry structure),
technology knowledge bases, but are still expected to perform effectively (with the aid and management frameworks like Porter's five forces (industry structure analysis).
of technical experts). Studies of specific firms or industries59,60 are ubiquitous, but the role of technological
Time and again, even in high-tech firms, this has produced managers who never change is rarely explored within an institutional context.61,62 Institutionally focused
were, or are no longer, familiar with technologies they are managing. Generalist man- academic analyses have been largely supplanted by approaches which treat institutions
agers' responsibilities for technology-based companies include Robert Miller's as outcomes of other forces,63 omitting their role as sources of pressures, influences,
attempt to turn around Wang Computers, John Scully's failure to leverage the and norms. That compromises our understanding of strategic management, technology
Macintosh architecture and Apple Computer's transient market advantages, and Lou management, and competitiveness.
Gertsner's apparent failure to leverage IBM's technological strengths. In each case,
the individual had enjoyed remarkable success in firms with different technological
bases. Selection of these highly competent generalist managers obviously did not
6.8.3 Technology and Institutions
require their understanding technology evolution or leveraging.
However, American industry produces many excellent technology managers. One Institutions also reflect changing technologies. Industrial age technology was support-
path takes engineers and scientists, perhaps after 5 to 10 years of specialist experi- ed by codevelopment of a relatively simple set of institutional arrangements: at the
ence, and exposes them to a broader vision of management, primarily through the macro level were basic intellectual property instruments such as patents and copy-
M.B.A.55 The technologist is provided a conventional (atechnical) management educa- rights; at the industry level were instruments such as the telecommunications act of
tion with little opportunity to integrate that with existing technology skills. Most come 1937 and the Federal Communications Commission. Those institutions, seemingly
away with a better appreciation of the needs and challenges of general management complex at the time and frequently reviled as new-fangled interferences in commerce,
and a suitable set of tools for addressing technology related issues. But overall, this had the virtue of clear definition. Businesses, products, and markets seemed distinct.
conversion process remains ad hoc, even while producing outstanding technology- One did not confuse the auto industry with railroads or the telephone company with
based general managers, like George Fisher at Motorola. Few firms or business gas suppliers. Regulation could be relatively focused and straightforward.
schools offer a systematic approach for technologists, and there is no good model for Such distinctions have blurred, less from regulatory pressures than from technolo-
56 57
converting generalist managers into technology managers. . gy. For example, overlaps and spillovers in silicon chip data processing blur previous-
ly singular product, market segment, and business categories. Similar microchips can
be found in automobiles, shipboard navigation gear, airborne radar, telephone switch-
ing networks, fax machines, home computers, children's games, VCRs, etc. The insti-
6.8 INSTITUTIONS AND TECHNOLOGY
tutional infrastructure that has developed around this type of product is incredibly
MANAGEMENT: COMPETITIVENESS
complex. Suites of institutional arrangements exist to set technical standards, to
ensure operational compatibility, to promote noncompetitive research and develop-
Competitiveness at any level, firm, industry, or national, cannot be understood outside ment, to maintain related national competitiveness, to inhibit exporting advanced tech-
its institutional context. nologies, to promote exporting advanced-technology products, to ensure producer and
user safety, to allocate satellite positions or frequency spectra, to revise intellectual
property laws, etc. The component parts of these suites are reactive, proactive, com-
6.8.1 Definitions of Institutions petitive, cooperative, passive, active, hyperactive, obvious, invisible-all interacting
with products and with each other.
Definitions of institutions are almost as varied as those of management or competi- A critical problem is the inability of many institutions to keep up with technologi-
tiveness. However, institutions clearly denote some kind of semipermanent structure
6.16 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY TECHNOLOGY, STRATEGY, AND COMPETITIVENESS 6.17
cal changes, let alone anticipate them. Another significant challenge is to manage- recent study43 of a group of major Japanese corporations concluded that those firms
ments' ability to understand, navigate, leverage, manipulate, or merely survive this approach technology management from individualistic and very different perspectives
complexity. For example, the intricacies and politics of industry standards setting are that are products of their institutional arrangements. Technology management in eight
now intimately a part of the management of technology. Most managers lack the tools large Japanese firms showed surprising characteristics. Japanese firms are known for
to understand such changes and how they affect their business, or how to leverage pursuing aggressive business strategies, but they tend to pursue conservative technolo-
these processes to their advantage. gy strategies (although there is evidence that may be changing). Their society is seen
as homogeneous and conformist, but their corporate cultures reflect considerable
diversity.
6.8.4 Institutions, Management, and Competitiveness This diversity is underpinned by the absence of elite business schools "filtering"
and "homogenizing" corporate cultures, as described earlier. With stable personnel
The United States still dominates in number, scope, and capabilities of technology- and industry structures each firm develops a culture which is robust, unique, and
based firms, a dominance being extended in fields like semiconductor and information reflects its organizational structure, technology management approach, and overall
'technologies. That is less an indication of the health of U.S. technology management, strategy. Since managers are trained internally, they have an intimate appreciation of
than a reflection of structural and institutional advantages which have been widely their firm's technological capabilities. The strong individualistic culture, incorporating
discussed.4 By and large, American firms still benefit from first-mover advantages in that knowledge base, produces individualistic technology strategies.
most commercially important fields of technology, but that depends on ad hoc Mitsubishi Electric's major customer base is the electric utility industry, and its
processes at many firms. strategies are focused on close collaboration with utilities to develop and supply
For example, until recently a large semiconductor manufacturer managed its micro- equipment and technologies which meet their needs. These relationships led
processor business in much the same fashion as its analog components business even Mitsubishi Electric to develop systems technology and management capabilities, in
though the microprocessor market is based on substantially different technologies and contrast to its previous concentration on heavy electrical equipment. As required, it
exhibits very different institutional characteristics. As a result, it missed an opportuni- adds specific technological capabilities to its limited set of core technologies, either
ty in microprocessors. The firm once dominated semiconductors, but allowed leader- through internal development or more often in alliances with customers, in areas like
ship in this key segment to slip to a company with an inferior architecture and subopti- software and systems architecture.
mal technologies. Similarly, the advantages of the Ohono system invented at Toyota Sony defines itself by technical agility. It emphasizes long-range research and
were well known to the U.S. automobile industry by the mid-1980s, yet as of 1995 visioning of new products with large potential markets, obsoleting its present products
there are still many American plants which have yet to adopt essential underlying despite any technical obstacles. It concentrates on a few product functionalities and
technologies. masters or acquires whatever technological capabilities those demand, rather than fit-
ting product plans to a core of existing technologies.
U.S. Management and Institutions. American institutions' tendency to promote a NEe's goal is leadership in communications and computer (C&C) technologies
managerial elite mostly lacking systematic training in technology management was over the maximum number of markets that its technology-focused strategies can pene-
tolerable when there were few competitors in technology-based industries. However, trate. It grows, not by diversifying into other types of businesses which its core tech-
with their expansion and globalization and the end of the cold war, technology compe- nologies might support, but by extending C&C into other application areas, such as
tition has accelerated and will further intensify. Some suggest that future U.S. technol- the home.
ogy industries will be characterized by a few large firms which are internationally Institutions drive certain common development paths. Diffusion-oriented intellec-
competitive over a broad range of products. Industry structure will resemble that of a tual property regimes encourage widespread patent copying and filing around basic
"computer bus" in which those large "anchor" companies are highly dependent on inventions. The concomitant lack of technology market development (a hallmark of
alliances with a shifting set of smaller and midsized firms that can develop, adapt, and American competence) and dominance of industry-as opposed to government-funded
implement technologies quickly. American economic, social, and political systems and research-also contribute to the perpetuation of the system. Related competitiveness
institutions inherently encourage such firms, and features of this trend are already issues, such as overall technical and innovation agility, are less clear, but understand-
apparent in "virtual companies," strategic alliances, and other new corporate forma- ing these also requires an institutional perspective.
tions.
However, there are important caveats. Such industry alignments require managers
that are alert, adroit, and well-trained in identifying, assessing, utilizing, and leverag- 6.8.5 Summary: Institutional Influences in the United States and Japan
ing technologies. In a world of rapid change and exploding technology diffusion
paths, the evident American dominance of technology industries could rapidly dissi- The Japanese model encourages major privately owned research laboratories in each
pate. It is vital to fully and quickly embed technology management into appropriate conglomerate, whose size, concentration, corporate cultures, and technical capabilities
institutional contexts for management training, education, and development. are inherently suited to (I) systematic technology development and (2) internally
leveraging technologies into new businesses. By contrast, the American model, while
Japanese Management and Institutional Framework. Automobiles, consumer elec- it neglects intrafirm technology management, encourages tremendously agile technol-
tronics, semiconductors, and other products indicate that Japan will remain a fierce ogy markets. A free-enterprise orientation, relatively open markets, and deeply rooted
technology-based competitor on the world scene, but there are limited materials avail- concepts of equality before the law promote opportunities for a wider spectrum of
able in English which provide insights into Japanese technology management. One people and firms. Suites of American institutional arrangements that define and sup-
port institutions like stock markets extend opportunities far beyond limits found in
countries such as Japan. There, culture and closely held values require rules written
more to exclude certain groups or entities, rather than to conform to western concepts
of equity.
In the United States, complex webs of important legal, social, cultural, and public
policy infrastructures are critical to adoption and implementation of new technologies
regardless of source. While many U.S. businesspeople lament an excessive number of
lawyers, it is precisely the competence of the American legal establishment that allows
rule structures to be crafted quickly. Without them, many pioneering American tech-
nologies such as the cellular phone could not have been brought effectively and effi-
ciently to market.
It is also clear that it would be counterproductive for the United States to adopt
Japanese models, even if that were possible. Rather, improvements in technology
management through evolutionary extensions of traditional strategic management
appear more attractive.
6.9 COMPETITIVENESS
6.9.1 Technology and Competitiveness
Technology's ability to redefine competitiveness at all levels has long been recognized
by philosophers, scholars, and businesspeople from Adam Smith to John Kenneth
Galbraith to Michael Porter to Bill Gates. At industry levels, technology-driven
impacts can be obvious: solid-state devices replace vacuum tubes; passenger traffic
shifts from railroads to aircraft. Successes and failures also can be obvious at the firm
level, but specific linkages among management, technology, and competitiveness are
less apparent.
We will use, as a general guide, concepts broadly rooted in a "resource-based"
model of the firm. Terminologies are still vague, but in a simplified view, the competi-
tiveness of a company can be measured by the economic rents derived from certain
capabilities (bundles of combined know-how and resources) which it possesses. These
capabilities give the firm the means to provide value to customers in some differenti-
ated manner (by scarcity, nonreplicability, etc.) which creates competitive advantages
that provide the rents.
Two postulates are easily accommodated by conventional strategic management:
1. A firm's competitiveness is defined largely by specific competitive advantages.

2. A primary purpose of strategic management is creation of competitive advantages.
6.9.2 The Firm as Portfolio
The firm's task is to (1) evolve specific competencies in management (e.g., account-
ing, human resources, marketing), specific competencies in technologies (e.g., elec-
tronic assembly, chemical engineering, microchip design), and other necessary
resources (e.g., financial assets, plant and equipment, reliable suppliers) and (2) effec-
tively and efficiently employ these to meet customer needs. Sources of management
and technical competencies can be internal-there when the firm was established,
developed within it, or a combination of the two-or introduced by acquiring relevant
specializations from outside the firm. Usually firms perfect those competencies by
TECHNOLOGY, STRATEGY,AND COMPETITIVENESS 6.21
High-tech firms are not immune to such problems. American computer mainframe
producers, for a variety of reasons, kept ignoring the personal computer. As a result,
Unisys, NCR, DEC, Honeywell, and other major firms were never players in, have
never made serious profits in, or have effectively disappeared from the PC market.
Even IBM, which set the industry standard, lost its leadership position and is strug-
gling despite the richest of technology portfolios.
6.10 STRATEGIC ARCHITECTURE: AN

INTEGRATIVE APPROACH
------- .._--------- -------"-- ------ .. --- .. ------------ --
A more recent strategic management approach from Hamel and Prahalad provides a
step toward dynamic analyses. Strategic architecture2 is a more holistic approach and
better lends itself to inclusion of technological issues. It is not a detailed, rigid plan,
but rather a broad, top-level, opportunity-oriented blueprint of the firm's future: what
will the firm provide its customers (what "functionalities" will be included, what
value or benefit added); what resources will it need (new skills, technologies, capabili-
ties or core competencies); how does the interface between firm and customer (or the
interface between firm and supplier) need to be changed?
The capstone of strategic architecture is strategic intent, the "animating dream"
that provides intellectual and emotional bases for thrusting the firm forward and for
completing its journey. It obviously encompasses what is generally called "vision,"
but goes beyond it by including strong motivational elements; many vision and mis-
sion statements tend to be generic, interchangeable, and bland. It defines where and
what the firm wants to be and at least implicitly promotes a stretch from existing capa-
bilities and strengths to meet new challenges. Thus, strategic architecture incorporates
traditional strategic management elements, but forces a more strategic point of view_ It
also addresses what the firm must do at the present time to achieve the future position
it has defined, thereby effectively mating short-term needs with longer-term opportu-
nities.
6.10.1 Core Competencies
Central to strategic architecture is the firm's portfolio of core competencies, bundles

of individual skills and capabilities which enable it to provide value or benefit to cus-
tomers. These differentiate the firm from its competitors and underlie whatever market
leadership it enjoys.2 Strategic management must be the driver for optimizing, inte-
grating, utilizing, and leveraging the firm's competencies and resources into its core
competencies (Fig. 6.4).
The identity, self-image, market image, and public image of a firm are almost
always based on specific products, services, or business units. Those are important,
but the firm's portfolio of competencies, integrated sets of specific skills, technolo-
gies, and capabilities, are central or "core" to its meeting strategic goals and objec-
tives. They are not conventional assets, mere infrastructure, or endowments. Not every
distinctive competitive advantage is a core competency. They can become irrelevant
with time or they may evolve into industrywide baseline capabilities. They do not
wear out, but should become more effective with use. They should also be extendible
or expandable into gateways to future competitive advantage.2
and firm competitiveness, but those also come from the firm's metacompetency and
strategic architecture. This common type of core competency diagram may overem-
phasize products.
We use the term core competencies* to specifically encompass that optimization,
integration, utilization, and leveraging of technological competencies, management
competencies, and other resources. Technologies, specializations, management skills,
and other resources are thus effectively combined in core competencies.
They are by no means easy to identify and isolate.2 Logically grouping organiza-
tional, financial, technical, and a host of other constituents into true core competencies
is far from a trivial task, and results may be more instructive than precise. It is a
process that requires the time and attention of a range of knowledgeable and compe-
tent people who have been given the freedom and the proper tools for the task. In that
regard at least, core competencies, while a distinct concept, share some elements with
value-chain analyses.
6.10.3 Core Competencies and Individual Firm Competitiveness
There exist a myriad of approaches, paths, or decision patterns, by which specializa-

tions, competencies, and other resources are converted into individualistic sets of core
competencies. Those differences reflect situational and institutional factors at different
times in different businesses. There is a wealth of information and material regarding
transferring external technologies or developing or transferring internal technolo-
gies,64.65 outsourcing key operations or core competencies, 16and developing new man-
agement approaches.66 All reflect efforts toward defining and establishing competitive
advantages and metacompetencies, and the more recent particularly stress the impor-
tance of the integrative role of management. That idea is clearly central to this frame-
work and particularly highlights what an impediment a management gap can become.
6.10.4 Extending Core Competency Analysis
For complex operations, it may be necessary to further break down single core compe-
tencies. The next stage we will call specific competencies. These are narrowly based
sets of skills, processes, resources, and technologies that, although important, are
unlikely to significantly influence the metacompetency of the firm. For even more
complex operations, these can be further subdivided into highly specific individual
competencies. This analytical fine structure can uncover elements which are more eas-
ily identified and isolated. Technological change impacts on them are frequently more
readily analyzed and evaluated. Thus, such analysis starts with a top-down decon-
struction of firm activities, examines environmental changes, determines individual
impacts, and then reconstructs those to estimate overall firm impacts.
This technique is illustrated in Fig. 6.6. It begins by (I) identifying and isolating
core competencies, then (2) breaking each down into specific competencies, as
required, then (3) further breaking each of those into individual competencies (specif-
ic management tasks or needs, specialized technical skills, particular plant or equip-
ment requirements, etc., as required), (4) identifying relevant change indicators from
environmental scanning data, and (5) matching those to individual competencies (or
specific or core competencies, depending on the degree of complexity).
such a firm, we will examine only its manufacturing metacompetency (Table 6.4). ing its choices of technologies (broadly defined). Perhaps a new software release dis-
Manufacturing complex microchips with submicrometer feature sizes requires serial- places a familiar word processor in an insurance office, or a more sophisticated copy
processing silicon wafers through many discrete manufacturing operations. In many of machine is acquired. These affect people, previous technical choices, and firm opera-
these the firm may well possess a competency equivalent to that of its primary com- tions, but are not enough by themselves to have much impact on a core competency
petitors, a standard industry-level competency. For this example, we assume the firm (e.g., selling homeowners' insurance policies) or firm competitiveness. Over a long
has a core competency in the critical photolithography operation, that set of skills, enough period of time, of course, failing to keep pace with such technical opportuni-
resources, and technologies which produce precisely defined and aligned photographi- ties could have serious consequences.
cally derived patterns on the chip surfaces. That would be a core operation since a New core competencies are sometimes required. In the United States, improved
substantial advantage here could translate directly into technical, operational, econom- steel minimill technologies and practices allow these firms to produce higher-quality
ic, or other competitive advantages and enhance the firm's metacompetency. and more specialized products, taking market share from integrated steel producers.
The core competency of photolithography is made up of specific competencies Those improvements required considerable reworking of technologies, equipment, and
such as the application, processing, exposure, and subsequent removal of photoresist procedures-and retraining of personnel-to develop new core competencies. Many
(a photosensitive coating), the alignment of different pattern layers, wet (chemical) or other firms have had to add data processing, global marketing, or communications
dry (plasma) etching steps, etc. (Table 6.4). Each of these specific competencies is competencies in order to survive, grow, and prosper, changes often reflected in new
identifiable, separable, and important (but not important enough by itself to impact equipment, personnel, and facilities.
competitive advantage). Each requires its own subset of individual competencies: Finally, entire industries can be disrupted; as semiconductors replaced vacuum
component skills and technologies which are supported by particular personnel, facili- tubes, none of the principal U.S. vacuum-tube manufacturers survived to be signifi-
ties, equipment, materials, controls, etc. Most of these also may be industry standards, cant semiconductor suppliers. Here, one sees the impact of major technological dis-
but a leading firm will likely have some which are distinctly different and competi- continuity. The invention of the transistor and integrated circuit within a lO-year span
tively advantageous. It is also the selection, development, integration, synthesis, and created new products requiring entirely new sets of core competencies and many new
management of these interacting and overlapping individual competencies (individual supporting specific competencies. Earlier core competencies-and factories and
management skills, technologies, support elements, etc.) and resulting specific compe- firms-were either made obsolescent or reworked. Schumpeter's "winds of creative
tencies that create core competencies. destruction" are most apparent in such situations in which technology directly and
Each of these individual competencies is subject to influences and change pres- suddenly redefines products. However, they are also blowing, albeit more softly, in the
sures from the external (and likely from the internal) environment. Specific chemicals more continuous and less visible changes discussed above.
or operations can be restricted by environmental regulations, new technologies are
developed (e.g., x rays replacing ultraviolet exposure systems), managers or manageri-
al policies mutate (perhaps as firm ownership changes), economic conditions change
(impacting plant and equipment investment decisions), market demand shifts to differ-
6.11 WHAT IS TECHNOLOGY MANAGEMENT?
ent products, and so on. The probable impact of each such change on each individual
competency can be estimated, the accumulated effects of all relevant changes on all What do we mean by technology management? If management is about getting other
individual competencies of a specific competency gauged, and resulting impacts on people to do what you want, technology management is about getting people and tech-
core and metacompetencies judged. nologies working together to do what you want. Technology management is a collec-
tion of systematic methods for managing the process of applying knowledge to extend
Extending the Example. In actuality, the overall competitiveness or metacompeten- the range of human activity and produce defined products (goods or services). It is not
cy of such a firm would require more than just manufacturing. Device design would about managing only technical specialists in technology-based businesses, but
be critical and would include (1) the skills of creative engineers, (2) highly advanced includes that conventional, but very limited definition in a holistic and integrative
CAD (computer-aided design) and simulation hardware and software, (3) enlightened approach. Effective technology management synthesizes the best ideas from all sides:
design management, and (4) up-to-date physical resources and other technologies, academic, practitioner, generalist, or technologist.
skills, and capabilities. Again one could find interacting and overlapping sets of indi-
vidual competencies, specific competencies, and core competencies. Marketing
requires yet another set of competencies, again interacting and overlapping with oth- 6.11.1 The Technology Manager
ers, including those in manufacturing and design. Thus, a full-scale core competency
analysis of such a complex firm would itself be complex-and time-consuming. But Managing technology is about systematically applying know-how-both technical and
even partial analysis, or examination of only part of the value chain, can prove managerial-to meet needs by getting people to produce particular goods and services
enlightening. and thereby create competitive advantages for the firm. Thus, a technology manager
must have three critical and interlocking skill sets.
First, the manager must be a change manager, in both the usual sense of possessing
6.10.5 Summary: Using This Type of Analysis skills for implementing effective organizational changes and also in a technology-
change sense. Second, as with any good change manager, the technological change
As noted, such impacts are scarcely limited to high-tech or technology-based or manu- manager must have a deep and practical understanding of the institutional structures
facturing firms. Service, craft, or virtually any type of business is continually modify- being affected by the change and those affecting the change and must be familiar with
the technologies involved, but also comprehend the institutional basis in which these
technologies exist or will operate. Third, the technological change managee must
understand the fundamentals of relevant technology change mechanisms and trajecto-
ries and effectively operate within relevant technological, political, economic, and
management systems.
Thus, the profile of a good technology manager should be that of a person who
combines solid competence in (I) general management (hopefully available at most
business schools), (2) change management (taught, but generally underemphasized at
business schools), and (3) overall technological literacy (well beyond that available
from almost any business school). Table 6.5 represents a partial, certainly not a com-
prehensive, review of the skills required. No individual skill is really confined to the
category selected, but typically spills over and onto many others in complex, situa-
tional patterns.
6.11.2 The Critical Nature of Context
Again we emphasize the institutional dimension. A competent technology manager

must be institutionally informed and alert and understand the suites of institutional
arrangements that influence the industry, the firm, and managerial actions. These must
include, but not be limited to, those involved in strategic alliances; the import and
export of goods, services, and technologies; significant sources of management and
technical specializations-and modification mechanisms-within and outside the
firm; regulatory and economic institutional structures; sociopolitical structures; etc.
These include all the various elements and players one would expect: governments,
trade groups, labor unions, educational institutions, technical and industry associa-
tions, competitors, etc. Managerial requirements also include specific skills in cross-
cultural negotiations, knowledge of technology change and diffusion patterns and
mechanisms, influences and establishment of industry and product standards, etc.
Effective technology management cannot exist within hermetically sealed organiza-
tional units.
Obviously, the ideal technology manager is rare. Such a manager has to have excel-
lent managerial skills, competent political skills, and a good technical network in
addition to the normal requirements of an excellent general manager. The previous
discussion regarding the institutional context in which American technology managers
are educated and operate reveals at least some of the historical reasons why American
institutions have not been successful in generating a large cadre of such individuals.
6.12 SUMMARY AND CONCLUSIONS
Technology management remains the stepchild of professional management, both aca-

demic and practitioner. Technology plays an ever-growing role in our increasingly
complex business environment. Whether because of simple ignorance, chronic techno-
phobia, or institutional rigidity, management education in the United States has, for
the most part, neglected this primary business and economic driver. But it is scarcely
unique; businesses large and small have largely followed a similar course.
We have taken a narrow approach: seeking linkages which connect strategy, tech-
nology, and competitiveness. In our critique of conventional management theory and
practice and in defining what approaches appear beneficial, we emphasize institutional
contexts. This area of study has been badly neglected in technology management,
6. J. Fred Bucy, "Technology Transfer and East-West Trade: A Reapprisal," in National

Security and Technology Transfer: The Strategic Dimensions of East West Trade, Gary K.
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7. Shoshana Zuboff, In the Age of the Smart Machine, Basic Books, New York, 1988.
8. Lowell W. Steele, Managing Technology: The Strategic View, McGraw-Hill, New York,
1989.
9. Michael Hammer and James Champy, Re-Engineering the Corporation: A Manifesto fiJl'
Business Revolution, Harper Business, New York, 1993.
10. Taichi Sakaiya, The Knowledge- Value Revolution, Kodansha America, New York, 1991
(originally published in Japanese by PHP Kenkyujo, Kyoto, 1985).
II. Simon Ramo, as quoted in Devendra Sahal, Patterns ()f Technological Innovation, Addison-
Wesley, Reading, Mass., 1981.
12. Vannevar Bush, Endless Horizons, Arno Press, New York, 1975 (reprint of original publica-
tion by Public Affairs Press, Washington, D.C., 1946).
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1991.
14. Eliot Marshall, "Nobel Prize for Economic Growth," Science. 754, Nov. 6,1987.
15. Jon Elster, ed., Karl Marx: A Reader, Cambridge University Press, Cambridge, U.K., 1986
(excerpt from Das Kapital, vol. I).
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Industry, Free Press, New York, 1992.
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New York, 1988.
22. Paul Krugman, "Competitiveness: A Dangerous Obsession," Foreign Affairs, 28,
March-April 1994.
23. d' Aveni, op. cit. (Ref. I), Preface.
24. Ibid., p. 17.
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27. Robert Hayes and William Abernathy, "Managing Our Way to Economic Decline," Harvard
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THE ROLE OF TECHNOLOGY IN COMPETITIVE ADVANTAGE 7.5
or government subsidies. The exception is cases in which industrial customers are

entering into long-term partnering arrangements with suppliers, when a lower cost
structure may, indeed, be known to customers and be the more relevant advantage.
7.5.2 Quality
Quality is another term that has become widely used, so much so that one has to ask
what is meant specifically by a customer who claims to have purchased a particular
product or service over competing alternatives because of its higher quality. In this
framework, quality will refer to one of two different meanings:
Higher reliahility at a given level of performance, i.e., conformance to specifica-

tions
Higher level of performance
Having made this assertion, one must recognize that there is an aesthetic dimension to
quality as well. For example, people will often prefer natural leather or wood materi-
als to plastics or other synthetic materials because of their higher quality, without
regard necessarily to either reliability or performance.
Reliability. Reliability is the ability of a product or service to perform at a specified,

promised level over a reasonable useful life under normal conditions of use. It is not,
however, expected to perform at levels higher than what was promised. A product or
service is defective when it does not meet the conditions listed above; and when a cus-
tomer's reason for a purchase is higher reliability, this means that, of the number of
products or services they have purchased from a supplier and used, very few-if
any-have been defective.
There are, however, two very different ways to achieve high reliability: (I) to
inspect it in by identifying and removing defects from the product-services stream
before they reach the customer and (2) to build it in by improving production process-
es and getting them under control. There are costs that result from poor reliability-
the costs from waste, scrap, rework, warranties, loss of customer goodwill, and prod-
uct liability. Improving reliability also has costs-the investments needed to inspect
or build it in. In the latter case, getting production processes under control may
require process simplification and redesign or the implementation of an effective sta-
tistica] process control (SPC) program, but if done well, it should produce significant
savings in all the cost categories resulting from poor reliability. It is in this sense that
"quality is free," as Philip Crosby puts it,15 that the benefits from greater reliability
through improved process control can-at least in the initial stages of improvement-
far outweigh the costs. Although some complex, high-cost-of-failure products may
still require testing and inspection, the result of improved process control should be
higher yield rates, which means that fewer defects to the customer correspond to less
waste, scrap, and rework. Therefore, higher reliability-at least up to the point where
processes have been improved so much that diminishing returns have set in-is not a
tradeoff with cost. The achievement of both lower costs and higher reliability is possi-
ble.
Performance. Performance level refers to a property, feature, or characteristic of a

product or service which customers value, and therefore having more of it than com-
peting alternatives do can be a reason for their purchase decision. Performance has
multiple dimensions depending on the specific product or service and the customer or
market segment. For industrial customers of fabricated parts, dimensional tolerances
7.6 PERSPECTIVES ON MANAGEMENT OF TECHNOLOGY THE ROLE OF TECHNOLOGY IN COMPETITIVE ADVANTAGE 7.7
are a performance dimension that is often cited along with surface finish (corrosion 7.5.6 Awareness
resistance-durability), weight, etc. In the case of process industry customers, purity
and uniformity might be relevant performance dimensions. The range of performance Awareness is a factor in all other competitive advantages as well as a possible reason
dimensions is much wider for final consumers. For a teenage hot rodder, the relevant in its own right why customers choose one product or service over competing alterna-
automobile performance dimension might be acceleration, but for an older person it tives. If customers simply know more about one product or service than competing
might be the degree of riding comfort; for a hacker the relevant computer performance alternatives, they may choose it because of the comfort level which that knowledge
dimension might be processing speed, but for the neophyte it might be the degree of brings them compared to the relative uncertainty of the alternatives. If the knowledge
user-friendliness. The diversity of what different customers value, and the range of is positive and is repeatedly reinforced through experience and marketing or advertis-
product, service, and product-service combinations possible, make performance a very ing activities, brand-name loyalty may be created in customers who continue to
fertile form of competitive advantage. choose it apart from any objective evaluation of the actual facts. On the other hand,
even if one product or service has a lower price, greater reliability, higher perfor-
mance, sooner availability, better customer service, or more attractive designs than
competing alternatives but customers are not aware of these facts, they cannot influ-
7.5.3 Availability
ence customers' choices.
Availability is a time-related competitive advantage. All other things being equal,
many customers would prefer the competitive alternative that is available soonest-
instantaneously, if possible. Firms with new products which have no competing alter- 7.5.7 Stability
natives available until competitors can copy or catch up to or leap-frog over them have
a special availability advantage. For industrial customers operating in a just-in-time Stability of long-term relationships probably applies only in very specific situations
mode, availability translates into dependable delivery at precisely the scheduled time. where-again-that stability provides a comfort level to customers which they prefer
Availability also encompasses time-based convenience in purchasing such as one-stop over the relative uncertainty of short-term or temporary supplier-customer relation-
shopping and the advantages that accrue to suppliers who have broad product-service ships. For example, in the case of strategic materials or-recently-petroleum, the sta-
lines. bility of long-term supply contracts may be preferred by a customer over temporary
supply arrangements that offer lower prices or other advantages. This stability may
also apply to long-term social relationships between customers and suppliers in cases
Customer Service where customers value the relationship itself apart from the product or service the sup-
7.5.4 plier is providing.
Customer service enhances the utility of a product or the social relationships that com-
plement its sale and use. Traditional forms of customer service have included applica-
tions engineering, training of employees, and service-maintenance contracts. 7.5.8 Other Advantages
Financing services (time payments, leasing, trade-ins, etc.) that enable the customer to
purchase the product are also included. Good customer service can also make up for a Finally, there are always a number of reasons why customers buy one product or ser-
lot of customer ill will caused by product defects. And the social nature of person-to- vice over competing alternatives that are not easily classified or described-the other
person interactions that occur in connection with the sale and use of the product can category. These other reasons are based more on sociopsychological or political-ideo-
also be very crucial in competition-consider the restaurant with great food but poor logical factors than on rational decision making by customers. Snob appeal, for exam-
service and vice versa. In any of these cases, customers may be choosing among comple, would appear to be in this other category, as would whatever is involved in the
petitive alternatives based on the service that comes along with a product. impulsive purchase of a pet rock. "Buy national" behavior applied as an expression of
patriotism rules out an entire set of competing alternatives from foreign sources, and
the ideology which prohibits Cuban cigars from being imported into the United States
rules out what is reputed to be the high-performance competing alternative for U.S.
7.5.5 Attractiveness
cigar smokers. Although many more of these idiosyncratic reasons behind customers
Attractiveness applies principally to consumer products, although even industrial cus- purchasing decisions undoubtedly exist, we will be focusing on the major competitive
tomers may be turned off by a product's unattractive appearance. Attractiveness obvi- advantages of price, quality, and availability.
ously encompasses style and has an aesthetic component that transcends the annual
style changes of, for example, the fashion apparel industry, although what is perceived
as being attractive may have some cultural basis. An attractive product design may 7.6 SHOPPING AROUND
also be functional, of course, and for some consumers functionality itself may consti-
tute attractiveness. Because of its highly individualistic and abstract nature, attractive-
ness operates something like the Supreme Court's view of obscenity-it's hard to In practice, customers shop around among competitive alternatives by setting parame-
define, but you know it when you see it. ters for some of these advantages and then making the final choice on the basis of the
THE ROLE OF TECHNOLOGY IN COMPETITIVE ADVANTAGE 7.17
[AMHTs-e.g., CAM, CAD/CAM, CIM, FMS, NC, CNC (computer-aided manufac-

humans to do because of their physical makeup or boring for humans to do because of
turing, computer-aided design/manufacturing, computer-integrated manufacturing,
their psychological makeup can both lower health and safety costs and prevent human
flexible manufacturing systems, numerical control, computer numerical control)] error that results in scrap, rework, or other costs of poor quality.
might affect these production costs compared with alternative, traditional manufactur-
ing technologies, there is no clear and easy answer. The answer is the all-too-familiar
Materials Costs. Materials costs might or might not increase with AMHT and less
"it depends!"
direct labor. The human operator may lack the data input and processing speed of the
computer, but is more flexible when it comes to dealing with unexpected problems.
Plant and Equipment Costs. On what do these cost impacts depend? A partial list
Using AMHT in assembly operations, for example, may require higher-tolerance and
might include whether the AMHT was implemented in systems or in a series of stand-
higher-cost components so that feeders don't jam and robots don't position parts off
alone pieces of equipment-e.g., replacing an entire machinery system vs. replacing a
center, whereas human operators using traditional manufacturing technology could
worn-out lathe with a new NC or CNC lathe. Especially in product flow layouts, the
have easily handled these kinds of exceptional problems when they occurred.
AMHT systems approach might cost less than traditional technology because of the
The point of all this discussion is that the contribution of advanced manufacturing
potential cost savings due to systems redesign, while the stand-alone approach would
hardware technology to the competitive advantage of low cost-low price is ambiguous
probably cost more because the NC/CNC lathe costs more than the manually con-
and situation-specific. One would not want to precipitously rush into AMHT pursuing
trolled lathe and there are no cost savings from systems redesign. Similarly, equipment a low-cost low-price competitive strategy!
costs might be affected by the choice of specialized vs. multipurpose AMHT -e.g., a
CNC lathe vs. a CNC machining center. The lathe might fit into a system providing
one of a number of required machining operations, while the machining center might
do all the required operations itself, so the comparison of AMHT equipment costs with 7.12.2 Production Costs and Advanced Manufacturing Management
Technology
traditional manufacturing technology equipment costs has to be adjusted accordingly.
But this latter example illustrates other potential cost impacts as well. The multi-
Japanese Management Practices. When we look at advanced manufacturing man-
purpose CNC machining center should also take up much less space than the system
agement technologies (AMMTs), advanced ways to manage manufacturing operations,
with the CNC lathe alternative (and in growth-capacity expansion situations, avoiding
however, we see a more straightforward linkage with various production costs. There
the cost of building additional factory floor space can be quite considerable) and
are a number of so-called Japanese manufacturing management practices that can
should avoid WIP inventory costs associated with product flow through a series of
affect production costs; for instance, JIT lowers WIP inventory and plant costs; TQC
specialized CNC operations.
[andon, poka-yoke (Japanese terms meaning automobile hazard lights and foolproof
The impact of AMHT on plant and equipment costs might also be affected by how
mechanisms), etc.] lowers scrap, rework, and other costs of poor quality; Kanban
sensitive the AMHT equipment is to environmental factors such as temperature,
scheduling systems lower finished-goods inventory and WIP inventory costs; the
humidity, and vibration. This sensitivity can imply plant infrastructure costs that might
reported preference of Japanese managers for multiple copies of smaller, less expen-
not normally be considered. In obvious cases like cleanroom AMHT, these infrastruc-
sive, more mobile, less sophisticated machinery rather than "supermachines" lowers
ture costs are known up front, but there is also the case where a sophisticated piece of
equipment costs; total productive maintenance lowers labor, equipment, and process
CNC equipment installed and adjusted in the winter didn't work right in the summer
downtime costs; and cellular layout and group technology lowers labor and manufac-
because of the higher angle of the sun shining through the windows! turing process costS.32.33
Labor Costs. The traditional justification for using more advanced manufacturing
Management Policies. Many of these "technologies" might seem to be "policies,"
equipment has been the substitution of capital for labor, and 'there is little doubt that
but they are policies that govern the way activities are done. For example, the way in
utilizing AMHT usually lowers direct-labor costs. However, there are other cost impli-
which investments in new equipment are cost-justified-high-hurdle-rate discounted
cations to consider. Although the amount of direct labor might be reduced, what are
cash flow vs. strategic cost management techniques-can impact the decisions of the
the skill requirements of the labor that remains? If the AMHT requires less but more
firm to purchase and implement any new technology;34.35 the way in which overhead
highly skilled direct labor, there may be additional costs associated with employee
costs are defined and allocated-the traditional way of basing this on direct-labor vs.
training or higher wages. In addition, what happens to indirect labor with the utiliza-
activity-based costing and management-can affect management's understanding of
tion of AMHT compared to traditional manufacturing technology? AMHT mainte-
the real costs of the firm's operations;36 vendor relationships that are based on cooper-
nance is again an "it depends" situation. AMHT equipment is normally more complex
ative partnering rather than arm's-length confrontation can lead to lower materials and
and sophisticated so that maintenance costs might be presumed to be greater, but on
manufacturing process costs;37 negotiated partnering with labor unions (trading job
the other hand much of the complex electronics is modularized on printed-circuit
security for work-rule flexibility) vs. confrontational bargaining over wages and bene-
boards which are simply replaced when a circuit goes bad, so maintenance costs might
fits can lead to lower labor and manufacturing process costs;38 and giving operators
be less.
the power and the responsibility for quality, routine maintenance, and other activities
AMHT might have more positive cost impacts when the health and safety of work-
associated with their principal work tasks rather than relying on specialized quality
ers is considered. Automating dangerous or environmentally hazardous operations uti-
control or maintenance staffs can lower labor and manufacturing process costs.
lizing AMHT (e.g., spray painting, welding) may require more expensive equipment
but provide savings in lost labor hours, workmen's compensation premiums, and other
Hardware and Management Technologies. These kinds of illustrations can go on
employee health and safety costs. Similarly, automated operations that are difficult for and on. Two general points to make are as follows:
18.4 EDUCATION AND LEARNING THE LEARNING ORGANIZATION 18.5
Why is there not a strong theoretical framework, a robust basis, presently available drive an automobile. At first our potential learner is overwhelmed with competing
from which further analytical and empirically researched studies can emanate? To a "inputs" (vision; road tracking; engine sound; gear movement requirements; coordina-
large degree the answer to that question relates to the background and disciplines of tion of clutch, brake, and accelerator; responsiveness; etc.). The task, simple as it may
the researchers. analysts, or writers who have presently been addressing the topic. appear (the same applies to flying an aircraft), is almost daunting. To the basic task
They comprise economists, technologists, "systems" people, sociologists, policy ana- add (say) light signals, heavy flow of traffic, external distractions, and so on. Under
lysts, and rarely, too rarely, cognitive psychologists or information theorists. It is to such conditions there is little chance of the learner driver holding a parallel conversa-
the latter disciplines that we must turn if we are to posit a theoretical understanding of tion, listening to the radio, daydreaming, or planning ahead-as the competent driver
learning-it matters not whether this is seen as individual, organizational, or corporate is later able to do. In short, there is no spare capacity. But the potential driver "learns"
learning for the issues are, at bottom, the same. and matches the right responses to the right selection of relevant inputs. A flow and
Thus there is a wealth of information, theoretical understanding of learning, skill pattern to the skilled driver emerges. A beautiful orchestrated pattern of input/output
acquisition, unlearning, forgetting, memory encoding, and performance improvement information flow develops and, most importantly, spare capacity develops. The driver
deriving from those latter disciplines which can suggest the intellectual framework can, ultimately, drive the car almost without thinking about it. (This can be a little
that is so badly needed if we are to develop our subject matter in a satisfactory, unnerving-and many of us may have sometimes wondered who, or what, was driving
noneclectic manner. Such a framework, as we shal1 note, will not be perfect-and it the automobile.) Spare capacity is developed such that it is easy to undertake the pri-
will not be a simplistic extrapolation of an understanding of individual human perfor- mary task (driving the car) while also, in parallel, performing numerous secondary
mance to a more macro socioorganizational learning level. Modification and attenua- tasks (listening to the radio, engaging in conversation, daydreaming, planning ahead,
tion will be required. Nevertheless, there will be direction and coherence to the or whatever). It is also possible, should the driver wish, to use that spare capacity to
thoughts which shape and direct subsequent examination of that macro-organizational direct the spare attentional power to the primary task and thereby lead to a significant
structure, less arbitrariness-and the chance of fuller understanding. improvement in performance. It is this later characteristic which distinguishes good
In lhe sections which follow, in relation to the broad critique which we have just from excellent, the mediocre amateur from the highly skilled, continually learning,
posited. we will therefore locate our discussion into three broad areas. First, in Sec. professional.
18.2, we will consider the nature of individual learning. skill acquisition, information But we should not be so complacent. For if road conditions get tough-bad weath-
processing, and information usage. We shall also make several points relating to "for- er, poor vision, very heavy traffic, a worrisome day-accidents and errors abound,
getting." learning deficiencies, motivalion, stress, and vigilance curves~ Having laid indicating a limit to performance, an erosion or restriction of the spare capacity-in
down our framework, we will then examine (in Sec. 18.3) what this points to (and effect, the informational channel capacity of the driver becomes overloaded. (The
demands) in relation to the broader cousin of individual1earning: macro-organizalion- more ergonomically designed the automobile-indicator panels, seating, and gear-
al learning (and nonlearning). This will then be followed, in Sec. 18.4, by examples shift arrangements-the less is the threat.)
from the extant literature which at least provide us with some insight and data which Now all the above is descriptive but it can be expressed in a highly detailed mathe-
we can begin to fit into the framework, or alternatively permit uS to modify the frame- matical, procedural, and decision-oriented form. I It is to this more theoretical frame-
work-for much is, at present, unknown. work that we now turn. Thus, the main requirements in relation to learning and skill
Finally we detail future research and analytic tasks to be undertaken. For it is acquisition (especially for perceptual-motor skills, but we can extend our repertoire to
almost a virgin landscape, thereby offering rich pickings for dedicated researchers and more creative identical skills and learning) are to understand the following:
much practical gain to companies, public organizations, and the marketplace in gener-
al, if applied to good purpose. 1. The translation of inputs and outputs of information flow into a controlled pattern
(albeit pennitting flexibility of response and appropriateness of action).
2. The overcoming of a "limited channel capacity" to permit spare (mental) capacity.
18.2 TOWARD A THEORETICAL FRAMEWORK 3. The use of the spare capacity to permit continual improvement in performance.
OF LEARNING AND SKILL ACQUISITION: Thus we are not speaking of a robotic automaton (which was the downfall of
FACTORS TO CONSIDER "stimulus-response" behavioristic accounts of learning and also incidentally of
"Taylorism" in trying to understand skilled performance in the workplace). The
continual improvement in performance is learning, not just competence. Thus,
It is neither palpably possible, nor wise to attempt to summarize the present state of without continual learning, mistakes emerge and forgetting, declining perfor-
knowledge regarding our theoretical understanding of human learning and skill acqui- mance, or whatever ensues.
sition in the small space that we can allot here. We therefore merely outline one main,
but nevertheless useful, paradigm and signal some of the more important concerns and 4. The ability to cope with stress, boredom, and fatigue repetitivity and the need to
ideas. How can we approach this? First, let us recognize that learning and skills are recognize that such characteristics are always potentially present.
intimately concerned with information flmv, decision procedures (both explicit and 5. The need to recognize that many aspects of complex skills are essentially heuristic
implicit, viz., algorithms and heuristics-or tacit knowledge). Learning is dependent in nature (which is a deeper and more complex thing than so-called tacit knowl-
on sensing, encoding. and organizing a flow of incoming information, perceiving pat- edge) and that despite our best efforts-indeed, that of tens of thousands of cogni-
terns, and decoding on appropriate responses, actions, and judgments, which is in tive psychologists over a period of decades-we are still only at the brink of
essence outflmring information. understanding the true nature of those "heuristics." [Thus AI (artificial intelli-
Before we amplify on this, let us consider a "simple" (but nevertheless complex) gence), expert systems, complexity theory, and cybernetics are at only an embryo
example of the learning involved in a quasi-complex task: namely, that of learning to stage in their development.] Nevertheless, If we can reduce a heuristic to a set of
TABLE 18.1 Attentional Load and Skill Stage organizationallcvel? As we shall note in this section. there are, indeed, numerous par-
allels, gainful interpretation-not just in a metaphorical sense-but in a much more
Stage Attentional characteristics meaningful sense which then permits a robust, scientific understanding of the manner
----
I. Early descriptive Almo,H total attentionalload directed to external events. and needs of organizational learning.
Considerable weighting on self-awareness. and critical attention However. with regard to the examples which we highlight here, we should be cau-
to one's own performance. tious not to overclaim with regard to our full understanding of organizational learning.
2. Intermediate association Intermittent attention to external cues. This could be followed Thus no company. no social organization, "learns" to the same degree or with the
by "internal attention" to temporal and phasing relationships. same proficiency as that capable and exhibited by an individual. The marvelously
Partial self-criticism and accompanying self-awareness may smooth, patterned behavior, the wondrous mental models which reflect an individual's
still occur. innate learning capacity, far exceeds the most "organized corporation." As to the rea-
sons for rhis, we reserve comment until the concluding section of this chapter.
3; Final autonomous Minimal attention to external errors, although this is a function
Now what exactly is it that an organization needs "to learn"? The answer to that
of task requirements. At lhis stage, there is minimal self-criti-
question is: "Everything~" Thus any company or organization needs to learn, continue
cism and analysis. unless the subject is so motivated.
to improve on, its ability to (for example) derive its corporate plans and strategies:
Source: Whiston. I derive and formulate its product portfolio; obtain temporal matching and synergy
between the output from its R&D portfolio and the subsequent product portfolio; and
improve manufacturing and production procedures, maintenance and service sched-
quantifiable or understandable algorithms, we gain much in our understanding. In ules, and market analysis and marketing expertise. None of this learning needs to
many ways this is a "pattern recognition" problem, and much can be gained by a stand alone. Indeed, their interdependence (e.g., design for manufacture, exigencies of
judicious application of information theory.2 "lean production") is something again which has to be "learned" and continually
improved on. To all this, an era in which "payback windows" arc shorter than ever
How much do we understand regarding these factors? Can we integrate that under- before, in which new generic technologies [IT (information technology), biotechnolo-
standing into a coherent model on which to base (and test) further exploration and gy, new materials] proffer discontinuities in knowledge, or the relevance of primarily
comprehension? Such an integration has been attempted by several analysts,3 in hard-earned "tacit" knowledge, introduces new chal1enges to learning.5
essence, with information theory and communication theory4 as a language tool. Let Under such circumstances it is essential that information absorption, company
us return to the car-driving example which we outlined briefly above. The skill devel- intelligence gathering and information sensing, and diffusion of information and
opment stages which the driver moves through can be expressed in simplified form as knowledge across a11company functions be as efficient and effective as possible. This
shown in Table 18.1. requires (as discussed in Chap. 30) new multidisciplinary and interdisciplinary skills,
In stage 1 (Table 18.I), the early descriptive stage, the individual cannot take on new organizational structures, continuous retraining. and personnel updating. In par-
"extra" tasks, and is overwhelmed by the learning task. By stage 2, the intermediate ticular. the information flow implied requires that the learning organization is flexible,
associative stage, things are more relaxed. At the final stage (Table 18.1, stage 3) a adaptive, but not overloaded with information to the point of inducing functional
task can seem effortless. Attention can be paid to "external secondary features." This stresses and subsequent losses or breakdown in performance. Hence the importance of
permits but does not guarantee further learning or improvement. The aim is to direct such concepts (as referred to earlier) of "channel capacity," limited channel capacity,
the "spare atlentional capacity" to further skill improvement, not to dissipate the spare and the organization of information (and structure) to induce spare capacity, which can
energy. then be used to further improve performance.
Indeed, within a multidisciplinary, integrative cross-functionaJ environment (see
also Chap. 30) and where interdependence of numerous subfunctions demands inte-
grative cross-communicative skills and information exchange, then this reinforces the
18.3 THE NEEDS OF LEARNING notion of skilled performance as smooth integrated patterned performance, which is
ORGANIZATIONS the essence of any complex skill. (,
-
Thus the learning organization has to be viewed holistically, as do the learning pat-
Having laid down the foundations of a theoretical framework for "learning" (and other tern and skill of an individual. We will note below how such aspects as channel capac-
terms of reference are possible), how can we connect this with a ;;learning organiza- ity, spare capacity, and vigilance and stress reduction can be given meaning at the
tion"? Can we utiJize the theoretical framework plus the supporting constructs as a company organizational 1evel, but first it is useful if we comment on the different
means of furthering our understanding of the learning organization? And with respect properties, structures, and demands of various organizational settings. in particular,
to the supporting constructs, does this prescribe what exactly it is that we should be the disparities of large and small organizations.7 For just as with individuals, there is
paying attention to if we are to be more prescriptive and analytic with regard to how not one specific pattern of learning (although a generalizable model is possible), so.
any learning system functions? Do such concepts as information flow; limited channel too, with commercial organizations, there are significant differences between large
capacity: spare capacity: heuristics and algorithms; serial-to-parallel processing; stress and small companies. This. in turn, implies differential analysis in terms of skill and
and vigilance curves; rigidity, boredom. and reduced performance; information over- learning requirements and differences as to how they can best improve on internal
load (or underload); and primary and secondary tasks help in our need to describe the information flow.
conditions of continual learning, enhanced performance? In particular, do such con- Consider Table 18.2, which illustrates some of the main characteristics, strengths,
cepts or constructs possess meaningful interpretation and counterparts at the macro- and weaknesses of large and small enterprises.
What we should note, from the purview of our subject matter here, is that in many We therefore see differing strengths and weaknesses for large and small companies:
cases small enterprises are organic in nature; they are (or can be) dynamic and entre- differing learning challenges. Can we place these needs into a more organized format
preneurial. innovative in nature. They are capable of integrated behavior with the and in so doing relate the new needs, the comparative strengths and weaknesses to the
involvement of a large proportion of their personnel. From a learning standpoint this is theoretical framework which we outlined earlier? It is to that need for coherence that
excellent. Internal information flow is important in learning. But also there arc severe we now turn.
difficulties to be faced by small enterprises. Staff can be overloaded, under pressure. The terms and concepts which we emphasized earlier with respect to learning and
They often cannot be released for retraining and updating. If staff are retrained, there skill acquisition included the following characteristics:
is a danger of losing them through "poaching" of their enhanced skills and increased
market value. Often a small enterprise does not have a significant R&D arm or func- Channel capacity. A term developed to understand how much information can be
tion. Thus the sensing, the decoding. the absorption, the utilization of the large bank transmitted along a particular channel or corridor (often measured in bits per sec-
of information in the external environment is no easy task. Within such a context we ond or some such unit).
begin to see the limitations of information channel capacity, the lack of spare capacity, Limited channel capacity. The upper limit to transmission rate. What is important is
the danger of stress. and information overload. the coding system that is used in determining bandwidth and the influence of extra-
However, if we turn to large organizations, we can observe (at the risk of some over- neous noise.
simplification) a somewhat different pattern of strengths and weaknesses which can
affect or dominate their learning capability. Large companies have in many cases taken Selective attention. The ability to focus on important features of the external envi-
on fonnidable hierarchical structures which are almost militaristic in nature-numerous ronment. There is a subtle problem here since continual attention to numerous
levels of reporting layers, centralization of power and authority "at the top" (the text information sources arriving in parallel, in real time, requires selective filters. The
"On a clear day you can see General Motors" was well titled!),s centralization of R&D, sorting (filtration process) ensures that the system is not overloaded. Selective
multidivisional structures, specialized functions, bureaucratic regimes. and so on. In var- attention has to be learned and continually improved on.
ious ways each or all of the aspects just listed can compromise company performance. lnformational overload (or underload). Trying to deal with too fast an information
There are, of course. strengths as well as weaknesses to this essentially Fordist-type flow causes breakdown or stress: certainly loss in quality in performance. A situation
structure. Thus, under conditions of slow change, mass production, mature life-cycle cir- with continual informational underload equally can produce boredom and fatigue.
cumstances, the economies of scale and low unit costs have shown undoubted benefits. Neither is compatible with good performance or enhances learning capability.
Big might not have been beautiful, but it did produce the goods. General Motors, IBM, Heuristics and algorithms. Most individual skills are poorly understood. The intu-
Du Pont, or whatever prospered for many. many years. However, as the marketplace itive, implicit, or tacit way in which the brain (or an individual) performs reflects
becomes ever more dynamic. as the rate of technical change increases, as new generic ;'heuristics"-it works-but we don't know how. Continual study reveals some of
technologies emerge, as IT systems permit and encourage new and more flexible work the underlying algorithms-patterns, decision processes which we can codify.
patterns, as the strength and potential of total workforce involvement in micro decision
Vigilance curves (and peiformance decrement). ContinuaJ attention to a repetitive
making becomes ever more obvious (as presently exemplified in Japanese "lean-produc-
task usually results in a very large decrement in performance (it can be as high as
tion procedures," quality circles, lIT procedures, or whatever),9 and as multifunctional
40 percent). Task diversification (if meaningful) helps considerably.
skil1s and new design principles become ever more apparent for market success-then
we begin to observe the need of entirely new anatomies for large organizations. 10 With Spare capacity. This is essential to learning. If an individual (or system) is "glued,"
those new anatomies we can observe new learning needs, new learning capability, and "tied" to incoming signals and related information load, then no learning ensues-
new learning potential. We can observe the need to overcome internal informational bot- the action and responses are machinelike and robotic, however impressive the per-
tlenecks and to enhance channel capacity, in which differing functions can better com- formance. However (as noted earlier), if the individual learns to encode informa-
municate with each other. This latter requirement implies the ability to encode and tion, selectively filter, and impose realistic patterns on the environment-then
decode information across functions in the most effective way. Since different functions "spare capacity" develops. That spare capacity can facilitate learning-but only if it
(accountants, designers, engineers. marketing people, scientists. R&D) often-indeed, is directed or motivated to do so. Spare capacity can reduce strain, stress, and
usually-speak very different languages. this requires major shifts in large company fatigue-it can provide relief-but it is also essential to effective learning. The
structure and mode of operation if learning, mutua/learning. is to be effective. It more that is usefully learned, the greater the spare capacity. The greater the space
demands more organic integrative structures (viz., the "strengths" of the small enterprise capacity, the greater the learning potential. (If you want something done quick1y,
anatomy) and interdisciplinary and multidisciplinary training (see Chap. 30) and com- why give it to a busy person to do?)
munication channels to "gate" these new multidisciplinary skills. Serial-to-parallel processing. In processing information, sequential decision mak-
The strength of large organizations (in comparison to small enterprises) is that they ing is far less efficient than ability to process information in parallel. But the latter
possess large R&D functions. Thus they can "sense," decode, and act on new potential requires that the more complex gestalt patterns be learned and understood.
scientific and technical information. However, the (often) physical, geographic, and Ultimately such learning, in effect, increases the channel capacity of a system and
intellectual isolation or separation of the R&D department means that both the remit- permits, through the implicit spare capacity induced, a further ability to learn.
tance and the subsequent dissemination of R&D is by no means optimal. It is not just
Patterned performance. The distinguishing feature between skilled and highly
"even here" that we see the need of new integrative forms, it is particularly here that
skilled (professional) performance is the smooth pattern of behavior exhibited by
the need is obvious-but not always acted on. Thus a strong potential strength of large
the latter individual. The patterned performance permits attention to be paid to the
organizations (viz .. the R&D function) with respect to corporate learning can, in fact,
"fine tuning" of performance as unpredictable events occur (or to correct internal
be. if not an encumbrance, at 1east far, far less than its true potential.
18.12 EDUCATION AND LEARNING
faulty actions). In one sense patterned performance reflects a "giant internalized

and much tested standard" (the concert pianist, the professional car racing driver).
But such pattern is not rigid, predetermined. On the contrary, the ability to see pat-
terns (see serial-ta-parallel processing above)-to impose and construct patterned
performance-permits and is the essence of spare-capacity and continual learning.
The danger occurs when a pattern becomes "obsolescent."
How do these terms (and remember from our discussion earlier that in describing
individual performance they fOfm an interrelated coherent whole) relate to macro-
organizational or company learning? As we indicated previously, we should not over-
claim; the circumstances of macro-organizational performance (and hence learning
needs) may not be exactly the same as those that describe individual learning; never-
theless, as we now indicate, there are numerous closely related issues (and hence chal-
lenges to understanding).
Thus, if we consider the terms just listed, and apply them to company or organiza-
tional circumstances, we can note the following learning and skill acquisition tenus
applied at the organizational level:
Channel Capacity. All companies depend intimately on smooth information flow

between individuals, groups, departments, and functions. Numerous restrictions and
blocks to information flow evolve over time, most especially in large bureaucratic
hierarchically organized systems. Numerous reporting layers may facilitate the organi-
zation (but not necessarily the effectiveness) of vertical-communication command sys-
tems. However, at the same time nothing like enough attention is paid to horizontal
communication (see Fig. 18.1).
This imbalance in the creation of communication channels reduces the overall com-
pany or organizational channel capacity, the subsequent flow of information, and hence
the ability to learn. Some companies have introduced cell-like structures at lower levels
of the company hierarchical structures to try to compensate for this difficulty as illustrat-
ed in Fig. 18.2.
But this is not enough. What is required in order to achieve significant improvement
in total organizational learning capability is a more radical interlinkage of functions, with
the development of numerous new multidirectional channels of infonnation as illustrated
in Fig. 18.3.
Limited Channel Capacity. As the number and complexity of communication

channels are increased, there exist numerous barriers to optimum use of the channels.
This "extraneous noise" can severely hinder total company learning. The reasons or
problems are various: overloaded individuals or subgroups (see information load
below); divisions. departments. or functions who are not well integrated into the total
organizational entity and thereby hinder communication and learning potential. (This
can apply especially to ;'isolated" green-field-site R&D departments.) The need, the
remedy, is threefold: (1) design of totally integrated, organic structures;lO (2) encour-
agement of interdisciplinary linkages and focus of analysis; and (3) encouragement of
interdisciplinary and multidisciplinary training (see Chap. 30).
Selective Attention. Selective attention implies the need to focus, filter, and select,
from a multitude of incoming (and internally generated) information flow.
Organization of that data is the basis of subsequent analysis. formulation of corporate
strategies, improvement of product design and product portfolios. and correction and
improvement of past and ongoing procedures. How can this "filtration," this selective
attention, be better organized at the company level to improve self-learning? Some
companies employ technological gatekeepers; others recognize the importance of their
R&D department in this role-but R&D departments who are actively linked and
aware of all organizational needs. Ultimately whatever information is filtered, selec-
tively attended to, must be reintegrated for use; hence the importance of integrated
cross-linkage of departments and multidisciplinary communication skills.
Information Overload (or Underload). All levels of participants in any organiza-

tional system can be subject to information overload (or underload). In either case
learning and performance is compromised. To some degree it is more likely that more
senior managerial positions arc subjected to information overload; and shop-floor
operatives. undertaking highly repetitive work, to information underload. This is illus-
trated in Fig. l8.4.
The nonlinearity of the information load indicated in Fig. 18.4 can be disastrous for
company performance and learning capability. The implication is to introduce numer~
ous measures which in essence tend to reverse the classic organizational pyramid.!O loss which can accompany repetitive behavior. As a consequence, job rotation, skill
Organic structures, matrix management, reduced number of reporting layers (flattened enhancement programs, multiskilling, etc., are recommended.
pyramids), lean-production techniques. qualiry circles. socioergonomic design of the However, what is not sufficiently recognized is that much higher skillievels~viz.,
workplace, "managers on the shop floor" (viz., much favored in Japan). total employ- managerial levels in all forms-can be subject to a similar problem. Indeed, there is a
ee involvement. and so on are all fearures of such a trend to improve total organiza- deep paradox. As learning ensues, as experience extends for the intelligent employee,
tionallearning capacity. 10 limited scope of action can induce a "sameness" to the job which is equivalent to the
unwanred characteristics of a vigilance curve. The subsequent loss to company learn-
Heuristics to Algorithms. Much company knowledge is tacit in form.s There are ing capability can be large. Such a problem is reinforced in those organizations which
many advantages to this. Knowledge is necessarily embedded in individuals, and ulti- have become inherently conservative: where taking risks may endanger a career and
mately it is individuals who learn, and organizations and companies who benefit. The where mistakes are not forgotten and the safest promotional route is conservatism and
difficuhy is that (1) much noncodified knowledge is lost on employee transfer, or clo- conformity, not candor.
sure of departments, ere.; and (2) the internal (tacit) nature of knowledge can hinder The challenge is to extend people, to encourage creativity, and to recognize that
interdeparrmental (or person-to-person) communicarion and mutual learning. The failure is not forbidden-or punished.
need, therefore. is to codify. to make knowledge "transparent" wherever possible.
However, the potential danger and threat rhen arises in terms of external competition Spare Capacity. Spare capacity is not rhe same as carrying extra staff; it is not "fat";
due to intercompany learning. it is not massive financial reserves. Spare capacity is the outcome, the consequence of
ongoing effective company learning. It is the integrative accumulation of internal
Vigilance Curves. A large proportion of the lirerature pertaining to vigilance curves knowledge (explicit and tacit), effective company sensing devices, flexible corporate
(and performance decrement) focuses on lower~level perceprual~motor skills-plant strategies, and foresight and continuing analysis of the challenges and opportunities to
operatives, machinists. shop-floor employees. etc.-and recognizes the high-quality be faced. The evolution of lean-production systems, of the expansion of concurrent
THE LEARNING ORGANIZATION 18.17
Reduce information overload and possibly increase or improve on information

underload. (The first induces stress. then fatigue.)
Translate heuristics (tacit knowledge) into more overt algorithms and thereby offset
the dangers of lost skills, company "forgetting," and opportunity costs due to staff
transfer and employees leaving. In addition. the translation of implicit knowledge
into explicit knowledge (heuristics to algorithms) yields a "transparency" in which
criticism, improvement. diversification, wider dissemination of knowledge across
all company functions becomes possible.
Overcome the problems of repetitive. boring occupations which lead to qualitative
loss in employee and systems performance. Although this problem applies particu-
larly to less skilled employees (who often in mass-production systems undertake
very repetitive work-and where, incidentally, most of the study of vigilance
curves have been undertaken), related problems can also apply to more senior posi-
tions. Indeed, as an individual (or function) gets completely "on top of a job" and
has thoroughly mastered the skill, boredom can set in. The reverse side of "spare
capacity" implies the need of continuous challenges, continual learning, and so on.
Seek mechanisms which induce or encourage spare mental capacity. This, above alL
permits further learning. Its encouragement is a sine qua non. When an individual
learns a skill, it happens "naturally." The equivalent challenge in an organizational
setting is to create organizational circumstances, a culture, a cross-disciplinary cli-
mate. a training and retraining program, a linkage and involvement of R&D func-
tions, such that all functions can better handle increasing information inputs, disas-
semble it. and understand and reapply such information as is needed in order to
relate to the overall corporate strategy. This is not to say that al1 company functions
engineering principles toward a much wider systems involvement (see GaynorJl) can, or ever will, understand all the entire bank of skills of their colleagues; this is
reflect the seeking of systems. company organization, that has cross-linked all its mul- neither feasible or desirable. But what is required is a basal level of common knowl-
tifarious skills into a total company capability which can handle the new challenges edge far in excess of that which is usually the case. Thus different functions then
and market dynamics (which are never constant). Spare capacity results from the know when to pass on infonnation: what is relevant to them. when they should "add
application of all of the principles we have detailed under other headings, and thereby knowledge," add "value" to incoming, outgoing, or internally generated knowledge.
encourages and permits further learning. They thus demonstrate the spare capacity to rise above the immediate exigencies of
disparate information. They relate where necessary, they process and absorb (learn),
Serial-to-Parallel Processing (and Pattern Recognition). This demands the percep- but they do not overattend in situations where this is counterproductive.
tion of pattern, the ability to handle complex information in a totality. It is the hall-
mark of skilled performance and the means of overcoming the limited channel capaci- At a more meta- or macro-company level, if all subfunctions are interlinked and per-
ty and communication problems (and hence learning problems) outlined above. forming wel!, the organizational totality is such that the organization as a whole is not
As indicated earlier, serial-to-parallel processing demands cross-department link- overwhelmed when market conditions change rapidly. when competitors make signifi-
age, multidisciplinary training, and mOre "organic" structures. This can take many cant advances or threats. or when new technological paradigms emerge.
forms and has been the subject of extensive review. 10 An interesting feature is illus- Spare capacity does nor mean extra staff: idle [ime: wasted effort. It means, as with
trated in the studies of GaynorJ2 with respect to the need to link all departments or skilled individual performances, that the organization has a smooth, controlled, par-
functions in an organization (see Fig. 18.5). tiaJly autonomized level of skill. that is not phased out when under threat. Thus the
"organization's skills" are patterned where they need to be, but on top of that pattern,
General Implications. If we now collate the above, we can more clearly see the because of that pattern, the organization is able to handle crisis. fast incoming infor-
learning challenges which face all companies (whether large or small) but we can also mation. and new stresses-and in so doing adds this to their repertoire of natural
organize or group our subject matter, into classes or categories. Thus. in general terms, skiJls. Thus the learning curve becomes endless, always moving forward, as it has to.
in order to optimize learning, the challenge is to Much of the above is enhanced if the transition of serial-to-parallel processing of
information can be achieved. In technical terms as described earlier. this greatly
Maximize channel capacity. encourages the limitations of a "limited channel capacity" and hence leads to the
Overcome limited channel-capacity problems. desired spare capacity. Serial-to-parallel processing implies the ability to recognize
and act on more complex patterns in their totality. Interfunctional linkages, matrix
Direct selective attention to the most important areas. but simultaneously develop overlap of functions. and greater academic-industrial linkage programs in which dis-
sensory filter mechanisms in order to prioritize all the parallel information which parate skills and insights are brought together all assist. Parallel processing requires
impacts on any organization (or system). parallel judgments and hence integrative structures (see Figs. 18.3 and 18.5).
THE LEARNING ORGANIZATION 18.19
18.4 CONTEMPORARYANALYS~
Numerous texts, studies, and papers are now available on the learning organization-
so many, in fact, that the choice is bewildering.1(}-32 The choice dilemma is that much
greater because different authors and analysts (and perhaps even pundits) have their
own favored point of view. To review in detail that enormous literature would not be
possible in this short chapter. However, Table 18.3 does indicate some key authors
together with the area of discourse that they tend to favor.
A large part of that extant literature is eclectic but often stimulatory and useful.
What is required, however, as we have argued earlier, is a more integrative coherent
TABLE 18.3 Analytic Perspectives Regarding Organizational Learning
Dodgson 13-15 In a series of articles, Dodgson has provided extensive reviews of

contemporary issues and empirical detail of organizational learning.
Several of the articles emphasize the relevance of academic-indus-
trial collaboration, technical change, innovation studies, and organi-
zation theory-which demands a multidisciplinary approach if com-
plete understanding is to be achieved.
Gaynor11.12 In these two texts Gaynor addresses the importance of a total-sys-
tems and functionally integrated organization in providing the basis
for competitive development. Organizational learning and improve-
ment is shown to be greatly influenced by such an approach.
Goold and Campbell'6 In this text the authors examine the relationship "between corporate,
divisional and business units and show how the centre can choose a
style that adds value to the business in its portfolio." Building on
Chandler's classic account of the role of the Centre (in "strategy and
structure"), they provide a detailed analysis of the management
process in diversified corporations.
HandyJ7 In this book, Handy goes beyond the organization or company and
argues that the accelerated rate of change "is radical, random, dis-
continuous" and "doesn't make patterns any more." But this can be
turned to an organization's advantage if they adapt and innovate:
this requires individual working not only within the organization,
but outside-being self-motivated and muhiskilled. "New types of
'de structured organizations' will (therefore) arise." Adequate
response demands wider educational change, with governmental
and market changes.
Hayes et al.18 These writers (and the school they reflect) consider the new manu-
facturing and organizational principles available to companies.
Their text provides an informative and proactive overview.
Morgan'9 Morgan has placed the roJe of the individual as a key component in
corporate learning.
Morgan2O This text provides a stimulatory examination of organizational life
in terms of "metaphor." It suggests how this can be used as a means
of diagnosing organizational problems. Comparison is made with
the brain (as a self-organizing system), and the limitations of the
brain metaphor. It also considers "organizations as information~pro-
cessing brains ... and as holographic systems."
TABLE 18.3 (Continued) Analytic Perspectives Regarding Organizational Learning viewed as an intelligence function, are utilized as coherent combinatory concepts. The
organization, like the brain, must sense "data," process. not be too overloaded, be free
Patel and Paviu' These rcsearchers consider the role of technological change. R&D.
to "play" with the data, learn by mistakes, be motivated to learn, and learn that it can
and innovatory development. In "tcchnological competcncies in the
world's largest firms" (in which more than 400 of the world's learn. The greater the synergy between individuals within the organization and the
largest firms arc cxamined despite their diversified, but stable. mul- organization itself, the greater the synergy between the company and the wider envi-
titechnological competencies). they indicate (hc nature and impor- ronment (whether this involves customers, industrial networking, government agen-
tance of the scope for managerial choice. They argue "the impor- cies, the education establishment, or whatever), the greater the potential for, and
tance in technology strategy of integration (or 'fusion') of different smoothness of, learning.
fields of technological competence." (See also Whiston. 10) The conditions of such synergy are highly dependent on communication and infor-
Peters and Watcrman32 mation flow at all levels. Synergy, therefore, takes on the characteristics of integra-
These writers placed considcrable emphasis on "business succcss
tion, organicness, employee-employer identification, conditions to minimize stress and
through organizational learning and strategic management""-and in
reviewing seemingly '"best practice." fatigue, cooperative mutuality of purpose, ethos, and identification.
It is not difficult to see how the various "classes of authorship" indicated in Table
Senge21 This author argues the importance of 'systems thinking" and team 18.3 variously characterize that synergy. No individual school of thought is uniquely
learning. He distinguishes partnership as a form of entitlement" correct; nor is any uniquely wrong. But the coherence emerges if we consider motiva-
from participation as a basis of learning. Shared vision and team tion, information flow, and removal of communicative bottlenecks and barriers (as
learning are highlighted, as is the development of "mental models."
discussed in earlier sections) as being of paramount importance.
Planning is thus a potential learning platform at both personal and
Numerous Japanese and Scandinavian companies recognized this quite a while
corporate levels.
ago; hence the transformation from Taylorism or so-called scientific management
Thomson (ed.)22 In this volume numerous contributors cxamine how 'leading firms toward a wider socioergonomic goal. Quality circles, team organization, lean produc-
are organized to learn and commercialize learning, which brings tion, and JIT are natural stepping-stones-but they are only stepping stones to a more
continuing technological advantages .... Communication among organic organizational learning environment. As recognized by Handy,n the require-
institutions in leading countries fosters learning and innovation." It ments for effective innovative learning do not stop within the organization. Indeed,
is argued that '"Institutional change is needed to achicve and main there is no limit to the systems boundaries that must be considered and changed.
tain lcadership; institutions that supported one phase of technical Education, wider societal networking, governmental policies, and international and
change may block later phases."
global marketplace changes ultimately compound back on and within and without the
Thurbin23 This author recognizes the importance of 'employee learning on a "learning organization."
continuous basis." Reference is made to (he experience and lessons At the time of this writing, new technologies and information networks and the
of the Rover Group in the United Kingdom. The importance of enormous potential for parallel highly responsive and reactive information data net-
"trigger mechanisms" to stimulate the setting up of the learning works and communication network links (whether this is, say, of the internet variety
process, belief that transformation can occur and that risks should be or "private" multinational corporate databases) only serve to challenge the sensory
taken, action in part by trial and error within existing organizational nerve endings, the communication-handling capabilities of learning organizations.
strategies, and benefits and performance criteria that reinforce learn-
The danger of systems overload has never been greater. For here we now have a
ing are considered as basic tenets.
great social irony. More parallel information sources (as with the human brain) offer
WhistonlO This author has explored in some detail the importance of function- to the learning organization the potential for even more learning, but also the danger
al, manageriaL and technological integration in providing a robust of systems overload and rigidity due to informational overload-a form of organiza-
basis for company learning. On the basis of wide national surveys tional fatigue. Only if the learning organization is relaxed, integrative, and internally
and empirical study, the barriers to achieving intcgration and communicative (which implies numerous smooth functioning interfunctionallinks and
improved learning are identified. National and corporate policy rec- multi- or interdisciplinary trained staff) can that new source of information be proper-
ommendations are then examined. ly utilized and learning accelerated (or even achieved).
A critical part of achieving such smoothness and facility in information handling,
as well as encouraging a "creative learning intelligence" can be the research, the
design, and the development functions or departments. But here again we see the need
of coherence and systems linkage: both internally and externally.
theme which permits the analyst, the company executive-and developing theory-to The structure and pattern of linkage between research, design, and development
embed the "heterogeneous availability" into a consistent philosophy. functions is of critical importance in relation to overall organizational learning; but as
We can note in Table] 8.3 authors or schools of thought who (variously) emphasize we have just noted, it has both internal and external features Uust as is so for individ-
(1) the individual; (2) the organizational system; (3) deep or "meta" strategic and sys- ual learning). Also, much depends on the size and resources of an organization. The
tems thinking; (4) wider environmental, societal. or educational features; (5) pragma- problems of "learning" for small companies, small manufacturing enterprises (SMEs),
tism and "best examples"; (6) theoretical overviews; and (7) technological overviews. and large corporations are not exactly the same. The small organization (and usually
None of these is mistaken or irrelevant but an
can be more fully understood and inte- the 5MB) tends to be organic and intimate. If these two enterprises do have a research
grated if information flow, decision procedures or mechanisms, and strategic analysis arm, it is usually well linked to other departmental functions (this often is not the case
18.22 EDUCATION AND LEAR~ING THE LEARNING ORGANIZATION 18.23
with all large enterprises). We then begin to observe different challenges and needs to nized. Ever-increasing reliance on capital-intensive technologies, centralization,
encourage total organizational learning. strong divisional structures, alienated workforces, Taylorist principles, and productivi-
Thus in the case of large organizations there is a need to link and cross-link the ty gain at the expense of radical product innovation sowed the seeds of learning dis-
research, design, development functions with all the other departments in as rich a ability. Much reversal of company philosophy, much change in organizational struc-
manner as is possible (see Figs. 18.3 and 18.5). In the case of smaller enterprises, the ture, new internal communication patterns, new patterns and forms of linkage with
need-if there is a paucity of research capability-is to encourage external networking suppliers, new forms of assessment of market need, and so on have, in total, if not
and linkage especially through academic-industrial collaboration. trade networks, and reversed the earlier learning disabilities, at least now provided a more robust platform
the like. But here there is encountered a new form of learning difficulty-the large for organizational learning.
enterprise with its large R&D departments has the means. the intelligence capability, if At one time the automobile industry was seen as a "mature" industry in terms of its
you will, to decode the enormous "intelligence," data, which science, academia is con- place in the development cycle. All that changed in terms of both product and process
tinually generating (the challenge then is to sensibly filter such information and to dif- development. The auto industry is now, and continues to be, an immature-viz., learn-
fuse it throughout the whole enterprise-hence the need of integration and interdisci- ing, innovative-industry. In face of the challenges of the twenty~first century,30 it has
plinarity). However, for small enterprises such a decoding or internal assessment to learn even more and go on learning. There is a metamessage here. No industry, no
facility is often lacking. A research department. or even a so~cal1ed technological gate- sector should consider itself "mature," inviolable, secure. That way lies not maturity,
keeper. may well be absent. Appropriate "external" academic-industrial collaboration but obsolescence and death. Only continual open-ended learning ensures survival.
can then be of critical importance to subsequent learning. (In Chap. 30 we give several Many of the rapidly expanding corporations of Southeast Asia have recognized that
examples of such contemporary collaborative linkage.) challenge and now continue to oust competitors.31 To learn is to live.
In essence, therefore, the smaller organization has to learn to tap into a wider intel-
ligence, while for the larger organization the need is to share internally its innate intel-
ligence. Both perspectives point. at base, to cooperative needs, but of different forms.
Learning is dependent as much on cooperation as on competition (and learning from 18.5 FINAL COMMENTS
explanation or mistakes). In one sense that is the common message of most, probably
all, of the various views expressed in Table 18.3. Cooperation is also the means of The area of discourse briefly outlined in this chapter suggests that the following be
overcoming the different problems of small and large enterprises indicated in Table kept uppermost in mind:
18.2. Thus the small enterprise can improve its learning capability through external
linkage: if it is of an appropriate form: the larger enterprise via improved internal 1. There is a need for both explicit and implicit attention to be constantly paid to
functionallinkage.14 the overall needs of organizational learning. The former demands explicit, transparent
The linkage can be facilitated by organizational change,25 improved use of tech- corporate strategies; the latter demands structures, tie-lines-across departments,
nologies,26 improved training of individuals, and greater recognition by all employees across individuals, and across the whole organizational entity. The explicit and implic-
at all levels of the importance of learning. Thus learning becomes in the latter respect it modes are self-reinforcing and touch all levels of a company's employees. It is not
an open, intentional, purposive endeavor-not merely a by-product of how a company exclusive to senior or middle management. Japanese and Scandinavian countries have
functions. Numerous companies have made and are continuing to make impressive demonstrated, in numerous companies, the importance of total employee involvement
strides in placing emphasis on company learning: much beyond the conventional in respect of "company learning."
human resource development programs of yesterday. 2. To some extent, beyond (a) the generalizable principles of encouraging a good
It is perhaps invidious to single out particular companies: nevertheless. we should corporate "memory," of developing internal and external "selective attentive mecha-
note here that such enterprises as Rank Xerox; Shell, 3M: Canon Inc., Japan; most nisms" which improve the coupling of the company to both the external marketplace,
Japanese auto manufacturers; Volvo and Saab; Lucas and Rover: Du Pont; Motorola; to the science and technology base. to internal company process knowledge and prod-
and IBM-to name only a few-place increasing emphasis on the improvement of uct development (or more particularly its innovatory potential); there also (h) exist
organizational learning capacity. particular requirements dependent on company circumstance (viz., science-based,
An extensive empirical literature attests to the various gains so made. There is "no supply industries, scale-intensive sectors, traditional industries).
single recipe"-which is the point made in this section. It is an ethos. However. each
3. The organizational fluidity, structure, and circumstances of small and large
company, each enterprise has its own failings and disabilities which have to be over-
companies differ as does, usually, their degree of organicness. This signals particular
come if continuous learning is to develop and be encouraged. Perhaps this is well
learning abilities (and deficiencies) which should be attenuated or remedied.
exemplified in the case of the major U.S. automobile manufacturers: GM, Ford, and
Chrysler. For over a decade the U.S. automobile industry has been assailed by the 4. However, new organizational systems geared to the improvement of corporate
ever-ferocious competition of the Japanese and European auto manufacturers. Detailed flexibility (or, specifically in response to the potential of new technologies) have in
accounts of the difficulties they faced-in part relating to the historical trajectories of some sense altered the competitive boundaries between small and large companies.
their earlier development-are to be found in a variety of penetrating texts.28.19 In Mass-production systems are moving back to more batch like procedures. Attendant
addition, the changing conditions of the U.S. marketplace, and the ever-increasing with those post-Fordist changes are new learning challenges for small and large com-
regulation-bound sector, the environmental challenges to product development, panies alike.1O Indeed, the new technical era within which all companies find them-
implied that these gargantuan companies would either have to "learn" or die. Thirty or selves (in both product and service sectors), with all the attendant networking and new
so years ago such a scenario, if not undreamed of, was not sufficiently widely recog- global market challenges, suggests that heightened attention be paid to organizational
learning; to new modes of information intake (and hence improved external linkages ] l. G. H. Gaynor, Achieving the Competitive Edge Through Integrated Technology Management,
to customers, to academia-both viewed as informational and sensory learning McGraw-Hili, New York, 1991.
sources).
12. G. H. Gaynor, Exploiting Cycle Time in Technology Management. McGraw-Hili, New York,
5. All the above accentuates the importance of interdisciplinary skills, interfunc- 1993.
tional collaboration, and strategic coherence which involves all "departmental" func- ]3. M. Dodgson, The Management of Technological Learning, De Gruyler, Berlin, 1991.
tions. far in excess of (say) contemporary concurrent~engineering principles. It indi- 14. M. Dodgson, "Learning, Trust and Technological Collaboration," Human Relations, 46(1):
cates the need of managerial, organizational, and strategic integration across alJ facets 77-95. 1993.
of a company's activity. This, in turn, implies new training needs of a more interdisci-
15. M. Dodgson, "Technological Learning, Technology Strategy and Competitive Pressures," Br.
plinary nature-which again, in turn, can foster improved learning capability. (See J. Management, 2:133-149, 1991.
Chap. 30.)
16. M. Goold and A. Campbell, Strategies Qnd Styles: The Role of the Centre in Managing
Divers(fied Corporations, Blackwell. Oxford, 1993.
What is implied in research terms? What is now required is that research studies
attempt to collate and direct further study within a coherent framework rather than 17. C. Handy, The Age of Unreason, Business Books Ltd., London, 1989.
amassing more and more eclectic, disparate studies. One framework has been outlined 18. R. Hayes, S. Wheelwright, and K. Clark, Dynamic Manufacturing: Creating the Learning
in this chapter which can serve to better organize our presently limited understanding. Organization, Free Press, New York, 1988.
It is by no means the only framework. Nevertheless, the learning approach outlined 19. G. Morgan, Creative Organization Theory, Sage, Beverly Hills, Calif.. 1989.
earlier has stood the test of time in relation to individual learning; it is the result of the 20, G. Morgan, Images a/Organization, Sage, London, 1986.
endeavor of tens of thousands of researchers and has much merit. 21. P. M. Senge, The Fifth Discipline: The Art and Practice of the Learnin/? Organization.
Extrapolation from individual to organizational learning is, however, fraught with Doub]eday/Currency, New York, 1990.
difficulties. These new emergent properties can be observed as systems complexity
22. R. Thomson, ed.. Learning and Technological Change. St. Martin's Press. London, 1993.
develops; different structures and different sectors of activity no doubt demand differ~
ing optimal fOnTISof operation. But this still demands that a guiding theoretical frame- 23. P. J. Thurbin, Implementing the Learning Organization, Financia! Times (Pitman
work be developed. At present we are only at the threshold of that fuller understanding. Publishing), London, 1994.
24, T. G. Whiston, Managerial and Organisationallntegration. Technovation, Part I. 9(7):
577-606.1989: Part 2.10(1): 47-58.1990: Part 3.10(2): 95-118.1990: Part 4.10(3):
143-161,1990.
18,6 REFERENCES 25. A. Pettigrew, ed., The Management of Strategic Change. Blackwell, Oxford, 1987.
26. G. Dosi. C. Freeman, R. NeJson, G. Silverberg, and L. Soete, eds., Technical Change and
1. T. G. Whiston, "The Role of 'Spare Capacity' in the Deve]opment of Perceptual Motor Economic Theory, Pinter, London, 1988.
Skills," in Readings in Human Performance. H. T. Whiting, cd., Lepus Books, London, 27. M. Gibbons, "The Industrial-Academic Research Agenda," in Research and Higher
1975, chap. 2. Education: The United Kingdom and the United States, T. Whiston and R. Geiger, cds., Open
2. P. R. Meudell and T. G. Whiston, "An Informational Analysis of a Visual Search Task," University Press, Buckingham, 1992, chap. 6; T. G. Whiston, The Management of Technical
Perception and Psychophysics, 7(4): 212-214. 1970. Change, Training for New and High Technologies, 2 vo]s., a report to the UK Manpower
Services Commission on the Programme for Directors and Senior Managers of Austin-Rover
3. P. H. Lindsay and D. A. Norman. Human Information ProceHing. Academic Press. New held at Warwick University 1985/86, Feb. 1986, Science Policy Research Unit, University of
York, 1972.
Sussex, Brighton; T. G. Whiston, New Technologies and UK Educational Policy Response.
4. C. E. Shannon and W. Weaver, The Mathematical Theory of Communication, University of The House of Lords Select Committee on Science and Technology: Education and Training
IlJinois Press, Urbana, Ill., 1949; N. Weiner, Cybernetics. Wiley, New York, 1948. for New Technologies, HMSO. London. Dec. 1984, vol. III. pp. 472-478.
5, P. Pale I and K. Pavitt, Technolugical Competencies in the World'~' Largest Firms: 28. A. AltshuJer, M. Anderson, D. Jones, D. Roos, and J. Womack, Future of the Automobile.
Characteristics, Constraint~ and Scope for Managerial Choice. STEEP Discussion paper no. George Allen and Unwin. London, 1986.
13. Science Policy Research Unit, University of Sussex. May 1994. 29. J. Womack, D. Jones, and D. Roos. The Machine That Changed the World, Rawson, New
6. A. T. Welford. Fundamentals of Skill. Methuen, London, ] 968. York, 1990.
7. R. Rothwell and W. Zegveld, Industrialization and Technolug)'. Longman, Harlow, ]985. 30. T. G. Whiston, Glubal Perspective 2010: Tasks for Science and Technology. Commission of
8. J. De Lorean. On a Clear Day You Can See General Motor.\", Wright Enterprises. Grosse the European Communities. Brussels. ]992.
Pointe. Mich., 1979. 31. M. Hobday, "Technological Learning in Singapore: A Test Case of Leapfrogging," 1.
9. R. F. Conti. Taylorism. Ne\1; Technology and Just-in-Time Systems in Japanese Development Studie.~. 30(3): 831-858, April ]994.
Manufacturing. Judge Institute of Management Studies. Cambridge. U.K.. 1992; C. Edquist 32. T. J. Peters and R. H. Waterman, Jr., In Search of Excellence. Harper & Row, New York,
and S. Jacobsson, Flexible Automation: The Global Diffusion of New Technology in the 1982.
Engineering Industry, B]ackwelL Oxford. 1988: P. de Woot, High Technology Europe:
Strategic Issues for Global Cumpetitiveness. Blackwell. Oxford, 1990.
10. T. G. Whiston, Managerial and Organizational Integration. Springer-Verlag, London. 1992.
19.1 INTRODUCTION
In recent years, a new paradigm has been adopted for management of technology:
knowledge-hased management relying on evolutionary process guided by knowledge
value revolution. I The knowledge is considered to be an essential asset of any organi-
zation requiring attentive leadership efforts for its management. An underlying belief
is that to gain competitive advantage. a company must include building and develop-
ing knowledge resources to leverage improved Jong-term financial performance. This
imposes new requirements and creates new opportunities for individuals, teams, and
organizations for managing technology. Development. adoption, and improvement of
a new technology involves several types of knowledge and skills, such as technologi-
cal knowledge. economics. and organizational dynamics. as well as technical-engi-
neering and systems integration skills. The capability for technological innovation is
limited by the capability for organizational change or vice versa. Both involve mental
transformations and capability of learning. A technology-based organization is
required to establish an internal learning environment and to involve itself in learning
together with such partners as customers, suppliers. educators. and legislators.
Organizational and technological learning are closely related and hence must be
understood in order to manage them.
If organizational learning is the same as acquiring new skills and adopting new
behaviors to improve performance. then one must understand how individuals and
groups learn and then generalize the process to the organization as a whole. But is
there a theory of learning? For many organizations. their very survival depends on the
ability of their employees to continuously improve, to learn and retlect on new infor-
mation about changing customer needs. and to learn how to creatively apply new tech-
19.2 EDUCATION AND LEARNING KNOWLEDGE IMPERATIVE AND LEARNING PROCESSES 19.3
nology and solve problems. So it should be obvious that managers and leaders ought To develop interdisciplinary communication and interfunctional cooperation
to know the process of changing themselves and others and have knowledge about To integrate technical and organizational systems
how people and organizations absorb, adapt, and integrate technological changes. In To establish technology-based operations in all domains of the company's activity
this chapter we sha1l review two topics:
(not only in design or manufacturing)
Role of knowledge as imperative for management of technology To achieve these goals, new technology must be viewed from a business process per-
Models of learning processes in a technology-based organization spective and not from a functional perspective. A business process perspective
requires adequate human capabilities to adopt new technologies and derive all possi-
ble benefits from them.
19.2 KNOWLEDGE IMPERATIVE A holistic approach to management of technology requires a complete rethinking of
------- ----------- -- educational and training processes. The spectrum of knowledge that is used in practice
of technology management is expanding beyond formal divisions of academic disci-
Importance of knowledge as a source of competitive advantage has been discussed by plines. More than ever before, a combination of experiential and theoretical knowl-
several authors, who also tried to determine parameters and consequences of knowledge is needed.
edge-based organization. 1--4 Charles Savagc formulated the following guiding ideas for A combination of technical and organizational knowledge is required for managing
managers of the knowledge era:2 even such, relatively narrow, tasks as implementation of new manufacturing technolo-
gy.s However, for total integration of human and technical systems to achieve, it is not
Tmnsforming both raw materials and raw ideas enough to add together the two types of knowledge, as represented by conventional
Leveraging both capital and knowledge assets engineering and management education. The knowledge base for management of tech-
Cooperating and collaborating within and between companies nology should include methodology of systems integration. The latter may lead to
transferable insights. which is a form of organizational learning. This methodology,
Team and relearn capabilities
however, is still not a mature scientific discipline. It is rather a domain of expertise,
Mitroff et a1. proposed a new structure of company in which the knowledge-learn- conceptually rooted in systems theory. It requires careful evaluation and further devel-
ing center constitutes one of the most important functional units and has responsibility opment through experimentation. It includes some elements of empirical knowledge
for finding out ';what the company needs to know to produce/deliver world class prod- about human behavior (psychological and sociological background) and theoretical
ucts/services.,,4 According to Davis and Botkin, "in knowledge economies, the rapid models representing typical patterns of interaction between people, organizations, and
pace of technological change means ... that people have to increase their learning technical systems. Because of this broad scope, which makes it difficult to derive
power to sustain their earning power."3 The very survival of an organization in today's knowledge from a single well-structured theory, the systems methodology is being
competitive world can be tied to the knowledge imperative. Implementation of such advanced by learning from real situations, actions, projects, and programs. They need
concepts into practice may require some radical changes in almost all spheres of busi- to be evaluated from multiple perspectives. Linstone proposed a framework for multi-
ness operations and also in the educational system. After all, an educational institution ple perspective analysis of ill-structured systems.6,7 This approach assumes three basic
creates its first critical imprints on the knowledge workforce. perspectives superimposed in analysis of dynamic characteristics of complex systems:
technical perspective, organizational perspective, and personal perspective. The object
of system analysis is viewed as a whole and is evaluated simultaneously from these
IS.2.1 Types of Knowledse for Management of Technology three perspectives. It is just one example of possible methods for integrated system
analysis.
Creating, adopting, and implementing of new technical solutions (in products, The importance of technology development projects as a source of knowledge for
processes, and systems) represent a set of difficult tasks for managers. This is due to technology management has been emphasized by Clark and Wheelwright. 8 They spec-
some level of unpredictability and unrepeatability of the processes and procedures ified five types of knowledge that may be acquired (or verified):
involved. Almost by definition, all those tasks, as well as the coordination between
business and technology strategies and between overall technology strategy and prod- Procedure (new sequence of operations or rules that project members follow)
uct-process-service development projects, are difficult to routinize. Managers are Tools and methods (acquiring new skills related with tools and methods)
expected to understand, communicate, and decide on mutually dependent and mutual- Process (new sequence of major phases of development project)
ly reinforcing technological and organizational solutions to succeed. That creates a
need to develop a holistic view on technology and organization, and to integrate Structure (new structure and/or location of organization)
knOtt/ledge on all facets of a company. Professional knowledge, in both engineering Principles (new concepts and values applicable for decision making in future pro-
and management, has been traditionally developed, packaged, delivered, and acquired jects)
in the form of discipline-based courses, the building blocks of the modular structure of
academic curriculum. An unfortunate consequence is that integration is left up to the A similar conclusion has been derived from the study conducted by the Manufacturing
learners. the majority of whom treat tcchnological problems independently of organi- Vision Group. as de~cr']bed by Bowen and Clark,9 on the ba<sis of analysis of 20 devel-
zational problems and vice versa, because this is how they learned. opment projects in five companies. The authors suggest that the development projects
Currently, there is a practical need for managing technology in a company: may serve as "engines of renewal." "By wisely selecting the projects it undertakes, a
TABLE 19.1 Types of Knowledge for Management of Technology (MOT) Most of those programs are offered at the graduate leve1. Many of them are intend-
ed primarily for experienced managers or engineers who have interest in or responsi-
Knowledge Application for bility for managing technical projects or operations. It appears that it is still too soon
type Sources technology management to evaluate those university programs and their impact on quality of technology man-
agement in respective companies. Although the menu of courses offered is quite
Technical knowledge Engineering science, Definition and development extensive, it is difficult to prove a consistent pattern of MOT programs or to see any
engineering practice of products, processes,
dominant paradigm in their design. Rather, design is modular and hence traditional. In
and technical systems
many programs students are expected to have a previous educational background in
Organizational knowledge Management science, Managing technical engineering or sciences and some amount of managerial experience. MOT programs
economics, operations, projects, and are then focused at strengthening their organizational and managerial knowledge with
management practice organizations special orientation to applications in technical operations and projects. However, the
Systems integration methodology Systems theory, Integration of technical methodology of systems integration is seldom a subject of special courses. In several
development projects, and human systems cases it is presented only as part of strategic management projects or in general intro-
organizational learning (holistic view), developing duction to technology management. Both universities and their industrial customers
processes and managing the are still searching for an optimal mix between theoretical and empirical knowledge
learning organizations that should be provided in those educational programs. This subject is frequently dis-
cussed in journals and at conferences of professional societies related with manage-
ment of technology.12-14 Als015
manufacturer can use them to develop new skills, knowledge, and systems."9 This
means that the development project should be evaluated not merely for its direct tech- The following professional organizations are actively involved in discussion on educa-
nical outcome (e.g., design to specifications) but also for its contribution to the empir- tion in MOT: International Association for Management of Technology, American Society
for Engineering Management, IEEE Society of Engineering Management, Academy of
ical knowledge base for management of technology in the company.
Management, Institute for Organization and Management Sciences (former TIMSIORSA),
Classification of knowledge types for management of technology is summarized in American Society for Engineering Education. In 1994 this problem was also a subject of
Table 19.1. If the fundamental input to knowledge assets is people, the source is exist- the First National Conference on Business and Engineering Education sponsored jointly
ing educational programs. by: National Consortium for Technology in Business, American Society for Engineering
Education, and American Assembly of Collegiate Schools of Business.
19.2.2 Education and Training for Management of Technology

In addition to the degree granting MOT programs, several schools and institutes offer
In response to the increasing demand for interdisciplinary education of engineers and shorter and/or more intensive programs for executives. Their contents are highly
managers, several universities developed academic programs in management of tech- dependent on and adjusted to specific expectations of participants. Some of those ini-
nology (MOT). Names of those programs may be formally different, to indicate spe- tiatives are even intended as ad hoc training to fill the current gap in the executives'
cial core areas of expertise or to satisfy more specific needs, but their substance is knowledge rather than to lead toward transformation of their mind set.
quite similar. Recent review of the MOT educational programs, presented in 1994 by a Formal education and training in management of technology can be considered to
team of authors from the Stevens Institute of Technology, includes characteristics of be a necessary ingredient to activate the process of learning to build knowledge assets
programs existing in 32 universities in the United States.!O influencing the productivity and technological competitiveness of a company. \6.17The
According to Kocaoglu, the total number of "engineering and technology manage- process expects a fundamental transformation requiring every employee to balance
ment" programs in the United States was 94 in 1990.11 The latter number appears to continual and deliberate learning with task performance. The rest of the chapter elabo-
include some programs that represent rather narrow scope (industrial engineering, rates on what it takes to build a learning organization.
construction management, etc.) and might not be counted in the same category.
Configuration of courses and detailed program requirements differ substantially.
However, there is a common set of major areas of study which includes 19.3 LEARNING PROCESSES IN AN
ORGANIZATION
Introductory courses in functional areas of business such as accounting, finance,
marketing, manufacturing, human resources, and organizational behavior
19.3.1 Toward Definition of Organizational Learning
Selected topics of economics (macro and micro economics)
Course(s) in information systems and/or decision support systems Today's manager-leaders absolutely must understand some basic facts about learning
if they are to have any expectations of steering themselves and their organizations into
Course(s) in technology and innovation management (including technology strate~
the future and escaping information indigestion. Individual learning is not the same as
gy, technological planning, R&D management)
organizational learning, although the former is a prerequisite for the latter. Ultimately,
Courses reflecting special focus of a given program (quality management, opera- organizational learning has to do with improving performance over the long haul. If an
tions management, international business management, etc.) individual is learning, we expect that person to perform better. Similarly, if a team is
learning. we expect the team to perform for the benefit of the entire organization. capability. A fundamental message here is that deep learning takes place only when an
However, using organizationwide performance indicators to gauge effectiveness of indi vidual cycles through all four stages.
learning at an individual or a team level can be a trap, because in short run, an individ- A closer look at Deming's foufteen points10 shows that the core of the quality
ual or a team can do all the right things but the results will not show up immediately, movement lies in assumptions about people, organizations, and management that have
because of either intrinsic delays or confounding forces outside their control that arc a unifying theme: to make continual learning a way of organizational life. especially
depressing the hoped for performance. If management keeps demanding performance, improving the performance as a total system. This is possible only by dissolving the
an individual or a team can take shortcuts to improve appropriate performance indica- traditional, authoritarian, command. and control hierarchy in which top management
tors, but run a risk of creating problems in the distant future or creating unexpected thinks and the local employees act. to integrate thinking and acting at all levels. The
side effects for other parts of the organization. famous plal1-do-study-act (PDSA) cycle, the never-ending cycle of experimentation
So what is the definition of organizational learning ? A contemporary view is that a that structures all quality improvement efforts. is at the heart of TQM. It recognizes
learning organization is ab1e to adapt quickly to a changing marketplace. However, the that learning requires practicing new skills and obtaining feedback on our perfor-
view is limiting. Learning is more than the ability to adapt. It is really about improv- mance so that we can adjust our behavior. The concept of intrinsic motivation lies at
ing ability to create and to continually replace dysfunctional operating norms v./ith the core of Deming's management philo<,;ophy. By contrast, extrinsic motivation is the
more productive and competitive ones. Creating a learning organization is a long-term operating norm of many organizations. "People do what they are rewarded for" is
process of fundamental change.] K actually contradictory to the soul of the quality movement. This implies, even though
Every earning crisis leads a managerial team to brainstorm a list of possible actions. rewards or punishment are not irrelevant, that they are not a substitute for intrinsic
All the actions are hard measurable undertakings that can most dramatically enhance motivation to learn. An organization's commitment to quality or new technology that
earnings. The Jist includes such things as investing in a new technology, eliminating an is not based on intrinsic motivation is equivalent to planting seeds for a periodic moti-
unprofitable business line, expanding into new business, lowering cost through layoffs vational crisis leading to less-than-potential or less-than-hoped-for performance.
and limiting expenses. and increasing productivity through adapting new management Deep-seated curiosity and the desire to experiment generate a spiral of continual
technology. The interesting point about such a list of options is that the same items improvement that cannot be matched by external rewards alone. From the intrinsic
appcar over and over again every time the earning performance threatens the organiza- perspective, there is nothing arcane or academic about learning and continuous
tion. All along an assumption has been made that employees are continually learning improvement. If left to their own devices, people wil1100k for better ways to do things
through experience. New programs such as total quality management (TQM) involved using the knowledge they have and by learning. What they need is appropriate tools,
people who are given more responsibility and accountability with the expectation that adequate information, and a supportive, trusting, and caring environment. Total qual-
the organization's earning would be enhanced. Sure, the new management program or a ity management offers a variety of simple to complex tools,21.22 the subsets of which
new technology would enhance learning at an individual level and even at a team level. can be taught to people at all levels of an organization. Positive influence of such a
But individual learning or even team learning is not the same thing as organizational process is that the tools and the concepts provide a communication language funda-
learning, although they are necessary conditions. An organizational learning, if mental for enhancing organizational learning.
occurred, should reduce the risk of a performance crisis. Implications for management
are that organizational climate must be created to promote individual and group learn-
ing as path breakers for building a learning organization. 19.3.3 Group or Team Learning
Many organizations are very actively promoting teamwork in an attempt to foster joint
19.3.2 Individual Learning interrogation into organizational problems. Groups provide a forum to exchange ideas.
Groups are formed for many reasons. They may be formed as training clusters, as
When organizations want their employees to learn new skil1s, they send them to train- problem solving teams such as quality circles, or cross-functional teams to improve
ing programs. The problem is that training or enrollment in a local university course, process or product development. Regardless of the nature of the purpose, teamwork
by itself, does not guarantee that an individual wil1 learn new skills. As cited by can help individuals appreciate and learn how other parts of the organization interact,
Senge, Dewey postulated that all learning involves a cycling through following four how select actions have far reaching consequences than individual group members
stages:I'1 would have realized on their own, and why certain approaches are appropriate or inap-
propriate for the organization as a whole. When different viewpoints are represented
1. Discover-the discovery of new insights
in a business context, teams generate higher-quality information, reinforce learning,
2. Invent-the crealion of new options for action and deliver a heightened action orientationY
3. Produce-following through new actions Although group learning is a requisite for today's organizations, it is not synony-
mous with organizational learning. At the local level. groups solve problems that are
4, Observe-seeing consequences. which leads to new discovery, continuing the
cycle important locally. The groups do not confront the larger organizational reality, and
their solution can potentially, although unintentionally, create problems for other parts
This is how children learned to walk. to talk, to ride bicycles, etc. Interrupting the of the organization, or they may be solving problems inadvertently created by some
cycle interrupts the learning. The children are supported throughout their learning other unit of the organization.
process. 19 In effect, learning is moving back and forth between the world of thought Cross-functional group problem solving addresses wider issues spanning several
and the world of action. It is an interactive process of linking the two to expand our units of an organization, but they are still the problem-sol\iing teams to resolve an
issue with defined boundaries and scope. The solution generated, if it has to be phased 19.3.4 Theory-Building Process-Learning
in over a longer time period. can create side effects not in the interest of the larger
organization, because of factors outside the original scope of the group influence, it Individuals and groups are continually learning in organizations, and this means that
can influence the reality or the group's desire to succeed, it can unintentionally create they are also building a theory of reality. The word theory is too often considered as
ill effects on the system as a whole. Organizational learning cannot be assured just by an academic or esoteric word with no practical significance; in fact, it is of extreme
having numerous cross-functional teams working on quality, technology introduction, practical importance for a firm aspiring to be a learning organization. When individu-
and product or process improvement. It just means you are creating a culture of team- als and teams learn, in essence, they build theories in the form of general principles
work, but not necessarily continuously learning cultureYI.2.J- drawn from a body of facts and observations. The principles in effect represent distil-
A barrier to group teaming can be the defensive routines many follow. Good team lations of their knowledge and understanding of the world. The theories provide
members, acting rational1y within the organizational context in which they live, create means and foundation that bring coherence to our observations.
and maintain defensive routines that prevent organizations from learning.15-27 Dewey's individual learning process represented by the discover-invent-produce-
Defensive routines are habits of interacting that serve us to protect us or others from observe cycle and Deming's PDSA cycle of continuous improvement, mentioned
threat or embarrassment. but also prevent us from learning. According to Argyris, once before, can be thought of as natural rhythms of individual and group learning behavior.
they are started, these routines seem to take on a life of their own. They not only pre- There are other representations of learning cycles. For example. Kim presents
vent learning, but also prevent people from identifying and changing causes of the Kofman's assess-design-implement-observe cycle as an individual learning process.29
embarrassment or threat. Organizations take such routines for granted. For cross-func- Kolb30 introduces a Lewinian learning model which also has four stages. Two common
tional teams to foster organizational learning, it is essential to reduce defensive rou- threads in all representations are that a learning process moves back and forth between
tines that prevent learning about the importance of mutual interdependency for organi- thinking and doing as well as between abstract and concrete. Table 19.2 offers a com-
zational success. parative view of all learning cycles. Figure 19.1 shows a visual representation of indi-
From a group learning perspective, an environment must be created for members to vidual and group learning process. Deming's PDSA cycle is used in Fig. 19.1 because it
uncover and challenge deep-rooted assumptions and norms. The organizational operat- is much more widely known to today's managers than any other depiction.
ing norms, practices, procedures, policies, behaviors, resource allocations, and staffing If organizational culture and environment can be created such that individuals and
make up the organizational map which must be improved through the result of group groups can work through all stages of the cycle, learning can certainly be enhanced.
learning. Detection and correction of dysfunctional behavior patterns and embedding However. the breakdowns can occur as a result of dynamic complexity, time delays,
the results for the group inquiry into the organizational maps alter organizational unknown structures of the real world and delays, information errors, distortions, and
memory for the better. An organization learns when individuals within it have changed biases in the feedback. The lessons learned before can become obsolete with the fast-
their shared mental models about how the organization should behave. Ray Stata, paced changes in technologies and the marketplace. This suggests that the lifespan of
CEO of Analog Devices, Inc.,2H states that new theories, even if they are accurate, can be shortened by changes in environment
and technology. This does not reduce the importance of creating organizational culture
First organizational learning occurs through shared insights, knowledge, and mental
models. Thus. organizations can only learn as fast as the slowest link learners. Change is
blocked unless al] of the major decision-makers learn together. come to share beliefs and
goals. and are committed to take the actions necessary for change. Second, learning also TABLE 19.2 A Comparative View of Learning Cycles
builds on past knowledge and experience-that is. on memory. Organizational memory
depends on institutional mechanisms (e.g., policies. stnltegies and explicit models) used Learning process
to retain knowledge. Dewey* Deming+ Kolb~ Kofman~ characterization
Invent Plan Formation of Design Abstract Doing

This implies the creation of an organizational environment or culture that interweaves abstract concepts
learning and work. It is a process by which individuals are able to confront inconsis- and generalization
tencies in action which have become predicaments. According to Argyris, organization
Produce Do Testing implication Implement Concrete Doing
learning takes place when the manager's espoused theories get closer and closer to
that person's theories in action as evaluated by others. of concepts in new
situations
To promote organizational learning. from a perspective of group learning, individu-
als require skills in recognizing their own deep-seated values, beliefs, and assump- Observe Study Concrete experience Observe Concrete Thinking
tions-mental models used to frame and react to situations and ability to balance Discover Act Observations and Assess Abstract Thinking
inquiry and advocacy. This invites individuals to loosen their grip on their models of reflections
reality and consider alternative maps that can yield superior and effective organiza-
tionwide results. Being aware of one's own thinking process-the ladder of inference, *Senge;19Sengeattributescreditto Dewey.
and balancing advocacy with inquiry are among few action science tools promoted by "Deming.2O
Argyris et a1.24.27and are absolutely essential skills required to promote organizationaJ tKolb.-JO
learning through group interactions. IKim;2')KimeredilsF.Kofmanof MIT
and environment to foster individual and group learning. but it adds additional chal-
lenges for employees to be able to design and redesign organizational structures in the
face of new realities. while being part of the structure themselves. Thus organizational
learning is enhancing capability to continually change processes and structures in the
face of new realities and not the end goaL
19.3.5 Systems Thinkin9: The Foundation of the Learnin9 Organizations
Systems thinking offers theory and tools for understanding complex systems, which
have become increasingly threatening at the same time we are part of them.3L32 The
learning cycle from systems view is explained using feedback as a basic framework.
We make decisions, these decisions change the world, we obtain some information tion of time lags of process and organizational complexity as shown in Fig. 19.4. By
feedback about what is happening, and on the basis of this new infonnation, we make researching extensive literature in the field of systems dynamics, Senge has offered
new decisions. The feedback processes, as shown in Fig. 19.2, are at the heart of the several principles useful for understanding behaviors of complex systems. 18
individual and group learning cycles discussed above. The outer loop shows the basic
organizational learning loop, in which processes of dialogue, discussion, debate, and Today's problems come from yesterday's "solutions."
reflection eventually create changes in strategy, structures, and decisions, which Behavior grows better before it grows worse.
through implementation process bring about changes in the real world.33 The changes
are interpreted through information feedback, which are analyzed in the organizational The cure can be worse than the disease.
context to make changes in strategy, structures, and decisions. Figure 19.3 shows the The harder you push, the harder the system pushes back.
relationship between the elements of learning feedback diagram and plan~do-study-act The easy way out usually leads back in.
learning cycle.
Faster is slower.
In typical organizations, there are hundreds of process cycles operating, all interre-
lated, all running on different time clocks, and many of them feeding back each other Cause and effect are not closely related in time and space.
information, which get utilized to change the decisions to alter the reality. The PDSA Small changes can produce big results-but areas of highest leverage are often the
view tends to be static when one tracks what is happening in a single process. The least obvious.
PDSA cycle works on a human-determined time clock without recognizing the real- Dividing an elephant in half does not produce two small elephants.
world dynamics. Thus the PDSA cycle tends to work very well in the situations in
which quick feedback is possible, such as on the factory floor or for the processes You can have your cake and eat it, too--but not at once.
which are stable over extended periods. Systems thinking always looks at dynamic There is no blame.
interrelationships. As dynamic complexity increases. the breakdowns in the learning
are more likely. Kim34 describes dynamic complexity for a particular project as a func- These principles hold true because cause and effect in complex systems generally are
not close together in time or space, but in the PDSA process mode of operation, indi- deal with complexity results in the counterintuitive behavior of social systems.35
viduals or groups often assume and act as if they are. The methodology of systems People just do not have the menta] capacity, because of cognitive limitations. to under-
thinking, with system dynamics as a core, offers many tools which vary from use of stand the dynamic complexity of the system. But people are good at identifying under-
simple paper and pencil to draw causal loop diagrams or sketch behaviors over time to lying structures. Thus computer-based simulations of correctly represented and widely
some sophisticated computerbased models and management flight simulators.34 agreed-on structures offer tools to overcome our inability to deduce long-term dynam-
Learning in complex systems is not as direct as the PDSA cycle suggests. Referring ics. Microworlds offer simulation based learning environment to understand recurring
to Figs. 19.2 and 19.3, we can note that there are time delays between different parts generic structures.36 The recurring generic structures are also known as archetypes. IS
of the feedback cycle: (I) between our decisions and their repercussion on the real Understanding. identifying. and applying while engaged in the PDSA process can also
world, (2) between their effects and our perception of information feedback, and (3) deepen individual and group learning.
between the time we recognize the change and the time we decide how to intervene.
Because the process or system is part of the larger system, which is constantly evolv-
ing according to its own dynamics, the other influencing factors change even as we 19.3.6 Challenge for Manager-Leaders
are designing new interventions. Furthermore, quality of information feedback is a
function of the measurement systems we have in place. The contents and information In order to sustain learning, manager-leaders need to create structures that enable the
we select. measure. and pay attention to are imprisoned by mental models, and individual and group learning processes to become ingrained in the organization as
changes in mental models are influenced by what has been chosen to measure. part of its infrastructure. The learning infrastructure can be utilized to create wide-
Misperception of feedback can also account for another set of barriers. Inability to spread change. Figure 19.5 extends the learning process shown in Fig. ] 9.\ to include
the systems thinking "LEARN" process. PDSA can be used to apply many of the qual-
ity management and action science tools, whereas LEARN can be utilized to improve
systemic learning, supported by systems thinking tools.37
Implicit in the learning process model described are new roles for managers and
employees. Employees have job security as long as they add value to the organization,
and become responsible for finding ways to add value through continuous learning.
The pace, nature, and scope of changes such as reengineering, downsizing, and new Stewardship comes not with a leadership position held in an organization, but lead-
competitive maxims suggest that we do not know all we would like to know about the ership challenge of a moment, that requires individuals to make the choices and then
emerging model of technology-intensive corporate organizations. Block38 defines live by them.-'9 Recognition by all the requirements of leadership lie with everybody,
stewardship as "willingness to be accountable for the well-being of the larger organi- and hierarchy becomes less of a system of power and control and more of a system of
zation by operating in service, rather than in control, of those around us." He offers a coordination of different types of work and responsibilities.
vision of a future organization based on a belief that all employees are mature adults
and can be held responsible for themselves and their actions. The new vision of the
corporate model has an environment in which people can fully participate and con-
tribute to the goals of the larger organization. 19.4 REFERENCES
-,
The organization learning process presented in this chapter is in alignment with the
vision of the emerging view of an organization. The governance structure of most I. T. Sakaiya, The Knowledge-Valul:' Relmlutioll, Kodansha International. New York. 1992.
organizations will have to change from patriarchy to the concepts based on steward- 2. C. M. Savage."'The Dawn of the Knowledge Era," OR/MS Today, pp. 18-23. Dec. 1994.
ship. It would require organizations to relinquish much of the control they have held 3. S. Davis and J. Botkin, ""The Coming of Knowledge-Based Business." Harvard Business
over their employees and give them genuine authority to work in teams. Stewardship Redew, pp. 165-170. Sept.-Oct. 1994.
implies a belief that with better information and goodwill, people can make responsi-
4. I. J. Mitroff, R. O. Mason, and C. M. Pearson,"' Radical Surgery: What Will Tomorrow's
ble decisions about what controls they require, and who they want to implement them. Organizations Look LikeT Acad. Management Executh'e, 8(2): 11-21, 1994.
Obviously, having better infonnation and goodwill may not be enough to make intelli-
5. W. B. Chew and D. Leonard-Burton. "'Beating Murphy's Law," Sloan Management RevietF,
gent decisions, if people are not aware of the larger context in which decisions are
pp. 5-16. Spring 1991.
being made. and if they do not have know1edge of appropriate tools.
6. H. Linstone, "Multiple Perspectives: Concept, Applications, and User Guidelines," Systems 31. Daniel H. Kim and Peter M. Senge, "Putting Systems Thinking in Practice," System
Pracrice, 2(3):307-33]. 1989. Dynamics Review, 10:277-290, 1994.
7. H. Linstone, Multiple Perspectives for Decision Making, North-Holland. New York, 1984. 32. John D. Sterman, ., Learning in and about Complex Systems," System Dynamic.~ Review,
8. K. B. Clark and S. C. Wheelwright, Managing New Product and Process Development. Free 10:291~330. 1994.
Press. New York. pp. 733-759. 1993. 33. J. D. F. Morecraft, "System Dynamics and Microworlds for Policymakers," Eur. 1.
9. H. K. Bowen and K. B. Clark, "Development Projects: Thc Engine of Renewal," Harvard Operational Research 35:301~320, 1988.
BU.I"inessReFie", pp. ] 10-120, Sept.-Oct. 1994. 34. Daniel H. Kim, " Toward Learning Organizations: Integrating Total Quality Control and
Systems Thinking," Pegasus Communications Reprint Series, Cambridge, Mass., 1992.
10. R. Jain, S. Jasti. T. M. Flaherty, and D. N. Merino, SU1>'ey of Management of Technology
(MOT) Educational Programs", (discussion draft/working paper), Stevens Institute of 35. Jay Forrester, "Counterintuitive Behavior of Social Systems," Technology Review, pp. 52-68,
Technology, Hoboken. NJ .. 1994. Jan. 1971.
11. D. Kocaoglu, "Research and Educational Characteristics of the Engineering Management 36. Peter M. Senge and Colleen Lannon, "Managerial Microworlds," Technology Review, pp.
Discipline." IEEE Transact. Engineering Manugement, 37(3): 172-176. 1990. 63~68, July 1990.
12. E. Howard, "The Managemem of Technology (MOT): Need for New Courses and Programs 37. Ani! B. Jambekar, "Frameworks for Integration of Systems Thinking with the Quality
in U.S. Universities," Proceedings of the 9th Annual Conference of ASEM, Knoxville, Tenn., Management Practices," International System Dynamics Conference-Change Management,
Oct. ] 988. pp. 17-26. 1994, pp. 17-25, Systems Dynamic Society, Sterling, Scotland.
] 3. 1'. M. Khali] and E. Berman. "Educational Programs in Management of Technology," 38. Peter Block, Stewardship, Berret-Koehler, Pergus Communications, San Francisco, Calif.,
Proceedings of PICMET '91: Technology Management-the International Language, 1993.
Portland, Oreg., Oct. 27-31. 1991. p. 1]5. 39. Daniel H, Kim and Colleen-Annim-Kim, "Stewardship: A New Employment Covenant," The
14. Y. Shulman. "Graduate Programs in MOT-a ManuaL" Proceedings of PICMET '91: Systems Thinker, 5(6):1-3, August 1994.
Technology Management-The International Lunguage, Portland, Oreg., Oct. 27-3], 1991. p.
115,
IS. Engineering/Business Partnerships: An Agenda fur Action. Summary Report of the First
National Conference on Bu~iness and Engineering Education, Auburn Univer~ity, April 5-7,
1994.
16. P. S. Adler, "Shared Learning:' Management Science, 36(8): 938-957, 1990.
17. P. S. Ad]cr and A. Shenhar, "Adapting Your Technological Base: The Organizational
Challenge." Sloan Managemelll Review, pp. 25-37, Fall 1990.
18. Peter Senge, The Filth Discipline: The Art and Practice of Learning Organization,
Currency/Doubleday, New York, 1990.
]9. Peter Senge. "Building Learning Organizations." 1. Quality Participation, pp. 30-38, March
]992,
20. W. E. Deming, Our of the Crisis, Center for Advanced Engineering Study, MIT, Cambridge.
Mass., 1986.
21. Shoji Shiba, Alan Graham, and David Walden. A New American TQM. Productivity Press.
Cambridge, Mass., 1993.
22. Don Clausing. Total Quality Development, ASME Pre~, New York, 1994,
23. Michele L. Bechtel!. Untangling Organi::.ational Gridlock, ASQC Press, Milwaukee. Wis.,
1993.
24. Chris Argyris, Overcoming Organiwtional Defenses, Allyn & Bacon, Needham, Mass.,
]990,
25. Chris Argyris. Reasoning, Leurning, and Action, Jossey-Bass, San Francisco, 1982.
26. Chris Argyris and Donald Schon, Theory of Action, Jossey-Bass, San Francisco, 1974.
27. Chris Argyris, Robert Putnam. and Diana McLain, Action Science: Concept.I, Methods, and
Skillsfor Research and Intervention, Jossey-Bass, San Francisco. J985.
28. Ray Stata, "Organizational Learning: The Key To Management Innovation," Sloan
Management Review, Spring 1989.
29. Daniel H. Kim, "The Link bctween Individual and Organizational Learning," Sloan
Management Revinv. pp. 37-50. Fall 1993.
30. D. A. Kolb, Experiential Learning: Experience as the Source of Learning und Dn'elopment,
Prentice-Hall, Englewood Cliffs. N.J., ]985.
Kevin B. Lowe
Department of Management and lnternational Business
College of Business Administration
Florida International University
University Park, Miami, Florida
Terri A. Scandura
Department of Management
School of Business Administration
University of Miami
Coral Gables. Florida
Mary Ann Von Glinow

Department of Management and International Business
College of Business Administration
Florida International University
University Park, Miami, Florida
20.1 INTRODUCTION
The pace of business change, characterized by globalization, higher consumer expec-

tations, greater competitive pressures, and shorter process cycle times. has forced
many organizations to fundamentally redesign work structures to meet rapidly chang-
ing marketplace requirements. Pressures for workforce productivity gains are intensi-
fying. Organizations and industries now look beyond obvious efficiency gains from
automation and personnel reduction to more systematic and breakthrough ways of
being low-cost producers of high-quality products and services. The useful life of
information is shrinking (McLagan, 1989), and organizations that are able to work in
less time gain competitive advantage. Hierarchies are dissolving and being replaced
by flatter. more flexible organizations that strive to generate new ideas and then trans-
fer or generalize those ideas to action faster than their competitors.
In this dynamic environment, organizations increasingly view physical advantages
in production technologies as a fleeting source of competitive advantage (Stein and
Sperazi,1991),
20,1
20.2 EDUCATION AND LEARNING TECHNICAL LiTERACY AND THE KNOWLEDGE IMPERATIVE 20.3
In search of a new winning formula, organizations increasingly focus on develop- knowledge workers constitute the primary source of competitive advantage (Drucker,
ing human asset competencies; such competencies have surprisingly become an 1985). To be effective in this fluid environment, employees must understand the orga-
increasing portion of value-added and, as many organizations are now discovering, the nization's business objectives in order to take direction from the work itself in meet-
most difficult asset to duplicate (Casio, 1989). Some estimates suggest that even in ing those objectives rather than relying on policy manuals or being told what to do by
manufacturing, which has traditionaJly placed strong emphasis on production and their supervisor. The supervisor may have been replaced and the manuals may
process technology, perhaps three-fourths of value added derives from knowledge describe jobs which no longer exist or procedures which are obsolete in the newly
(Losee, 1994). Jeffery Pfeffer of Stanford University writes in Competitive Advantage configured workplace.
through People (1994, p. 6): The incentive to develop and acquire competent employees with the requisite abili-
ties is clear: Those high-performance organizations that are able to leverage the per-
formance of individuals in their ;;jobs," as team members, and as organizational
Traditional sources of success-product and process technology, protected/regulated
markets, access to financial resources, and economies of scales-still provide some com- resources, will be the recipients of economic gain (Stein and SperazL ]991; U.S.
petitive leverage. but to a lesser degree now than in the past, leaving organizational cul- Department of Education, 1992a). What is less clear is how and where American orga-
tures and capabilities, derived from how people are managed as comparatively more vital. nizations will develop and acquire the type of talent required to be competitive. When
productivity and quality are discussed, often the issue of the skill level of the work-
force emerges as a potential barrier to improving organizational capacity (Charp,
This primary emphasis on managing human assets in the firm is a relatively new
1995).
phenomenon (Ulrich, 1986). Organizations have always strived to manage scarce
It is essential that educational systems from kindergarten through university recog-
resources and accordingly have paid relatively less attention to those resources which
nize increasing demands on workers to keep pace with a rapidly changing technologi-
are readily available. Traditionally scarce resources have been capitaL abundant
cal environment. Fewer workers leave the education system with the skills needed to
resources included skilled workers who havc been highly capable of sustained perfor-
do the job. This has been referred to as the "national crisis" in public education. As a
mance. The easy availability of competent employees resulted in an emphasis on capi-
result, highly technical organizations arc undertaking a great deal of on-the-job train-
tal over competence. However, today's demographic trends such as an aging work-
ing and education. What knowledge gaps are these companies increasingly having to
force, reduccd growth in the rate of new workforce entrants, and declining educational
fill? Primarily, the underpinnings of basic learning and thinking: research, data synthe-
system quality have made competence increasingly a scarce resource. In this scarce
sis, and analytical skills (McKendree, ] 991). Companies who for decades invested in
market for competence, firms are aggressively competing worldwide to attract, moti-
technica1 training only for relatively specialized jobs can no longer ignore the need to
vate, and retain competent employees.
teach the workforce how to investigate, analyze, and ultimately anticipate options and
As we approach the next millennium, business strategies will be more dependent
challenges that the competitive landscape will present in the years ahead (Business
on the quality and versatility of the competent human resource. Moreover, organiza-
Week, 1994).
tional resources will be expended toward identifying and assessing scarce human capi-
tal in much the same manner as obtaining physical assets and technologies have tradi-
tionally been sought as a means to achieve competitive advantage. One author has
suggested that convergence of these forces in the 1990s has ushered in the era of peo_ H
20.2 THE ROLE OF THE WORKER: A SHIFTING
pIe power" as the key competitive force (Doyle, 1990). Another states "Strategies of PARADIGM
the nineties will not be delivered if the organization's people aren't capable and com-
mitted. Organizations that apply only money and technology to problems, without
bringing the people along wil1 not survive" (McLagan, 1989). The movement toward an emphasis on workplace literacy in the United States is in
Organizational changes in response to environmental pressures require correspond- response to the shifts identified earlier from traditional production organizations to
ing changes in employee roles and the skill sets required to be effective in those roles high-performance organizations. Traditional production organizations are based on
(Katz and Kahn, 1979). As organizations have downsized their workforces in the nineteenth- and twentieth-century theories of management and productivity (Roth,
] 980s and now the 1990s, many jobs have all but disappeared, leaving tasks that still 1993). Such organizations emphasize large-scale manufacturing to generate sufficient
need to be accomplished but fewer workers to perform the work (Hammonds et aI., inventories, and focal attention is given to cutting costs and reducing per unit costs by
1994). The tremendous effort now spent on organizational design initiatives is partial- increasing the number of units produced (Hodgetts et aI., 1994). Product cycles are
ly a reaction to headcount reductions. These redesign efforts frequently concentrate on long in duration and new products are infrequently introduced giving the ultimate con-
self-directed work teams, process reengineering, and culture change to achieve a bal- sumer limited product choice (Stein and Sperazi, 1991). Traditional industries rely on
ance or "fit" between multiple organization tasks and competent workers who can per- hierarchies in which multiple levels of management control workers in much the same
form these tasks (Fisher. ]993: Manganelli and Klein, 1994). Further, rigid jobs are manner as other tools in the production process. In traditional organizations, jobs are
displaced by team accountability and flexible, multiskilled job designs. These are broken down into simple tasks, and the role of the worker is to repeat those tasks with
more participative team-based designs which require a greater level of technical, busi- machineJike efficiency (Bridges, ]994). Worker reliability and willingness to comply
ness, and interpersonal skills than was required in a more rigid hierarchical structure is valued. System improvements are the prerogative of an "elite" cadre of managers
with narrowly defined tasks. Now, organizational members are asked to do "knowl- charged with reviewing processes (Walton, 1985). Effective in its time, the traditional
edge work" which requires judgment. flexibility, and personal commitment to the job organizational approach will be insufficient to meet competition in global markets
rather than compliance and submission to organizational procedures (McLagan, 1989). with twenty-first century standards (Sasseen et al., 1994).
Peter Drucker has characterized the current era as an information society where In traditional organizations, workforce learning was not viewed as a meaningful
20.4 EDUCATIONAND LEAR;\JING TECHNICAL LITERACY AND THE KNOWLEDGE IMPERATIVE 20.5
activity in relation to the production process (Stein and Sperazi, 1991). Workers in tra- change and innovation. These educational systems involve investment in training and
ditional organizations are expected to engage in only first-order learning, which development with a firm foundation in basic literacy skills at the K-12 (kindergarten
involves improving the organization's capabilities to achieve known objectives and is through twelfth grade) level. A nation whose core workforce is only basic-skill-literate
often associated with routine and behavioral learning (Ulrich et aI., 1993). Traditional will not be competitive in the global marketplace.
workforce programs are problem-centered with outcomes measured in terms of short-
term goal attainment. Training is viewed as a technique to prepare workers for action,
a form of remedial activity designed to fill gaps in the abilities of workers to perform
20.4 BASIC SKILLS
specific job skills. The "real" activity is viewed as job training which follows work-
force education. There is a presumed inconsistency and conflict between education
and production, and workers are not given release time for participation in learning Basic skills are traditional skills such as the ability to read signs. the ability to add
(D.S. Department of Education, 1992b). three numbers to determine the amount of a bank deposit. and language fluency suffi-
High-perfonnance organizations view the production process differently. They are cient to articulate questions and understand their answers (Adams, 1993; Barton and
constantly reinventing themselves by emphasizing frequent product development even Kirsch, 1990). Basic skills are a prerequisite, a necessary but not sufficient condition.
when it requires cannibalization of an existing market leader position. Customized to the skills necessary to be effective in twenty-fir'3t-century organizations. The fol-
products are built to order, inventories are small, and development time is short. lowing demonstrates one example of how basic skills provide access to higher~level
Second order learning is expected of employees, requiring consistent reevaluation of skill learning (U.S. Department of Education, 1992):
the nature of objectives and the values and beliefs underlying them (Argyris and
Schon. 1978). Second order learning, or double-loop learning, consists of "learning :\1y employee was involved in the ESL (English as a second language) class wrote a
how to learn." something that even "smart managers" have difficulty with (Argyris, first-line supervisor. I have seen a direct improvement in his confidence leve\. He will
1991). Every member of the workforce is responsible for product and process now come to talk to me. instead of having someone else come to ask questions for him.
improvement, efficiency gains, and customer satisfaction. The emphasis in the produc- He talks much more freeJy. His initiative is greater and he looks more motivated. This
tion process is on continuous improvement, increased productivity. and growth. In same employee completed a 40-hour Robot Operating Training Course with two other
high-performance organizations, managers function as coaches in "participatory employees who spoke English as their first language. He was able 10 participate equally in
processes" and workers are viewed as resources. Training prepares workers not only the training due to his increased English skills.
for jobs as currently defined but also for the job as it is expected to evolve and for
future jobs. Workers are measured on working efficiently and smoothly in self-man- The quality of the American workforce, for both existing and anticipated entrants,
aged teams and for their ability to creatively solve problems (Fisher, 1993). Since falls woefully short of even this most basic requirement. One of evcry five current
improvements in the process and products are largely a result of worker inputs. per- American workers reads at or below the eighth-grade level, and one of every eight
ceived threat of job loss is minimized by the worker's role in developing process lacks a reading competency above the first~grade level (Mikulecky, 1990). In interna-
improvements. If the American economy is to transition successfully into the twenty- tional comparisons of student achievement in industrialized nations on 19 different
first century, then workplace education must respond and adapt programs to the educa- academic tests, American students never finished first or second, but they scored last
tional needs of high-performance organizations (Stein and Sperazi. 1991). seven times. Of all high school graduates, 13 percent are currently illiterate, and
among selected minorities, illiteracy is as high as 40 percent. Only 70 percent of U.S.
students complete high school, as compared with 98 percent in Japan. The typical
20.3 CHALLENGES TO THE NEW PARADIGM high-school graduate in Japan is better trained in the basic sciences and language than
half the college graduates in the United States. And the average Russian high-school
graduate has taken 5 years of physics. 5 years of algebra, 4 years of chemistry, 4 years
Organizations are moving into an era of system solutions where the concern is to of biology, and 2 years of calculus. In contrast. the typical American student has not
resolve issues or make real changes, not just to implement programs (McLagan. taken physics or chemistry, and only 6 percent have taken calculus. And, finally, more
1989). Problem solving and change usually require multiple and diverse actions (train- than half of U.S. high-school graduates lack the sophisticated information processing,
ing, policy change, job redesign). The number of new jobs in the United States is pro- communications. teamwork_ and ana1ytical thinking skills that most of the coming
jected to increase to over 25 million by the year 2000, mostly in management, admin- decade's jobs wil1 require. The U.S. Department of Education reports that by the year
istrative support, sales, and service (Hudson Institute, 1987). These new jobs wil1 2000 an estimated 17.4 million limited-English-proficient adults will be living in the
require higher levels of formal education and technical literacy than are presently L~nited States. Immigrants will make up 29 percent of the new entrants into the labor
found, standards formerly expected only of managers and other high-level workers. force between now and the year 2000-twice their current share (U.S. Department of
Basic skilllevcls that formerly were adequate for assembly line production arc inade- Labor. ]99]).
quate in a workplace with just-in-time inventory processes, elaborate quality-control Compare this with a cross section of current jobs where reading level requirements
systems, flexible production. team-based work, and participative management prac- were found to be between the eighth- and twelfth-grade levels. Of thc job~related
tices (Hudson Institute, 1987). Charp (1995, p. 4) stresses the need for education material in these same jobs, IS percent required even higher reading levels
beyond the "3R's" (rcading, writing, and arithmetic) for organizations to maintain (Mikulccky. 1990). Clearly the problem of deficient basic skills is not new. What may
competitive advantage in an "information age": "Worker skills must mean more [than] be new is the inability of organizations to mask basic skill deficiencies within narrow-
job skills." She describes systems of continuous learning in place in Japan and Korea. ly defined jobs and routinized job tasks. The competitive pressures of the global mar-
which have increased organizational capabilities for learning that enable adaptation to
20.6 EDUCATION AND LEARNING TECHNICAL LITERACY AND THE KNOWLEDGE IMPERATIVE 20.7
ketplace will not absorb the burdensomc costs and lack of flexibility characteristic of mentally different than obtaining math and reading skills (U.S. Department of Labor,
the mechanistic organization operating in a more insular market (Hammonds ct at.. 1991). The deductive and problem-solving skills of an automobile mechanic may be
1994). more relevant to achieving technical literacy than reading level, although clearly a
The number of 18- to 24-ycar olds entering the workforce is shrinking, and thus minimum performance standard in reading is relevant to utilizing repair manuals.
reform in the schools, although relevant to longer-term competitiveness, will not elim- Thus, even if we could magically eliminate the basic skills deficiencies of the work-
inate current workforce deficiencies in basic skills (Hudson Institute, 1987). New force, we would still be faced with the development of a number of skills required for
entrants to the workforce are increasingly female and nonwhite adults (McLagan, effective organizational functioning in the twenty-first century.
1989). Over three-fourths of those who will be working in the year 2000 are already Definitions provided for technical literacy are often narrowly focused on the abili-
out of school and most are already on the job (Hudson Institute, 1987). The literacy ty to use technological tools, especially computers (Filipczak, 1994; Stokes, 1993). A
gap in basic skills continues to widen, and increasing portions of the population are familiarity with computers may not be required of all jobs, but it is fair to say that the
being classified as "functionally illiterate" or unable to speak English (McLagan, percentage of jobs requiring a human-computer interface is likely to increase rather
1989). The most lenient literacy standard in use today for employable adults is fourth- than decrease. Given the exponential growth in computing power and a corresponding
to sixth-grade skills, which include the ability to read simple text and street signs. increase in the power of the computer to provide increasingly large amounts of data in
Under this definition of literacy, estimates of the number of functionally illiteratc the same time frame (Gross and Coy, 1995), a critical skill that will be needed is
Americans range from 16 to 27 million, with the upper figure representing approxi- knowing how to produce useful data and how to analyze and interpret it. Too often in
mately 20 percent of the U.S. adult population (Adams, 1993). The next~highest litera- the name of technical literacy we have focused on how to use the computer for genera-
cy standard requires eighth-grade reading skills which include the ability to read a dri- tion of the data with ever increasing speed and/or lower cost while paying less atten-
ver,s license manual, read a digest or newspaper article, and compute change from a tion to educating employees on the why of data generation, whether they are truly use-
purchase. Under this definition, nearly 45 million adult Americans or roughly one- ful, or whether alternative outputs could be more effectively utilized. Those who view
third of the adult population are illiterates (Chall et aI., 1987). These literacy ratcs can the use of technology as a tool for doing the same tasks faster lose out on potential
be contrasted with Japan, a major international competitor and trading partner, which new ways of operating that redefine tasks rather than speed up the processing of exist-
reports a 98 percent literacy rate. American employers are thus being forced to reach ing tasks. Employees who understand the why of the process are equipped to reinvent
out to less-qualified workers to develop entry-level workforces and the skills gap the process to achieve the objectives rather than to simply repeat the process at
between current workforce competencies and future workforce competencies is con- increasing speed.
tinuing to widen (Mikulecky, 1990). The New York Telephone Company reported that One narrow approach to measuring the technical literacy of a population would be
it tested 57,000 job applicants in 1987 and found that 96.3% lacked basic skills in the frequency or extent to which products of technology are used in daily lives and the
math, reading, and reasoning (Bradsher, 1990). Chemical Bank in New York reports assimilation of these technologies (Filipczak, 1994). According to research by Del1
that it must interview 40 applicants to find one that can be successfully trained as a Computer Corporation, the Austin, Texas-based computer manufacturer, 55 percent of
teller (Bank of America, 1990). Filling the jobs that will be created by the year 2000 all Americans are technophobic to some degree, meaning that they resist the use of
and in the decades beyond will require organizations to develop in the existing work- technology in their daily lives. Of the adults surveyed, 25 percent had never used a
force the basic and advanced literacies needed (Hudson Institute, 1987). computer, set the timer on their VCR, or programmed stations on their car radio
Organizations must take an active role in moving its members along the continuum (Filipczak, 1994). These figures suggest a pronounced aversion of many individuals to
from basic skills to technical literacy to knowledge workers. Learning requires mas- alter routine processes through the use of technology to arguably improve their quality
tery of basic literacy and technical literacy at the workplace. Without basic literacy, oflife.
technical literacy will be difficult to attain. It is clear that many organizations are Walter Waetjen, president emeritus of Cleveland State University and chairman of
investing in developing the basic literacy of their workforce to improve their competi- the Technology Education Advisory Council, provides three dimensions to technologi-
tive advantage. For example, Laabs (1993) describes Ruiz Foods' commitment to a calliteracy in his definition:
Comprehen,n've Competency Program, which the company bought from the Ford
Foundation (cofunded by the California State Employment Training Program). The 1. You need enough knowledge to understand technological advances as they are
company's 1200 employees have the opportunity to learn basic English, computer reported in the media. You may not know how a modem works but do know that it
operations. and math skills. In addition, employees are encouraged to attend team- is a tool that can get you on the Internet.
building seminars. The founder of this family-owned company believes that the 2. You should be able to solve basic technological problems. If nothing appears on
investment in basic literacy of the workers is paying off for the company, which has the monitor or the printer will not work, do you know enough to check the cord
more than tripled its sales during the past 5 years. connections?
3. You should know how to use basic low-tech tools to accomplish tasks (Filipczak,
1994), Ignorance of basic tools is a barrier to the development of higher level tech-
20.5 TECHNICAL LITERACY nical skills.
Another definition of technical literacy or "technoliteracy" as suggested by Filipczak

An individual with basic skills possesses many of the building blocks required to (1994) that comes closer to our own is that to be literate in technology means that you
upgrade to a standard we define below as technical literacy. Yet experts in technologi- understand what the technology does (a computer can replace both your typewriter
cal education caution that the process of obtaining technical literacy may be funda- and calculator) and you've overcome your fear of the machine in question.
Progressive levels of technoliteracy are then achieved as one begins using technology possess the expertise and knowledge of organizational objectives that would allow the
to solve problems, but the essence of technical literacy is the ability to develop skills outsourcing of training. Once employees understand firm and industry forces that
requisite to understanding and using the technology to do work. O'Connell (J994) impact the organization's business objectives, a need for developing informational
speaks of the management of "technology resources" as an umbrella term for the hard- systems and networks will arise to accommodate employee demands for the acquisi-
ware, software, communications, and employee knowledge and skills needed to solve tion and processing of informational inputs from multiple levels. The demand for such
business problems. All resources, whether natural, human, financial, or electronic, inputs will present a great challenge for information systems groups who will be chal-
need care and tending if they are to survive and be productive. One such nurturing lenged to develop informational delivery systems that meet these needs.
process is the organization's emphasis and communication of the importance of tech- 3. A set of analytical skills which include problem identification, inference mak-
nicalliteracy (Koulopoulos, 1993). ing, data reduction and synthesis, problem solving, and information presentation (i.e.,
We define technical literacy as a multidimensional toolkit of skills rather than a solving organizational problems and conveying learning points to organizational
unidimensional familiarity with some particular aspect of a specialized technology or members).
a broad familiarity with instruments of technology in general. A radar "technician"
who can interpret blips on a computer screen but does not have an understanding of We regard individuals who possess these three technical literacies of technology
how the blips are generated and who could not rotate to an assignment using a differ- awareness, business literacy, and analytical skills as possessing the core competencies
ent radar technology without extensive training is not technically literate. This to engage in "knowledge work." Knowledge workers are, in turn, those individuals
employee is instead required to utilize a narrow skill set in a rigidly defined job where who are capable of raising organizational capabilities to the level required of what has
rote learning is more important for successful performance than the ability to engage become known as the learning organization.
in continuous learning and improvement. This person performs the job as specified
within the boundaries of existing parameters but lacks the why perspective, which
results in insufficient depth to address change and generate ideas for adaption of the
job to business objectives (Reitzfeld, 1989). Technical literacy as we define it has 20.6 TECHNICAL SPECIALISTS MAY NOT BE
three primary components: TECHNICALLY LITERATE
1. The ability to understand how a technology can be utilized (i.e., modem as com- The rate of technological change is escalating rapidly. As the workplace changes and
munications device for information access) and to obtain the required information to employees are asked to continually improve processes, continually do more with less
make an informed business decision (Sasseen et aI, 1994; Business Week, 1994). This and continually learn, technological literacy is becoming a new learning imperative.
dimension most closely corresponds to what the typical layperson would label techni- Knowledge workers are keenly interested in understanding why their function exists in
calliteracy. Managing technology calls for at least a modicum of technical knowledge, the organization. An understanding of the why component is especially important in an
but the critical literacy is in how to apply technology to business problems era of rapid change and cross-functional interaction. If individual jobs and processes
(O'Connell. 1994). are changing rapidly, then it becomes increasingly important to understand ~\/hy certain
2. A proficiency in the basic language of business and a familiarity with industry things need to be accomplished. Workers who understand the why of the business
forces to ease categorization of information and facilitate communications (i.e., foun- objective are more likely to be able to evolve and adapt their roles to accomplish that
dation in management. economics, and statistical process control). To be technically objective. Technical specialists who are up to date on the latest developments in a nar-
literate in the language of business is increasingly important as organizations engage row specialty area are the mainstay of today's organizations, but much of this techni-
in business process reengineering (Manganelli and Klein. 1994). Business process cal acumen is lost if the individual has only a vague notion of how to apply these
reengineering, with its emphasis on processes. requires more cross-functional business skills to meet the organization's business objectives. This person has a tool (technolo-
literacy than in the traditional hierarchical organization. Business literacy includes gy), expertise using the tool (technical proficiency), but is unsure what the organiza-
both basic generalized business literacy and a literacy that is more firm specific. The tion needs fixed (lacks business literacy and analytical skills).
general business aspect of business literacy training can be effectively outsourced Organizations must not only foster the acquisition of technical specialties but must
through the general business curriculum of local universities and community colleges also continually communicate business objectives to allow the employee to have a line
or by bringing faculty on site (Philippi, 1993; U.S. Department of Labor, 1991). of sight between a specialty area (role) and accomplishment of the organization's busi-
Stokes (1993) discusses a more localized. firm-specific. business literacy. He suggests ness objectives. At that point the employee will be able to be more responsive to
that employees can be responsive to organizational objectives only when they know accomplishment of business objectives by anticipating what needs to be "fixed" rather
key industry players, understand developing industry trends, recognize jargon that is than being informed by someone with the "big picture" what needs to be fixed.
specific to the industry, and are attuned to what the enterprise sees as its current and Additionally, understanding internal customer needs is important in the communica-
future niche. He also includes in business literacy an understanding of the nature of tions process. The knowledge imperative for organizations is to develop in their
the organization's political alliances (how things really get done), which increases employees the ability to "learn to learn" or to engage in what Argyris (l978) refers to
capability in relating to internal clients and customers. To develop these firm-specific as double-loop learning, and thereby continually adjust their "jobs" to meet organiza-
competencies and learning systems, the organization must provide specialized training tional objectives. Workers who have "learned to learn" can, in turn, communicate to
on industry parameters and environmental forces that affect organizational objectives. organizational members in a way that can be generalized to other organizational situa-
Such training will likely have to be developed in house as relatively few outsiders wi11 tions within relevant boundaries. Employees who understand the why of their jobs are
more likely to know the why aspect of situational success or failure. By sharing this
learning across the organization and embedding this information in the organization's
collective thought processes. we have moved beyond basic skills and utilized our tech-
nicalliteracies to engage in knowledge work that fosters real organizational learning.
20.7 IMPROVING ORGANIZATIONAL LEARNING

CAPABILITIES
-------
The investment in basic and technical literacy is a component of a competitive strate-

gy based on the ability of all workers to contribute to the production of better-quality
products and improved service. This strategy emphasizes the key role of investment in
human resources to create what have been termed the "workers of the future" (knowl-
edge workers) (Harrigan and Dalmia, 1991). Harrigan and Dalmia (1991) describe
these "knowledge workers" as employees that are problem solvers and innovators.
They argue that these workers are the key to competitive advantage in a changing
global economy. An individual's ability to learn and to convey learning to other orga-
nizational members is crucial to the organization's overall ability to compete. The
ability to learn allows an individual to upgrade or acquire new skills in addition to
organizing and taking from the experiences of others. These workers need not have
high organizational rank or status. Ideally, innovation can be initiated at any level of
the organization to improve processes and products (Harari, ]994). Organizations that
create environments in which any employee can offer suggestions for improvements
have been described as "Learning Organizations" (Senge, 1990a).
20.8 LITERACY AND THE KNOWLEDGE

IMPERATIVE IN LEARNING ORGANIZATIONS
Ulrich et a1. (1993) describe learning organizations as those that have the following
characteristics:
"Employees are continually challenged to help shape their organization's future."

"The capacity of an organization to gain insight from its own experience, the expe-
rience of others, and to modify the way it functions according to such insight.'
"The process of improving actions through better knowledge and understanding."
"An organization that is continually expanding its capacity to create its future."
"An organization that continually improves by readily creating and refining the
capabilities needed for success."
Learning organizations enable their employees to embrace their intrinsic motiva-

tion to learn. According to Senge (I 990a, p. 4), "Learning organizations are possible
because, deep down, we are aJilearners." Senge and others advocate the implementa-
tion of work-team systems to tap into employees' ability to learn and apply systems
thinking. However, without the requisite basic literacy skills, work-team systems are
doomed to fail. Prior to implementation of work teams as part of learning systems, an
inventory of the requisite basic skills of the workers (reading. writing, basic arith-
metic) is a necessary first step.
Given basic literacy, the next level of learning is an understanding of systems
been attained by the worker. Abstract reasoning assumes that the basic tools are in skills, plus abstract reasoning ability. These skills are necessary if the organization
place in order to work with concepts and data (basic literacy). Once abstract reasoning wishes to fully empower its workers (Taylor and Ramsey, 1991; Dobbs, 1993).
skills are developed, learning can occur because workers will be able to generate and Empowerment is allowing employees the authority to make decisions about their work
generalize ideas (Ulrich et a1., J 993). This enables some of these workers to become without having to ask a supervisor for permission (Taylor and Ramsey, 1991). Too
knowledge workers. who will be the innovators and problems solvers, which will cre- often. organizational decision makers rush to implement work teams, with disastrous
ate competitive advantage for the organization (Harrigan and Dalmia. 1991). In Fig. results because the workers do not have the necessary basic skills to be fully empow-
20.1, fewer workers exist per level at any point in time in the development of the orga- ered. Beyond basic skil1s, abstract reasoning skills are necessary to engage in creative
nization's learning capacity. However, the premise is that workers are learning and problem solving. Brainstorming is an exercise in futility if the workers do not know
moving throughout the process, with the goal being the creation of as many knowl- how to critically evaluate the ideas generated at the appropriate time in the process or
edge workers as possible. At some point, a critical mass of knowledge workers, those if good ideas have been lost for lack of facilitation skills. Critical thinking skills must
with requisite knowledge, skills, and abilities (KSAs) will develop. Once this has be learned and practiced if the processes of brainstorming are to result in some useful
occurred, a learning organization can emerge (Senge, 1990a). Literacy and knowledge product.
literacy are an imperative for today's organizations and necessary for development of Second. learning organizations also employ teams of workers to solve problems
learning organizations. and generate new products or services. Recent theories of knowledge suggest that
learning organizations create "activity systems" within which workers engage in col~
laborative work, and share information and ideas (Blacker, 1993). If the team-based
20.9 ORGANIZATIONAL IMPLICATIONS organizational form is being implemented, team skills are a prerequisite for all
OF THE
employees in addition to literacy skills (Brachule and Wright. 1993; Katzenback and
KNOWLEDGE IMPERATIVE
Smith. 1993; Scholtes. 1993; Schonk. 1992; Sunstrom et a1.. ]990). Team and inter-
personal ski1Js are necessary for generalizing ideas and sharing information effectively
The creation of knowledge workers and ultimately learning organizations will require within teams. in cross-functional teams, and throughout the organization (Katzen back
investment in human resources at unprecedented levels (Doyle. 1990). Individual and and Smith, 1993; Schonk. 1992). Given the literacy and knowledge imperative, orga-
organizational learning are not isomorphic, but the latter is dependent on the former. nizations will require new forms of leadership to implement systems that support and
Individual learning occurs as people acquire tacit knowledge through education, expe- encourage learning. Technical literacy and the knowledge imperative have implica-
rience. or experimentation. Organizational learning occurs as the systems and culture tions for training and development and leadership (Brachule and Wright, 1993;
of the organization retain learning and ideas are transferred across organizational Katzenback and Smith, 1993; Senge, 1990b). Creation of a learning organization
boundaries of space. time, and hierarchy (Ulrich et aI., 1993). This is an important dis- requires that employees have the requisite skills and the opportunity to apply them
tinction as learning without organizational change can occur when individuals gener- through participative leadership practices. Command-and-control autocratic leadership
ate new ideas but the ideas are not generalized to organizational systems. or when is not consistent with the learning organization, and all levels of management will
units of the organization experiment with an idea. but fail to share their learning. In need to unlearn old behaviors and learn new ways of leading (Conger, 1993). They
contrast, a learning organization adopts mechanisms to capture individual learning and will need to create learning environments in which workers take responsibility for the
develop in employees those ways of knowing that lend themselves to policy capturing. future of the organization (Fulmer, 1994). The leader's role will shift from telling
Individuals who are able to arrive at the "correct" answer but cannot elucidate the workers what to do to that of teacher, coach, and role model (Manz and Sims, 1987;
decision process offer the learning organization less than an individual who has been Senge, 1990a).
trained in systematic ways of knowing and therefore can assist in transferring knowl- Leaders are responsible for shaping the culture of the organization (Deal and
edge throughout the organization. The organization must actively develop this policy Kennedy, 1982). Leadership at the top is essential for establishing the vision of an
capturing mechanism much the same way that "expert" systems capture aspects of organization that is committed to learning, and supporting the efforts of training and
individual learning. Such mechanisms are necessary to achieve learning organization development in terms of necessary resources. Leaders in the middle level of manage-
status. ment have a critical role in the learning organization, since it is their job to create
So what must organizations view as a prerequisite to achieving the status of a high-quality work relationships with their workers that support innovative behavior
learning organization? First. the creation of knowledge workers requires basic literacy (Graen and Scandura, 1987). Workers must be encouraged to learn, experiment, and
plus abstract reasoning abilities. To develop these capabilities. organizations wilJ need keep on learning through courses and application of concepts to the work environ-
to increase their investment in training and development. Assessment of knowledge ment. Middle-level managers must learn to accept intel1igent failures and learn a toler-
gaps will become a necessary part of the training and development system. ance for employee mistakes. This is a very different type of leadership. in which the
McKendree (1991. p. 101) comments that manager's job is to support. coach, and teach. rather than to command and control the
workers. Senge (1990b) defined the roles of leaders in learning organizations as
... American companies are. by necessity. filling critical knowledge gaps in their new designer of vision. ~teward of employee empowerment. and teacher. The role of the
hires. Fewer \','orkers are coming Out of the education system with the skills they need to leader as a role model is emphasized in the latter role of teacher. Leaders must be will-
do their jobs. As a result. highly technical and complex organizations must undertake a ing to "walk the talk" or employees will become disillusioned with the learning
great deal of training and education on their own. process. and perhaps dismiss it as another management fad. In sum. the role of top
management is creating vision and support for the learning organization. Generating
this idea and then generalizing it through translation to middle-level management is
Oncc gaps in knowledge have been identified, training must be provided in basic
the next necessary step in the process. Next, it is middle management's role to trans- You've got to teach business skills along with technological competencies if you want
late this vision to the workers by being role models who engage in learning practices to get the optimum productivity out of both employee and machine. The teaching of
and serve as role models and teachers. As the organization's commitment to knowl- accounting in one course and the use of spreadsheets in another will not help employ-
edge increases at these three levels, so does the organization's learning capability. ees blend the skills together, and that blend is the key to technical empowerment.
Ulrich et al. (1993) provide key principles for extending learning across organizational Training which focuses on problem solving with the computer will avoid confu-
boundaries. sion. eliminating the need to explain the "bells and whistles" available on many CUf-
rent software packages that may serve to intimidate the user rather than help to
1. Generate a large number of learning opportunities. acquire basic skills.
2. Generalize the learning beyond the individual.
3. Build in the desire and opportunity to learn from others.
20.10.3 Team and Interpersonal Skills
4. Study failures and satisfactory episodes, not just successes.
In addition to basic and technical literacy skills, training in team and interpersonal
skills is necessary to develop a learning organization. Team-building skills such as
20.10 RECOMMENDATIONS knowledge of basic team processes, conflict resolution, and skills in running meetings
should be taught. Interpersonal communication skills are a necessary underpinning of
such training, in particular how to give and receive feedback and constructive criti-
20.10.1 Training and Development
cism. Senge (1990a) describes team learning in contrast to team building as the neces-
sary team-level process skill for the learning organization. In team learning, employ-
Training and development within learning organizations must be continuous and not
ees in teams become colearners and help one another to learn new skills, solve
ad hoc "fixing up" of skill gaps in the workforce. To attain this objective, assessment
problems, and implement innovative ideas. In a team learning environment employees
of the employee basic and technical literacy skills defined in this chapter must be
in teams learn how to learn, adjust, and self-regulate their own learning behaviors.
ongoing. As skiUlevels of employees improve, new training objectives should be set.
Implementing the learning organization under the literacy-knowledge imperative
Learning must be made a visible and central element of the strategic intent.
has implications for leadership. New roles for new managerial styles will be neces-
Employees should be encouraged to challenge the status quo and constantly look for
sary. Senge (1990b) describes the new role of leaders in the learning organization as
ways to improve their own basic and technical skills, as well as the products, process-
es, and services the organization provides. vision, steward, and teacher. Participative styles of leadership will increase with a cor-
responding decrease in the micro management of processes, as employee teams are
Knowledge acquisition should be encouraged as a core competency, a valued COm-
empowered to make decisions regarding the work they do. The manager's job is to
modity which is recognized and rewarded. Individual, team, and organizational com-
create and sustain activity systems, remove barriers to innovation, and assess and
petencies for learning should be a central objective in the organization's staffing and
teach. To this end, a new focus on relationship development will be necessary. Mutual
training initiatives. Similarly, the performance management system should encourage
trust will become the hallmark of relationships in the learning organization.
individual, team, and process learning by providing explicit feedback on accomplish-
Employees with the basic and technical skills needed to do the job can be entrusted to
ments through appraisal and the provision of overt and tangible rewards. Continuous
do the job, with support and coaching from the leader. Interpersonal trust is needed for
assessment and rewarding of individual capabilities that serve to increase organiza-
close interpersonal relationships and comprises faith of one person in another, depend-
tional capability will encourage the development of a "learning mindset" that may
ability on one another, and predictability in the relationship (Rempel et aI., 1985).
become embedded in the organization's culture as a cherished value (Schein, 1993).
Trust enables social systems to operate, since high levels of trust allow high reliability
to be established through faith, dependability, and predictability. Underlying the
20.10.2 development of trust is the development of basic and technical literacy of workers and
Basic and Technical Literacy as Gateways to Higher-Level Learning
leadership learning to trust them.
Basic skills and technical literacy as gateways to higher-level learning should be
emphasized. In developing our training sessions we must keep in mind that technolo-
gies are a tool, and that we need 10 learn problem-solving skiils using that tooL Thus 20.11 SUMMARY
the computer (or any technical competence) must be made a part of training. Training
employees on the tool and on needed :o;killsseparately is less effective than combining
the learning of the skill required using the computer as a tool in problem solving. This chapter reviewed the literature on the implications of basic literacy for work
Research on adult learning (McKendree, 1991) suggests that children tend to learn organizations and developed a definition of technical literacy. Next a model of the role
first and then do, while adults tend to do first and then learn. If we want employees to of basic and technical literacy in the development of learning organizations is present-
integrate technology into their work processes, then training must integrate technology ed (Senge. 1990 a and b; Ulrich et aI., 1993). Basic literacy is necessary for technical
and problem-solving skills within a context relevant to the worker. literacy and. in turn, technical literacy is necessary for learning.
Computer skills training needs to incorporate the teaching of business skills. Support systems for the development of basic and technical literacy in the learning
"Technical empowerment" is the idea that an employee needs to understand what the organization were reviewed. including training and development team learning, and
numbers on the spreadsheet mean instead of merely learning to manipulate them. leadership. Throughout the chapter, the role of learning as a strategic posture for com-
petitive advantage is emphasized. Organizations that provide training, support sys- Gross. N .. and P. Coy, 'The Technology Paradox: How Companies Can Thrive as Prices Dive:'
tems, and leadership that enables them to learn how to learn and continue to learn will Business Week. pp. 76-84. March 6.1995.
hold the key to competitive advantage in today's global and rapidly changing market- Hammonds. K. H .. K. Kc11y. and K. Thurston. 'The New World of Work." Busines'S Week, Oct.
place. 17.1994.
Harari. 0.. "When Intelligence Rules. The Manager's Job Changes." Management Revie'\l, pp.
33-35. July 1994.
20.12
---
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20.18 EDUCATIONAND LEARNING
Schein, E. H., "On Dialogue, Culture, and Organizational Learning," Organizational Dynamics,
pp. 40-51. Fall 1993.
Scholtes, P. R., The Team Handbook, Joiner Assoc., Madison. Wis., 1993.
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American Psychologist, 15: 120-133, 1990.
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of Vocational and Adult Education, Washington, D.C., 1992a.
U.S. Department of Education, Voices from the Field: Proceedings of the September 1991 21.1 THE NEW BUSINESS ENVIRONMENT
National Workplace Literacy Program Project Directors Conference, Washington. D.C., 1992b.
U.S. Department of Labor, What Work Requires of Schools, The Secretary's Commission on
Achieving Necessary Skills, Washington, D.C., 1991. Technology has never been more important. Throughout history, technology has been
Von Glinow, M. A., "Diagnosing Best Practice in Human Resource Management," in Research in a major driver of economic growth. It is also a driving force which makes borders
Personnel and Human Resources Management, SuppL 3, B. Shaw, P. Kirkbride, G. R. Ferris, between nations, between companies, and between compartments of our lives-trans~
and K. M. Rowland, eds., JAI Press, Greenwich, Conn., 1994. parent. A recent study of CEOs makes the point that "The strategic management of
Walton, R. E., "Prom Control to Commitment in the Workplace," Harvard BU!iiness Review, pp. technology remains an unfulfilled goal and a pressing need for many multinational
77-84, March 1985. enterprises."j The CEOs stated that their businesses needed technology management
education, particularly in the strategic incorporation of technology into business for
shortening product development Iife cycles, capitalizing on innovation, and adopting
or exiting technologies faster.
Clearly, part of the responsibility for technology management education rests with
the nation's colleges and universities. For example, in the United States, approximate-
ly 75,000 M.B.A. and 250,000 undergraduate business and management degrees are
awarded annually. In the widely heraJded book Made in America: Regaining the
Productive Edge, it was argued that2
For too long business schools have taken the position that a good manager could man-
age anything, regardless of its technological base. It is now clear that this view is wrong.
Whilc it is not necessary for every manager to have a science or engineering degree, every
manager does need to understand how technology relates to the strategic positioning of
the firm, how to evaluate alternative technologies and investment choices, and how to
shepherd scientific and technical concepts through the innovation and production process-
es to the marketplace.
Increasingly, both corporate executives and academicians have raised questions about,
and debated how, business schools can add value to the business community:"'
The worldwide corporation in the 1990s is markedly different from its predecessors in
the 60s, 70s. or even the 80s. Companies are now confronted by rapid globalization of
21.1
21.2 EDUCATION AND LEARNING DEVELOPING TECHNOLOGY MANAGERS 21.3
markets and competition, the increasing importance of speed and flexibility as key agement; each has different interests, expectations, and charters. They also have to
sources of competitive advantage. and the growing proliferation of partnership relations cope with constant and rapid change of technology, markets, regulations, and socioe-
with suppliers, customers, and competitors. As a result these companies must respond
conomic factors. To get results, managers in technology-based organizations must
with radically different management approaches to succeed.
However, relatively litt]e attention has been paid to one of the most difficult corporate relate socially as well as technically, They must understand the culture and value sys-
challenges of the] 990s: How to develop a new breed of senior managers who have tem of the organization in which they work. The days of the manager who gets by
knov,'ledge, sensitivities, and skills necessary to lead corporations through the difficult with only technical expertise or pure administrative skills are gone.
times ahead. This is also a key concern for many business schook Increasingly under fire
for having !ost their reJevance to the practitioner community, business schools are grap-
pling with the challenge of how they can fu]fill their mandate of helping companies deve]-
op their next generation of leaders. 21.2 SKILL REQUIREMENTS
Technology management is, by its nature, global. Global markets, globaJ financial As we are undergoing a transition with our concepts for organization and management
institutions, global sourcing, and a globa1 factory floor require successful bminess practices, many of the traditional principles of management and management develop-
schools and ventures to change. As widely noted in the press, traditional business ment became obsolete. The kind of workplace managers were traditionally trained for
management paradigms have proven inadequate for the new technological age and are was structured along stovepipe functions with rigid chain-of-command reporting rela-
giving way to an enhanced set of principles which enable managers and organizations tions, centralized decision making, and a reasonable predictable business environment.
to meet these challenges. All institutions are rapidly becoming technology-intensive, But as organizations are changing into flatter and more f1exible structures with higher
and the need to integrate technology across traditional functions of the firm has degrees of powersharing, distributed decision making, and a more self-directed, team-
become paramount, whether the firm produces technological products or uti1izes oriented workforce, traditional training methods no longer produce the management
process technologies to reduce costs or increase service. ski11s needed to function effectively in today's dynamic business environment.
This transition into the new technology-based business paradigm creates chal- Specifically, managers in today's technology-based organizations must be skilled in a
lenges to technology management education;4- broad range of disciplines in order to deal with their complex challenges, They must
understand the following:
We live in an increasingly technological world. The U.S. is no longer the dominant
technoJogical innovator in the world, and the competitive position of many of America's How to integrate technology into the overall strategic objectives of the firm
companies has faltered, Many have lamented aboU( U.S. managers' inabilities to harness How to get into and out of technologies faster and more efficiently
the full potentia] of product and process technology. The ability to manage technology
strategically will be an increasingly important competitive dimension during the remain- How to assess and evaluate technology more effectively
der of this century, as more and more managers are being called upon to manage technical How to best accomplish technology transfer
people and processes. Getting the product out of the lab and into the marketplace before
the international competitors is vital, and managers are essential in this process. How to reduce new product development time
Organizations are moving away from vertically dominated structures where functions How to manage large, complex, and interdisciplinary or interorganizational projects
control resources, to horizontally dominated organizations in which processes own the and systems
resources. These core processes integrate the create-make~market processes to ensure that
firms are competitive in reaching today's customers with new. high quality products, at How to manage the organization's internal use of technology
reasonab!e prices, in the shortest possible time. How to leverage the effectiveness of technical professionals
There is no magic formula that guarantees success in managing technology~based

Today's technology-oriented businesses are more complex and multifaceted than con- organizations. But research consistently shows that high-performing managers have
ventional or traditional forms of organizations. They require effective planning, orga- specific skills in three principal categories as shown in Table 21.1.
nizing, and integration of complicated, multidisciplinary activities across functional
lines in an environment of rapidly changing technology, markets, regulations, and
socioeconomic factors. Their management must share resources and power, and estab-
Leadership and interpersonal skills
lish communication channels that work both vertically and horizontally, and intra- and Technical skills
interorganizationally, to integrate the many functions involved in modern technology- Administrative skills
based business operations.
Managers who evolve with these technology organizations must confront untried
problems to handle their complex tasks. In contrast to managers from more established 21.2.1 Interpersonal Skills and Leadership
organizations, these new managers have to learn how to move across various organiza-
tionallines, gaining services from personnel not reporting directly to them. They must Effective leadership involves a whole spectrum of skills and abilities: clear direction
build multidisciplinary teams into cohesive groups and deal with a variety of net- and guidance~ ability to plan and elicit commitments; communication skills~ assistance
works, such as line departments, staff groups, team members, clients, and senior man- in problem solving; dealing effectively with managers and support personnel across
TABLE 21.1 Skill Inventory of the Technical Manager 21.2.2 Technical Skills
Leadership skills Most of loday's work is technically complex. Managers rarely have all the technical
Ability to manage in unstructured work environment expertise to direct the multidisciplinary activities at hand. Nor is it necessary or desir-
Action-orientation. self-starter
able that they do so. It is essential, however, that managers understand the technolo-
Aiding group decision making
gies and their trends, the markets, and the business environment, so that they can par-
Assisting in problem solving
Bui]ding multidisciplinary teams ticipate effectively in the search for integrated solutions and technological
Building priority image innovations. Without this understanding the consequences of 10ca] decisions on the
Clarity of management direction total program, the potential growth ramifications, and relationships to other business
Communication (written and oral) opportunities cannot be foreseen by the manager. Furthermore, technical expertise is
Creating personnel involvement at all levels necessary to communicate effectively with the work team, and to assess risks and
Credibility make tradeoffs between cost, schedule, and technical issues.
Defining elear objectives
E]iciting commitment
Gaining upper management support and commitment
21.2.3 Administrative Skills
Managing conflict
Motivating people Administrative skills are essential. Managers must be experienced in planning,
Understanding the organization staffing, budgeting, scheduling, performance evaluations, and control techniques.
Understanding professional needs
While it is important that managers understand the company's operating procedures
Visibility
and the available tools, it is often necessary for managers to free themselves from the
Technica] skins administrative details.
Ability to manage the technology The manager's effectiveness often depends heavily on personal experience, credi-
Aiding problem solving bility, and understanding of the interaction of organizational and behavioral elements.
Communicating with technical personnel The significance of the skill inventory shown in Table 21.1 is in three areas. First.
Facilitating tradcoffs the spectrum of skill requirements remains relatively stable over time in spite of rapid
Fostering innovative environment changes in the field of management. Second, Table 21.1 could be used as a tool for
Integrating technical, business. and human objectives
assessing actual skill requirements and proficiencies. For example, a list could be
System perspective
developed, for individuals or teams, to assess for each skill component:
Technical credibility
Understanding engineering tools and support methods
Understanding technology and trends Criticality of this skill to effective job performance
Understanding market and product applications Existing level of proficiency
Unifying the technical team Potential for improvement
Administrative skills Needed support systems and help
Planning and organizing multifunctional programs
Attracting and hoJding quality people Suggested training and development activities
Estimating and negotiating resources Periodic reevaluation of proficiency
Working with other organizations
Measuring work status, progress, and performance Third, Table 21.1 can be useful in developing training programs by focusing on specif-
Scheduling multidisciplinary activities ic skill requirements and the development of appropriate training methods.
Understanding policies and operating procedures
Delegating effectively Learnability of These Skills. Formal studies investigating the learnability of project
Communicating effectively (orally and in writing) management skills reveal some good news. On average, 94 percent of the skills need-
Minimizing changes ed to perform effectively in technology leadership positions are learnable,s mostly on
the job. In fact, as summarized in Fig. 21.1, 85 percenr of all management skills are
derived from experience. Three-quarters are developed strictly by experiential learn-
ing, while one-quarter comes from more specific work-related methods such as obser-
functional lines often with little or no formal authority; information-processing skills: vations, formal on-the-job training, upper-management coaching, and job rotation.
ability to collect and filter relevant data valid for decision making in a dynamic envi- Second to experiential learning, skills can be developed by reading the professional
ronment; and ability to integrate individual demands, requirements. and limitations literature, such as books, magazines, journals, and research papers, as well as audio-
into decisions that benefit the overall project. It further involves the manager's ability and videotapes on related subjects. A third source for technical management skill
to resolve intergroup conflicts and to build multifunctional teams. development exists through professional activities such as seminars, professional
DEVELOPING TECHNOLOGY MANAGERS 21.7
professionals and managers to determine the potential of engineers for advancement

into leadership positions, and for effective performance as managers. The instruments
can help in career guidance, selection, and transitioning, as well as in the development
process itself.
Further. the test questions provide some "predictor of success" by comparing the
candidate's aptitude scores with those of the broader population of other test takers,9
which is shown in graphic fonn in Fig. 21.3.
For managers, these instruments provide a set of criteria for initial assessment of
an individual's potential for technical management, for defining career objectives and
development plans, and for comparing candidates and attitude changes over time. For
the technical individual the tests stimulate thoughts regarding the type of work, skill
requirements, and changes in work habits, norms, and values required for effective
role performance. These tests help in evaluating an individual's career wants and
needs, as well as the development actions required for successful transition. Finally,
these tests are also helpful to the management researcher, who can use them for com-
parative studies and refinement of selection criteria, as well as for statistical analysis
of the aptitude scores regarding the probability of management success.
Suggestions for Using the Aptitude Tests, If used properly, aptitude tests can effec-
tively facilitate career development. The following suggestions might help:
Realize the criteria for becoming a manager. The instruments should serve as
guidelines rather than absolute measures for promotion. Personal judgment should
remain an important factor in the final decision.
Don't use the numbers as a scientific measure. Realize that the scores, whether
they come from you or others, are subjective and should serve as a basis for com-
parison and critical thinking, not as a mechanical selection tool or substitute for
managerial judgment.
Use the instruments for career development. When technical people use these
instruments to assess their own managerial aptitudes, they can get a better under-
standing of personal strengths, weaknesses, and desire, and of areas in which they
need to increase their efforts. In other words, the test instruments may help in for-
mulating career plans and specific action items.
Use the instruments for management development. In a conceptual manner, super-
visors can use both the criteria and the instruments themselves to identify subordi-
nates with management interest and potential. Remember to obtain data from mul-
tiple sources. In addition to your own evaluations of a candidate, solicit evaluations
from other sources. Your peers, project leaders, customers, and support personnel
who know the candidate may be good possibilities. You can solicit their input dur-
ing informal discussions or by using formal questionnaires or letters.
Focus on managerial strength. If the aptitude scores indicate a strength in a specif-
ic area, the management candidate should seek opportunities for additional respon-
sibilities in that area. That will build skills in areas of most likely success and pro-
vide favorable learning experiences. Management should encourage and support
such learning experiences.
Use incremental skill building. Participation in such managerial activities as pro-
posal development, task management, feasibility studies, and technology assess-
ments helps a candidate sharpen skills in cross-functional communication, plan-
ning, and organizing. The candidate also can develop new skills, and test his or her
desire for a career in management.
all the factors against the person's professional background and the specific manageri-
al challenges at hand.
The instruments for determining managerial aptitudes can be helpful in supporting
professional development decisions, but we lack a method for accurately determining
management potential. The challenge is for managers and engineers to develop
enough understanding of the dynamics of their organizations and their managerial
demands and to relate them to their candidates' personal strengths and desires, indi-
vidual background, and the needs of the organization.
21.4 PREPARING FOR TECHNICAL

MANAGEMENT
"Managers can be developed." This is the strong message of managers in technology-

oriented companies. 11
The action list in Table 21.2 describes how to prepare for a career in technical man-
agement. It shows that personal preparation for a managerial position, supervisor's
assistance, and organizational support have a significant impact on the ability to
become a candidate for a technical management position, and ultimately succeed in
the transition to technology-based management.
21.4.1 Criteria for Success
One of the key criteria for success, stressed by newly promoted managers and man-
agement veterans alike, is a person's desire to become a manager. This desire seems to
have a positive effect on many of the factors needed to transition into management
and up the managerial ladder. 12 Yet, despite this favorable correlation, personal desire
alone is insufficient to gain a promotion, In the final analysis, personal competence
and organizational needs are the deciding factors. People who receive promotions usu-
ally meet five key requirements:
1. They are competent in their current assignments. All individual contributors

must master the duties and responsibilities of their current positions, must have the
respect of their colleagues, and receive favorable recommendations from their super-
visors.
2. They have the capacity to take on greater responsibility. The person must
demonstrate the ability to handle larger assignments that have new and more challeng-
ing responsibilities. Good time management. the willingness to take on extra assign-
ments, and the expressed desire to advance toward a management assignment are usu-
ally good indicators of a person's readiness for advancement.
3. They have prepared for the new assignments. A new management assignment
requires new skills and knowledge. Candidates who have prepared themselves through
courses, seminars, on-the-job training, professional activities, and special assignments
will have the edge. Managers perceive such initiatives as evidence that a candidate is
committed to the new career path, is willing to develop new skills, and wants to go the
extra distance.
4. They are good matches with organizational needs. The candidate's ambi-
tions, desire, and capabilities have to match both the current and long-range needs of
the firm. Obviously, a new job opening can create an immediate opportunity for
advancement, but many companies make detailed, long-range plans for their manager-
ial staffing needs. They also encourage managers to identify and develop future man-
agers. In such environments, people with management ambitions must be recognized
early as qualified candidates. Companies then may help them develop management
skills with training and special job assignments. When the need for a new manager
arises. the company often selects from the pool of prequalified candidates.
S. They have an aptitude for management. Taking an integrated look at the
qualifications for transitioning into management, we see that the first four criteria are
based on behavior in a known environment and on the assumption that the candidate
will adapt to the new management situation. If these criteria are met, higher-level
managers wil1 have a lot of confidence in the candidate. However, there is yet no guar-
antee that the candidate will actually perform well in the new assignment. It is more
difficult to evaluate the candidate's readiness for the new challenges in leadership,
power, personnel administration, change, and conflict management. Therefore, techni-
cal contributors who want to be considered for leadership positions must show the
actions and behavior at work which reflect strong aptitudes for management.
21.5 DIRECTIONS FOR THE FUTURE
As the issues of managing technology have become very real, companies have been
responding to the challenges by intensifying their search for processes and programs
potentially useful in developing technology managers. This becomes a challenge by
itself since the type of knowledge and skills needed to function effectively in today's
intense technology-based global business environment are not readily available
through traditional training and development programs. Business leaders must go
beyond the obvious and simple methods of developing managerial talent. They must
recognize the highly multidisciplinary and cross-functional nature of skill require-
ments. They also must have business policies which integrate continuing professional
education and skill development into the business process, and the individual perfor-
mance appraisal and award system. A vital precondition for these multidisciplinary
skill developments is interdisciplinary cooperation. Different disciplines often share
the same business process, power, and resource basis, which often causes predictable
and natural tension, anxieties, and organizational conflict. New ways and strategies
have therefore to be found to bridge this gap.
An important role of senior management is to provide its career-oriented technical
people with the knowhow to alter their destiny-to make career leaps, to break into
new areas with higher and different skills and responsibilities, and to offer their
employees wider horizons and far more opportunity than any generation of technology
managers has encountered before. For the human race to survive, and for that survival
to be worthwhile, we must master the skills and develop the knowledge required to
manage technology.
21.6 REFERENCES
1. Jil1 E. Hobbs. "The First Global Forum on the Business Implicatiom of Technology:
Executive Survey," Fururescupe, Decision Resources, Inc.. Aug. 1992.
2. Michael Dertouzos, Richard Lester, Robert Solow, and the MIT Commission on Industrial Argyris, C, "Skilled Incompetence," Harvard Business Revie",; 64(5): 74-79, 1986.
Productivity, Made in America: Regaining the Productive Edge, HarperPerennial. New York, Badawy, M. K., Developing Managerial Skills in EnRineers and Scientists, Van Nostrand, New
1990, York, 1982.
3. Sumantra Ghosal, Breck Arnzen, and Sharon Brownfield, "A Learning Alliance Between Beddowes, Peter L, "Re-inventing Management Development," J. Management Development,
Business and Business Schools; Executive Education as a Platform for Partnership," 13(7): 40-46, 1994,
California Management Review, pp. 50-57, Fall 1992. Bolster, C. E, "Negotiating: A Critical Skill fOf Technical Managers," Research Management,
4. The Resource Guide for Management of Innovation and Technology, a joint publication of 27(6): 18-20, 1984,
the American Assembly of Collegiate Schools of Business, the National Consortium for Brush, D. H., "Technical Knowledge or Managerial Skills?" Personnel j" 58,(11): 771-804,
Technology in Business, and the Thomas Walter Center for Technology Managemenr at 1979,
Auburn University, Feb. 1993. Butler, F. C, "'The Concept of Competence: An Operational Definition," Educ. Techno! .. 18(\):
5. The managers claim that most of these skills are learnable was verified earlier via a field 7-18,1978,
study by Thamhain and Wilemon which identified seven skill categories: (1) technical exper- Carroll. S. J., and D. J. GilJen, "Are the Classical Management Functions Useful in Describing
tise, (2) organizational skills, (3) administrative skills. (4) leadership, (5) team building, (6) Managerial Work?" Acad. Management Review, 12(1): 38-51, 1987.
interpersonal skills, and (7) conflict resolution skills. On the average, 94 percent of these Fott]er. M. D" "Is Management Really Generic'?" Acad. Management Revinv, 6( I): ]-]2, 1981.
skills are learnable. as perceived by project managers. The learning proficiency varies
Hague, D., "The Development of Managers' Knowledge and Skills," Internatl. J. Techno!.
depending on the particular category. For example, conflict resolution skills seems to be
Management, 2(5-6): 699-710, 1987.
more difficult to learn than administrative skills. However. all categories taken together, 94
percent of project management skills seem to be learnable. Harper, Kirke, "Trends in Management Education:' Public Manager (Bur.), 23( I): 19-21. 1994.
6. The percentile was determined by asking 355 technical managers to indicate for the skill Katz, R. L., "Skills of an Effective Administrator," Harvard Business Review. 33(1): 33-42.
inventory shown in Table 21.1: (I) what training methods helped to develop each skilJ and 1955,
(2) how effective was the method in developing these skills relative to other methods Katz, R. L., "Skills of an Effective Administrator-Retrospective Commentary," Harvard
employed. The data were evaluated to determine the contribution made by each of the five Business Review, 52(5): 94-95, ]974.
methods to leadership, technical, and administrative skill development. The distribution of Kotter, 1. P., "What Effective General Managers Really Do," Harvard Business Reviev.-', 60(6):
sources was somewhat similar for all three skills. Figure 21.] presents an aggregated view of 156-167,1982,
the sources for managerial skill development. For detailed reporting of the study, see H. J. Lorange, Peter, "Back to School: Executive Education in the U.S.," Chief Executive, (92): 36-39,
Thamhain, "Developing the Skills You Need." ResearchlTechnology Management, 35(2):
March 1994.
42-47, March~ApriI1992.
Morgan. P. G., "Central Skills of Successful General Managers," Practicing MQ/wger, 8(1):
7. See H. Thamhain, "Managing Technology: The People Factor," Technical and Skills 13-15,1987,
Training, Aug.-Sept. 1990. In a survey 85 percent of engineering managers considered the
Peter. L. J., and R. Hull. The Peter Principle, Morrow, New York. 1969.
development of new engineering management talent crucial to the survival and growth of
their businesses. Rafail, Israel Dror, and Albert H. Rubenstein, "Top Management Roles in R&D Projects," R&D
Management (UK), Jan. 1984.
8. Louis S. Richman, "The New Worker Elite," Fortune, pp. 56-66. Aug. 22,1994.
Shcnhar, Aaron J., and Hans J. Thamhain, "A New Mixture of Management Skills: Meeting the
9. The statistical basis for Fig. 21.2 is a sample of 1500 technical professionals who were tested High-Technology Managerial Challenges," Human Systems Management. 13( I): 27-40, 1994.
for managerial aptitude. using both supervisor's assessment and self-assessment. These tech-
Smith, J. R., and P. A. Golden. "A Holistic Approach to Management Development." J.
nical professionals were then tracked regarding promotional actions and performance.
Management Development, 5(5): 46-56, ]986.
10. Consider also the confidence level and bias of the scoring; aptitude tests are more realistic Solem. 0 .. "Professional Engineers' Need for Managerial Skills and Expertise," ElIgin'l'ring
after a candidate has gained some manage~ent-related experience.
Management Imernatl., 3( I): 37-44. 1984.
] 1. This conclusion was reached during a study of 300 managers in 63 technology-based compa- Stewart, R.. "A Model for Understanding Managerial Jobs and Behavior," Awd. Management
nies. These managers stated almost unanimously in one form or another that technical man- Review. 7(1): 7-]4,1982.
agement skills don't just happen by chance, but are systematically developed through formal
Thamhain, Hans J., "Managing Engineers Effectively," IEEE Transact. Engineering
and informal methods.
Managemem, Aug. ]983.
]2. This association was verified statistically using Kendall's correlation: the association Thamhain, Hans J., "Developing Engineering/Program Management Skills." Project
between personal desire to become a manager and actual promotion was T = .35: between Management 1., 22(3), Sept. 1991.
personal desire and subsequent managerial performance, it was 'J" = .30. Both statistics are
Thornberry, Neal R.. "Training the Engineer as Project Manager:' Training ami f)('I'elofJmel1t 1..
significant at a confidence level of 92 percent or beUer.
Oct. ]987.
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21.7 BIBLIOGRAPHY
Adams, John R., and Nicki S. Kirchof. "A Training Technique for Developing Project
Managers:' Project Management Quarterly, 24(1), March ]993.
Alban-Metcalfe. B. M., "How Relevant Is Leadership Research to the Study of Managerial
Effectiveness? A Discussion and Suggested Framework for Skill Training:' Personnel Review,
12(3),1983.
Major product innovations that create new industries are typically seen as offering
substantial opportunities for growth and prosperity. But unless an innovation is tied to
the creation of entirely new markets. it may also pose a threat of substitution to com-
panies competing in a more established industry. When the new product first appears.
its long-term potential is usually unclear; some potential substitutes never gain wide-
spread acceptance, or find application only in relatively small market segments.
Others, however. will develop in ways that can have devastating consequences, espe-
cially for firms whose largest or core business is threatened. Today, many companies
(for example, Kodak and other manufacturers of conventional cameras) are contend-
ing with technological threats (i.e .. electronic cameras): the executives of such firms
must decide how to respond to an innovation that may have the capacity to destroy
their existing business. 12.1~
This chapter considers the management of technology in the substitution context.
To a significant degree, the discussion represents a synthesis of the author's previous
research on the subject.42.4_' The specific focus is on major product innovations that are
associated with the emergence of new industries. and that pose a substitution threat to
firms in a more established industry. Innovations that create entirely new markets and
substitution threats that are posed by other established industries (e.g .. aluminum vs.
steel) are outside the scope of this chapter.
Because of the importance of the substitution aspect of technology management to
managers. a significant stream of research has developed regarding technological sub-
stitution (in which one technology displaces another in performing one or more func-
tions in existing markets) and strategies for responding to substitution threats. In the
'The author would likc to thank the editor. Gus Gaynor. for his valuable comments and suggestions. and
also Daniel P. Hensley for his outstanding research assistance.
22.3
THE NEW-PRODUCT PROCESS
MANAGING TECHNOLOGY IN THE SUBSTITUTION CONTEXT 22.5
22.4
next two sections, established conceptions concerning substitution are considered and 22.1 ESTABLISHED CONCEPTIONS
an emerging view of the phenomenon is explored. The discussion in these sections
revolves around two basic strategies that are commonly used in responding to techno- Substitution in the MOT context is the process by which one technology displaces
logical threats: (I) improving the traditional product and (2) entering the new industry another in performing a function or functions for one or more customer groups.
(partial1y as a hedge against the risk of substitution). Research concerning the substitution process has historically focused on the reasons
In part, the emcrging view of substitution indicates that while the range of func- underlying a new product's growing acceptance, and why the threat to the traditional
tions for which an existing product is used may be narrowed, its sales can be relatively product often increases over time. Past studies of how firms respond to substitution
unaffected within its principal markets even as the new product gains widespread threats have also suggested that two very commonly used strategies-improving the
acceptance. In essence, the long-term relationship between the two products can be existing product, and entering the young industry with their own versions of the
complementary, rather than competitive. Each product may have advantages in per- new-often prove to be unsuccessful. Such research has viewed substitution mainly in
forming particular functions that customers value. Thus, it may not be necessary to product terms (i.e., the new product supplanting the traditional one in given customer
stem the adoption of the new product to ensure that the traditional product will be able groups), and has focused on situations in which the new and existing technologies
to survive and prosper. were fundamentally different (e.g., transistors vs. vacuum tubes). While significant
There is also a growing recognition that it is important to look beyond the impact contributions have been made, the conceptions of technological threats that have
of a substitution threat on an incumbent firm's product and consider how the new arisen are limiting.
product affects the value of the company's competitive capabilities. These capabili-
ties-for developing and improving the traditional product, for making the product,
and for marketing it-constitute the foundation of the firm's competitive position
22.1.1 The Process of Substitution
within the given markets. Thc extent to which these capabilities prove to be of value
for the new product is a kcy issue for the firm's continued viability in those markets Standard views of the substitution process are largely based on two parallel streams of
where the existing product is displaced. research. The first, concerning innovation and technological threats, considers the role
Finally, there is an increasing awareness that the way in which a young industry of continuing improvements in the new product following its introduction. 12,18.30.38.39.49
develops can affect long-term substitution outcomes. Early in an industry's develop~ This research indicates that early versions of a new product are crude and expensive,
ment, firms may pursue fundamentally different strategies, and sponsor alternative and enjoy performance advantages in comparison to the existing product only in spe-
product designs that are based on different product concepts and technological cialized niches. Over time, however, ongoing product and process advances bring
approaches. How the new product comes to be defined and marketed can affect about improvements in costs, quality, and functional performance. As a result, the new
whether the traditional product is displaced, and the extent to which the technical and product normally penetrates additional customer groups. Such improvements may also
marketing capabilities for the old product prove to be valuable for competition in the extend the range of functions in which the new product offers price-performance
new field. advantages within a given group, thereby increasing the value that it provides relative
With this emerging view of substitution as background, important technology man- to the existing product. For example, the first transistors were expensive and unreli
agement issues concerning the two response strategies mentioned above (improving able relative to vacuum tubes; they found early use only where their small size and
the existing product and participating in the young industry) are considered. The spe- low power consumption were inherent advantages (e.g., hearing aids). However, fol-
cific topics that are explored concern low~on innovations steadily improved the transistor's cost and performance capabili-
ties, and enabled it to invade other markets for vacuum tubes, such as portable and
The circumstances under which the traditional product will or will not be displaced automobile radios and computers. Further, these ongoing advances eventually caused
within its primary markets tubes to be supplanted in many applications where they had earlier been used together
The potential challenges that are associated with a strategy of participation in the with transistors .."4
young industry The second stream of research, concerning the diffusion of innovations, highlights
the role in the substitution process of changes in the propensity of buyers to adopt the
How an incumbent firm can improve its chances for competitive success in the new new product as the young industry develops. 23,35~n This research indicates that while
field, and reduce the risk that the existing product will be displaced
early adoption is typically confined to adventurous, high-income buyers, and those
How the traditional product may be improved so as to bring about a complementary
who place a high value on the product's initial performance advantages, the proclivi-
relationship with the new ty of other customers to embrace the new product increases over time. Price-perfor-
mance improvements, the development of an industry infrastructure and industry
The discussion suggests that prior conclusions about the prospects of firms that arc
standards, knowledge of others who have had favorable experiences, and a growing
confronted with technological threats have been unduly pessimistic. It also suggests
familiarity with the product (due to word of mouth, etc.) all reduce the perceived
that the factors that affect the outcomes of the two most commonly used response
risks, and make the purchase of the product a more attractive proposition. And as the
strategies are not well understood. In the concluding section, the implications of the
diffusion process continues, social or competitive pressures to adopt the new product
discussion are considered. and questions are posed for managers who find themselves
usually build.
having to make technology management decisions in the substitution context.
22.6 THE NEW-PRODUCT PROCESS MANAGING TECHNOLOGY IN THE SUBSTITUTION CONTEXT 22.7
22.1.2 Response Strategies found that newcomers often playa lead role in improving the new product and in gain-
ing market acceptance for it. Incumbent firms, in contrast, appeared to delay mounting
Prior research has suggested general strategies for responding to substitution threats. a vigorous effort until after the potential of the new product had become appar-
These include (l) finding new markets for the existing product that are unaffected hy ent.J8.27,40A6
the substitute: (2) focusing marketing efforts on traditional customer groups that are Such research also suggests that an incumbent firm's historic experience can color
likely to be later adopters of the new product; (3) attempting to maintain sales through its perceptions of how to compete in the new field. For instance, Tilton's study of the
actions such as increased promotion, greater customer service, longer warranties, or transistor industry's early years found that entrants from the vacuum-tube industry
price cutting: (4) expanding work on the improvement of the existing product. in an emphasized process innovation in their business strategies, an approach that had long
attempt to stem the adoption of the new; and (5) entering the young industry. The lat- been the norm in the tube business. In contrast, young semiconductor firms focused on
ter two approaches appear to be used quite frequently, often in conjunction with each product innovation, and sometimes obsoleted the transistors that the vacuum-tube
other. I 2.1:05,49
companies were trying to produce in volume ..t6 And finaJly, several studies have found
that even leading incumbent firms are often unable to maintain a viable competitive
position in the new field and are ultimately forced to withdraw.12.l~.27A6 Of course,
22.1.3 Improving the Traditional Product there are exceptions, and the competitive position of some firms does appear to
improve over time. But the general indication from this research is that success in the
The emergence of a substitution threat frequently induces vigorous and imaginative old technology by no means assures success in the new.
responses by incumbent firms that result in significant advances in what had been a sta- These studies have mainly considered situations where the new and traditional
ble technology.12.18.38.W,49While fundamental issues concerning the traditional technol- technologies were fundamentally different (e.g .. transistors vs. vacuum tubes and elec-
ogy may have long been considered settled, competition from the new product causes tronic vs. electromechanical calculators). In this context, the patterns observed are
incumbents to reexamine their product's basic design characteristics, core components, partially attributed to concerns about the cannibalization of the existing product. and
and subassemblies, and the processes for its manufacture. Over time. this reassessment the obsolescence of investments in plant and equipment. They are also attributed to
typically leads to considerable improvements in the product's functional performance. political resistance from important individuals and groups whose skills and influence
quality, and cost. As Rosenberg has noted (Ref. 38, p. 205), the emergence of a compet- are tied to the threatened business. However, the discussion below will argue that
ing technology often is a more effective catalyst for improvements in an established more basic issues are involved. Further, an incumbent firm will be better able to
technology than the more diffuse pressures of intraindustry competition.38 develop a viable competitive position in the young industry under some circumstances
Nevertheless, while acknowledging that such advances are occasionally so substan- than others. The discussion will consider actions that can be taken in the new field to
tial as to drive back the new technology, this research suggests that attempts to stem improve the chances of competitive success and, somewhat paradoxically, to reduce
the new product's adoption will usually be unsuccessful. In general. this outcome is the risk that the traditional product will be displaced within its primary markets.
seen as being probable under the assumption that an existing product is normally
much closer to the inherent limits of its potential in relation to the new.1R,49While this
may commonly be true in an overall sense, it should be noted that only limited atten-
tion has been given to the role in the substitution process of improvements in the 22.2 EMERGING VIEW OF SUBSTITUTION
existing product. The main focus of substitution research to date has been on continu-
ing improvements that occur within the generic new technology. Rosenberg (Ref. 38. The limitations of established conceptions of substitution are now becoming apparent.
p. 203) noted that it is very common for researchers to fix their attention on the story Increasingly, the substitution process is being explicitly considered in functional terms
of the new product as soon as its feasibility has been established, and to terminate all (i.e .. the specific functions for which the new product proves to be superior). It is
interest in the 01d.38 This remains true today. being viewed more in terms of the technical and marketing capabilities associated
It will be argued below that efforts to improve the traditional product can be worth- with the existing product as well (i.e., how the competitive value of these capabilities
while. where the intent is to ensure that it is not displaced in its primary markets as the is affected where the product is displaced). Also recognized are the high levels of
new product gains acceptance. uncertainty that surround young industries, and the rivalry among firms that are seek-
ing to structure the "framework of competition" in ways that favor their interests. The
dynamics of this rivalry, and the rules of competition that are formed as the new
22.1.4 Entering the Young Industry industry develops. can have a significant impact on long-term substitution patterns.
Overall, this emerging view of technological threats (summarized in Table 22.1) pro-
Many firms also respond to technological threats by entering the young industry, usu- vides significant insights for decisions regarding efforts to improve the traditional
ally through internal development. 12,40Their well-established brand names. customer product, and attempts to establish a position in the new field.
relationships, and channels of distribution would suggest an ability to convert the
threat into an opportunity. However, several studies have indicated that they often do
not pursue the new technology aggressively. and frequently experience significant
22.2.1 Functional Perspective
competitive difficulties in the new field. For example. Cooper and Schendel found that
the new product's first commercial introduction was made by a company from outside It has long been recognized that the identification of substitution threats involves
the threatened industry in four of the seven cases examined.12 Other studies have focusing on products that perform one or more of the functions that the traditional
22.8 THE NEW-PRODUCT PROCESS MANAGING TECHNOLOGY IN THE SUBSTITUTION CONTEXT 22.9
TABLE 22.1 Emerging View of Substitution are viewed as "adoption costs," since buyers may come to use both products to satisfy
the given set of needs. Such costs arc considered as part of the price-performance
Developing perspective Summary comments
- comparison in evaluating the relative effectiveness of the new and traditional products
Functional perspective Vital for analyzing substitution dynamics and long-term substi- on given functional dimensions.
tution outcomes. Suggests that while the range of functions for
which existing product is used may be narrowed, its sales can
be largely unaffected within principal markets even as new 22.2.2 Resource-Based Perspective
product gains widespread acceptance. Thus, it may not be nec-
essary to stem adoption of new product in order for existing A growing body of research has indicated that while some innovations render a com-
product to be able to survive and prosper. pany's existing R&D and manufacturing capabilities obsolete, others permit the firm
Resource-based perspective Important to look beyond the impact on traditional product and to utilize and build on them.4.5.42.43.47 The latter can be true even for major product
view "threat of substitution" in terms of firm's existing R&D, innovations (i.c., innovations that are associated with the creation of new industries).
manufacturing, and marketing capabilities. Such capabilities are To the degree that a new product is rooted in the R&D and manufacturing capabilities
the foundation of a firm's position in the given markets. Extent for an existing product, Smith defines the underlying technology as being "related" (0
to which they prove to be valuable for the new product is a key its traditional counterpart. (Note: Where the new and existing technologies are closely
issue for continued viability where existing product is dis- related, it is usually because the new has largely arisen from experience with the old.
placed. Examples include integrated circuits vs. transistors, and color vs. black and white tele-
Competitive perspective How an industry evolves can affect substitution patterns. vision.44.50)
Strategies of various firms may reflect different competitive Smith also explored the extent to which a firm from the established industry can
capabilities and/or economic interests. Competing designs may benefit from its existing marketing resources (i.e., brand names, distribution channels,
vary in the range of functions performed, the potential effec- sales organizations, and service networks) and skills in the new field.42 These market-
tiveness in performing given functions, the technical capabili- ing capabilities often provide a sizable advantage as an industry matures and product
ties on which they arc based. and the marketing requirements offerings become more standardized across competitors. However, this research sug-
that they give rise to, gests that the new technology and the strategies of newcomers can erode the value of
Thus. how the new product comes to be defined and marketed such capabilities for marketing the new product to the firm's existing customers.
can affect whether the existing product is displaced and the In sum, the emerging view of substitution indicates that it is important to look
extent to which existing technical and marketing capabilities beyond the impact on the traditional product and also view the hthreat of substitution"
prove to be valuable in the new field. in terms of the firm's established competitive capabilities. These capabilities-for
developing and improving the traditional product, for making the product, and for
marketing the product-are the foundation of its competitive position within the given
markets. 16 The extent to which they prove to be valuable for the new product is a key
product performs. rather than products that have the same form. 1.25.35As Porter notes issue for a firm's continued viability in those markets in which the existing product is
(Ref. 35, p. 275), a new product may perform a narrower range of functions than the displaced.
existing product. It may perform a wider range as well. 35 (In addition to performing
the functions of a typewriter. for example, a personal computer also performs other
functions. including calculating and small-quantity copying.) And among the tradi- 22.2.3 Competitive Perspective
tional functions that the new product performs, its price-performance capabilities rela-
tive to the existing product may be greater on some dimensions than others. Early in an industry's development, firms often pursue different strategies and sponsor
But only recently has it come to be fully recognized that a functional perspective is alternative product designs. 3D In some instances, the various strategies mainly retlect
vital for analyzing substitution dynamics and long-term substitution outcomes.42.43 different assumptions about how to compete, and the design alternatives revolve
While the range of functions for which an existing product is used may be narrowed, around a single basic product technology. However, research concerning innovation
its sales can be largely unaffected within its principal markets, even as the new prod- and young industries indicates that there are also cases in which the diversity among
uct gains widespread acceptance in those same markets. In essence, the long-term strategies and product designs is more fundamentaI.2.8.17.22 Here. the strategies pursued
relationship between the new and traditional products can be complementary, with may retlect not only different assumptions about how to compete but also differing
each having price-performance advantages in performing particular functions that cus- competitive capabilities and economic interests. And the various designs may differ in
tomers value. Thus, it may not be necessary to stem the adoption of the new product in the range of functions performed, the potential effectiveness in performing given func-
order for the existing product to be able to survive and prosper. Nowhere is the prod- tions, the technical capabilities on which they are based, and the marketing require-
uct (vs. functional) focus of prior research more apparent than in the notion of ments that they give rise to.
"switching costs," which are commonly viewed as one-time costs of changing from Indeed, a major reason for such diversity is the presence within the young industry
the old product to the new. These include the costs of learning to use the new product of firms with differing backgrounds and competences, each trying to shape the frame-
and of purchasing ancillary products such as software; they are typically seen as work of competition in ways that favor their interests."17.22 The competition among
potential impediments to substitution.35 From a functional perspective, however, they firms is over how the industry will be structured. and which version of the new prod-
MANAGING TECHNOLOGy IN THE SUBSTITUTION CONTEXT 22.11
technical and marketing capabilities for the old product prove to be valuable for com-
petition in the new field.42,43
22.3 TECHNOLOGY MANAGEMENT ISSUES
With this emerging view of substitution as background, four important technology

management issues concerning the response strategies of improving the existing prod-
uct and participating in the young industry are now considered. The specific topics
explored concern (1) the circumstances under which the traditional product will or
will not be displaced within its primary markets, (2) the potential challenges that are
associated with a strategy of participation in the young industry, (3) how incumbent
firms can improve their chances for competitive success in the new field and reduce
the risk that the existing product will be displaced, and (4) how the traditional product
may be improved so as to bring about a complementary relationship with the new.
22.3.1 Circumstances under Which Traditional Product Will or Will Not Be

Displaced
Although an existing product may be close to the inherent limits of its potential in an
overall sense, there are still circumstances in which it will not be displaced within its
principal markets even as the new product gains widespread acceptance. While a
threatened technology may be "mature," there can be significant room for price-per-
formance improvements on important functional dimensions as incumbent firms
reconsider the set of benefits that their product offers to the customer. For example,
CT (computerized tomographic) scanners have proved to be very effective for imaging
soft tissues, and for brain studies in particular. Nevertheless, the older technology of
nuclear medicine has remained superior for organ function studies because of
improvements that allowed it to better exploit its dynamic imaging capability.!S
Moreover, while given versions of the new product may have clear and early
advantages on some dimensions, they can also be fundamentally constrained in their
ability to perform other traditional functions that customers value. As a result, the
magnitude of improvements required of the existing product to maintain superiority on
those latter dimensions may not be great. And finally, given versions of the new prod-
uct may perform only some of the functions that are valued by the traditional prod-
uct's mainstream customers. Under all three scenarios, the long-term relationship
between the two products will ordinarily be complementary. Within the existing prod-
uct's principal markets, the new product will supplant the traditional in performing the
particular functions in which it has the advantage. But, as illustrated in Fig. 22.2, the
traditional product itself will not be displaced.42.43
In general, the existing product will be supplanted only if the new product per-
forms all the traditional functions that customers value more effectively (and it per-
forms additional functions as well). (Note: In cases where the sales of the traditional
product decline substantially, the time period from the new product's first commercial
introduction to the point when its sales exceed those of the traditional appears to be
about 5 to 14 years.!2) The range of traditional functions in which the price-perfor-
mance of the new product proves to be superior will depend on (I) the success of
incumbents in bringing about improvements in the existing product on given function-
al dimensions, (2) the traditional functions that the new product performs, and (3) the
ultimate effectiveness of the new product in performing those functions. (As discussed
22.3.2 Challenges of a Strategy of Participation

Young industries are characterized by high levels of uncertainty. Early on, no "right"
strategy has been clearly identified, and firms-including entrants from outside the
threatened industry-often utilize different marketing approaches and production
technologies. Only time will determine the relative validity of the assumptions on
which they are based. Competing product designs often vie for acceptance as well.
[The rivalry among electronic watches with LED, LCD (light-emitting diode, liquid-
crystal display), and analog displays in the 19705 is one example.] All the designs typ-
ically have serious shortcomings and technical obstacles that have to be overcome, the
possible means for doing so are usually unclear. and the potential for improving their
ability to meet perceived customer requirements-which are also evolving-is largely
unknown. As a result, it is very difficult to predict which alternative will gain wide-
spread acceptance, and emerge as the dominant design.3.8.34
Resource-Based Challenges. From both functional and resource-based perspectives,

these uncertainties sometimes have only limited significance. During the early 1980s,
for example. PC designs had different operating systems, command systems (that used
the mouse, touch-screen, or keystroke approaches), and microprocessors. However,
the various designs performed the same basic functions, and there were substantial
overlaps in the technical capabilities required for each. Further, the major competitors
also followed parallel business strategies.]9 In such cases, there are risks that include
the possible obsolescence of product inventory, raw materials, and components. But
the uncertainties described above will not have a major bearing on whether the tradi-
tional product is displaced. Moreover, the value of existing technical and marketing
capabilities in the new field wil1largely be tied to the basic technology that underlies
the different versions of the new product.
A key issue here is the degree to which the new technology is related to its tradi-
tional counterpart. Where the two technologies are related to a significant degree,
incumbent firms will be able to utilize and build upon their R&D and manufacturing
capabilities as they attempt to surmount technical obstacles and establish a competi-
tive position.4.5.41.47 For example, this was true for transistor firms that became
involved in the newer field of integrated circuits:~4 Under these circumstances, the
incumbents' understanding of the new technology and their abilities for continued
improvements should be at least as good as those of entrants from outside the threat-
ened industry. Indeed. where the capabilities that are critical for the performance,
quality, and cost of the new product are specific to the established industry, it may be
difficult for new entrants to establish a beachhead.
Conversely, where the new and traditional technologies are fundamentally differ-
ent, incumbent firms that enter the new field will face the challenge of developing the
necessary technical resources and skills for the new product. Particularly if the new
technology evolves at a rapid pace. they may find it difficult to offer a product that is
state-of-the-art. This may place incumbents at a significant disadvantage, during the
early stages of industry development, when product performance is usually the most
important basis of competition. As the industry continues to evolve, knowledge about
the new technology will tend to become more widespread, and the rate of technologi-
cal change will eventually slow. Nevertheless, these early conditions will make it rela-
tively more difficult for incumbent firms to develop a strong competitive position in
the young industry.3o.34.42A-8
A further concern is the extent to which incumbent firms can benefit from their
existing marketing resources and skills in the new field. Where one or more of the
marketing assets noted in Table 22.2 were important for success in the established,
oriented toward capitalizing on their competitive capabilities, offsetting their weak-

nesses, and nul1ifying the advantages of the incumbents.2.817,20.22.43.51
In electromechanical calculators, for example, direct-sales organizations and ser-
vice networks had been important requirements for success, and the major producers
of such machines had concentrated on the business segment in their marketing efforts.
As the electronic calculator field began to emerge in the 19605, entrants from the
threatened industry understandably sought to use their established sales and service
networks for the new product as well. But the scientific and programmable models
that they offered were aimed at statisticians, scientists, and engineers who had previ-
0usly relied on large computers for their computational needs. As the division presi-
dent of Monroe said later of his company's early participation, "Our effort in electron-
ics, I think logically, was not to create competition for [our] electromechanical
machines. It was not to take away the established base, but to seek new business over
that base" (Ref. 27, p. 60).
However. new entrants targeted the mainstream business segment with the elec-
tronic calculators that they developed, and sold their models through office equipment
dealers. Further, by exploiting the potential for dramatic reductions in the cost of elec
tronic components, they drove market prices down to levels that made it difficult to
cover the costs of direct-selling efforts. Several incumbent firms were forced to devel-
op a network of office equipment dealers for the electronic business calculators that
they belatedly began to manufacture. Finally, as the reliability of electronic calculators
(which had few moving parts) improved, the need for a strong service network waned.
Combined with the eventual displacement of electromechanical calculators by their
electronic counterparts, the sales and service networks of the incumbents ultimately
became irrelevant for competition in their traditional markets. 14.27
Here, the marketing strategies of new entrants capitalized on the new technology's
potential to create superior value for mainstream customers (in part, via lower prices
and greater reliability), and to undermine incumbent marketing capabilities. In a simi-
lar fashion, the R&D and manufacturing strategies of newcomers can also undermine
incumbent marketing capabilities. For example, American and Baldwin Locomotive
(leading producers of steam locomotives) found that their new competitor in the
diesel-electric fIeld, General Motors, ignored their time-honored methods of custom
manufacturing and built standardized locomotives for inventory instead. GM's success
in gaining customer acceptance for this approach eroded the value of the incumbents'
skills concerning selling methods and marketing practices.13 In these instances, the
different versions of the new product were based on a single basic technology, one that
was unrelated to the traditional technology.
The emerging electronic-watch field illustrates the significance of competing
designs that are based on different product technologies and concepts. During the
early stages of industry development, semiconductor firms such as Texas Instruments
concentrated on the all-electronic LED and LCD product designs, while traditional
watch firms such as K. Hattori (Seiko) focused the majority of their efforts on the
quartz analog. Most LED and LCD designs reflected a concept of the electronic watch
as a "wrist instrument" that could perform a wide range of timekeeping functions.
Instead of the traditional "hands" of the analog display. the technological approaches
underlying these designs utilized a semiconductor (LED or LCD) display, which was
well suited for the broad functiona1ity of the wrist instrument concept. In addition, the
approaches underlying the LED and LCD designs were largely unrelated to mechani-
cal watch technology.
By comparison, the quartz analog design reflected a concept of the electronic
watch as a timekeeping device that was also a piece of jewelry. While the technologi-
cal approach underlying this design replaced the traditional mainspring and escape
22.16 THE NEW-PRODUCT PROCESS MANAGING TECHNOLOGY IN THE SUBSTITLTION CONTEXT 22.17
mechanism with electronic circuitry and a quartz crystal oscillator, it retained the gear Influence Stratagems. In many instances, it will be possible for an incumbent firm
train and hands of the mechanical analog watch. As a result, portions of the technical to pursue effective strategie~ and product designs that are consonant with its economic
resources and skills for the old product remained relevant for this version of the new. interests. This may take the form of strategies that seek to reinforce the value of the
The product concept underlying the quartz analog design was also more consonant firm's established marketing capabilities in the new field. For instance, an existing
with the brand images and jewelry store distribution channels of mainstream incum- service network might be used to maintain or repair other products of customers
bent finns, such as Seiko. Ultimately, it was the quartz analog that emerged as the (beyond the product in question) for an attractive package price. An incumbent firm
dominant design; the new entrants were largely unsuccessful in their efforts to alter may also sponsor product designs that capitalize on its technical and marketing capa-
the set of benefits that customers valued.24 bilities to the extent that this is feasible. (Sometimes, it will be possible to develop
Similar competitive struggles are being played out today in high-definition televi- versions of the product that exploit existing technical and marketing capabilities. In
sion and electronic cameras. In such cases, the strategies of competing firms and the other cases, there will be viable design possibilities that exploit existing capabilities
dominant design that emerges can affect the extent to which incumbent technical and for the traditional product but also require the development of new resources and
marketing capabilities prove to be of value for competition in the new field. Further, skills. But there will also be situations where any feasible design will obsolete at least
the range of traditional functions that the dominant design performs, and the price~per- some of the traditional technical and marketing capabilities.)
formance capabilities that it proves to have on given functional dimensions, can affect Finally, versions of the new product may be developed with the primary objective
whether the traditional product is displaced. In summary, the managers of incumbent of bringing about a complementary relationship with the existing product. (Note: It
firms need to be sensitive to the resource-based and competitive challenges that have should be understood that the firm may have to develop new technical capabilities in
been described. They need to carefully appraise the potential impacts of the new tech- order to bring such a relationship with the existing product about.) Such a version of
nology, alternative product designs, and the strategies of rival firms. And the chal- the product might, for example, perform only some of the traditional functions that
lenges considered also have implications for actions that can be taken as part of a customers value. The basic objective would be to offer price-performance capabilities
strategy of participation in the young industry. It is to this issue that the discussion on a subset of the traditional functional dimensions that exceed those of both the exist-
now turns. ing product and rival versions of the new. Overall, these basic stratagems may enable
an incumbent firm to enhance its chances for success in the new field (by preserving
the value of established capabilities) and/or reduce the risk that the traditional product
22.3_3 Improving Chances for Success in New Field and Reducing Risk of will be displaced. While none of the approaches will be viable under all conditions,
Product Substitution each warrants consideration in most circumstances. Even where existing designs
revolve around a single basic technology, and firms have been pursuing similar strate-
How the new product comes to be defined and marketed depends on more than the gies. this does not necessarily mean that the limits of what is feasible have been
latent potential of particular product designs and strategies. While a given design defined; it may simply be a reflection of what has come forth. so far. from a larger set
alternative may have the capacity to be the "best" means of meeting emerging cus- of possibilities.
tomer preferences, the realization of this promise turns on the development efforts of Companies that have strong technical and marketing capabilities that are valuable
the firms that pursue the design. The relative success of these firms, and of other for their design and/or strategy, and ample financial resources, should have a greater
firms, in unlocking the potential of the alternatives that they sponsor has a substantial individual ability to influence how the new product comes to be defined and marketed.
impact on the outcomes of design competition. Industry participants also play an Relative to other entrants, such firms should have a greater capacity to unlock the
important role in shaping the formation of customer preferences in the first place. potential of their design, to stimulate the process of its diffusion, and engage in
Market feedback affects the direction of product development activities. But at the aggressive educational and promotional efforts that help to shape the rules of competi-
same time, the designs that are available and the educational/promotional efforts of tion. Further, the possession of strong competitive and financial capabilities may
firms that seek to define the rules of competition in given ways influence the develop~ favorably affect market perceptions about the likelihood that the firm will be success-
ment of concepts that guide customer choice. 5.8.9,22 ful in the new field. This may influence consumer preferences by making buyers feel
Beyond the industry's direct participants, other organizations can also influence more secure in their purchase decision. Such perceptions may also affect the decisions
how the new field develops. Depending on the nature of the product, such organiza- of suppliers of complementary products, concerning the version of the product that
tions may include suppliers of complementary products (e.g., distributors of VCR cas- they will support, and the decisions of industry associations and regulatory bodies.
sette tapes), industry associations, and government regulatory bodies. Suppliers of regarding compatibility standards.9.40.45
complementary products will influence an industry's evolution where their decisions
about which version(s) of the new product to support have a significant impact on the Time of Entry. Research suggests that the timing of a firm's entry is important in the
commercial viability of the competing product designs. And where the new product success of its efforts to influence how the young industry develops, and to establishing
(such as high-definition television) is part of a larger system, decisions by industry a strong position within it.26.28.35.41First-mover advantages can provide a firm that
associations and regulatory bodies regarding compatibility standards can have a siz- enters an emerging industry at an early date with greater leverage for shaping the way
able impact, if the decisions constrain the set of designs that are capable of meeting in which the new product comes to be defined and marketed. An early entrant win
the standard.2lA5 Clearly, industry competitors and other organizations play important often gain an edge over firms that enter later from having more time to improve the
roles in determining the way in which technological and market uncertainties are performance, quality, and cost of its design. Order of entry can also affect the forma-
resolved. tion of customer preferences. To the extent that an early entrant is able to achieve sig-
22.18 THE NEWPRODUCT PROCESS
nificant consumer trial, it will be in a better position to define the attributes that are 22.3.4Improving Traditional Product so that It Is Complementary with the
valued most within the product category. These advantages can, in tum, strengthen the New One
firm's ability to intluence the decisions of suppliers of complementary products,
industry associations, and reguJatory bodies. Early entry may also reduce the risk of Technology-based effofls to bring about a complementary relationship with the new
being preempted by other entrants that have different economic interests and capabili- product involve an exploration of the functions on which the existing product may be
ties. Indeed, it may be possible to chaJlenge such firms before they arc able to develop able to maintain price-performance superiority, and a corresponding redirection of
a viable competitive posilion.~9A2 technical development activities. In some instances, such a relationship with the new
From an organizational viewpoint, a decision to enter early may also be important. product may be brought about as a result of previously unrecognized opportunities for
Where a firm's product design and/or strategy requires new competitive capabilities, product or process improvements in the existing technology. (The earlier discussion
early entry can facilitate their timely development, and their integration into the firm's concerning nuclear medicine relative to the newer imaging technology of CT scanners
existing knowledge base. This issue wilJ be especially important if the technology provides one example in this regard.) In other cases, such a relationship may be creat-
underlying any feasible product design is unrelated to the traditional technology. Here, ed by exploiting limitations discerned in the ability of given versions of the new prod-
more time will be needed to develop the necessary technical capabilities. And because uct to perform traditional functions that are valued by mainstream customer groups.
unrelated tcchnologies are more likely to erode the value of existing marketing assets, Frequently, as the firm learns what improvements are possible in the existing prod-
significant amounts of time may also be needed to deal with this eventuality. uct, this strategy will evolve as it becomes more evident whether the shortcomings of
In addition, the various activities that are associated with participating in a young given versions of the new product can be overcome and, in some cases, as the domi-
industry have important impacts on organizational learning. Early entry can lead to nant design begins to emerge. The effectiveness of this effort to ensure that the tradi-
greater levels of cumulative learning Over time, to a greater ability to assimilate new tional product is comp1ementary with the new may be enhanced by sharing technical
information that is related to what has already been learned and, as a result, to knowledge gained with other incumbent firms (e.g., through liberal licensing poli-
improvements in the quality of business strategy decisions.10 While these organiza- cies). It can also be enhanced by enlisting the aid of component and subassembly sup-
tional issues are somewhat intangible, they can still have a major bearing on the suc- pliers in the existing product's defense. In generaJ, this strategy is most likely to suc-
cess of a firm's competitive efforts within the new field. ceed when the different versions of the new product cannot perform, or are
fundamentally constrained in their ability to perform, some of the traditional functions
Interorganizational Actions. As part of the influence stratagems described above, a that customers value.,n
company may undertake actions that harness the resources and skills of others. To the
extent that a firm's product design requires new technical capabilities, it will ofren be
valuable to augment internal R&D activities with "alJiances" with entrants from out-
side the threatened industry. (Harne] and Prahalad refer to such arrangements as ;'com- 22.4 SUMMARY AND IMPLICATIONS
.--
peting through collaboration."20) This can facilitate the development of the necessary
resources and skills, and thereby allow the firm to offer a more competitive version of This chapter has presented an emerging view of technological substitution and has
the product. Such linkages with new entrants, which have been common between explored important issues concerning two strategies-improving the existing product,
pharmaceutical companies and emerging biotechnology firms, for example, may take and participating in the young industry-that are typically used in responding to sub-
the form of contracts, licenses, joint ventures, minority equity investments, etc. And stitution threats. The discussion suggested the circumstances under which the tradi-
especially where the technology underlying any feasible product design is unrelated to tional product will or will not be displaced within its primary markets, as the new
its traditional counterpart, acquisition may also be a promising vehicle for gaining product gains widespread acceptance within those markets. The basic ways in which
rapid access to needed technical capabilities. 3] .3., .2 the existing product may be improved to bring about a complementary relationship
Collaborative efforts with other incumbent firms may also be undertaken in an with the new product were also considered.
effort to form an alJiance around a basic product design, and to put the strength of the In addition, the challenges that are associated with participating in young industries
firms' combined resources behind it. Such companies could, for example, establish were examined. FinaJIy, actions that can be taken in the new field to (1) improve the
R&D partnerships or cross-licensing arrangements to foster more rapid advances in chances of competitive success and (2) reduce the risk that the traditional product will
the performance, quality, and cost of the given design vis-a-vis competing alterna- be displaced were explored. (Questions for consideration by incumbent firm managers
9 32
tives. . In addition, a firm might participate (e.g., through traditional industry trade are posed in Table 22.3.) Overall, prior conc1usions about the prospects of companies
groups) in cooperative educational and promotional activities that are aimed at shap- that are confronted with technological threats may have been unduly pessimistic. The
ing the customer preferences that develop around the new product. [n generaL interor- factors that affect the outcomes of these two commonly used response strategies are
ganizational actions-which influence buyer preferences and strengthen the competi- only beginning to be understood.
tiveness of the given version of the new product-will directly improve the firm's The emerging view of substitution that has been presented has several implications.
ability to shape the way in which the product comes to be defined and marketed. They First. the focus of prior research has largely been on the role in the substitution
may indirectly influence the decisions of suppliers of complementary products, indus- process of continuing advances within the generic new technology. Future work could
try associations, and government regulatory bodies as well. make important contributions by adopting a parallel focus on improvements that take
22.20 THE NEW-PRODUCT PROCESS
TABLE 22.3 Questions for Incumbent Firm Managers

Where the diversity among alternative strategies and/or product designs is funda-
J. Is the new product likely to bc fundamentally constrained OT unable to perform some of the mental, assumptions that long-term substitution patterns are a function of the charac-
traditional functions that mainstream customers value? teristics of the new technology are likely to be inappropriate. Researchers and practi-
2. What actions can we take with respect to the traditional product to help bring about a com- tioners that proceed from this premise are likely to overlook important dimensions of
plementary relationship with the new product? the substitution process. More generally, an explicit recognition by researchers of the
3. To what degree will we be able to utilize and build on our existing R&D and manufacturing diversity that can exist among different product designs and strategies should lead to a
capabilities in the young industry? better understanding of the dynamics of technological substitution, and how compa-
4. What new technical resources and skiJIs will necd to be developed and integrated into the nies can influence long-term substitution outcomes through their strategic actions. For
firm's knowledge base? How can this best be done? What existing technica1 capabilities may incumbent firm managers, such a recognition could lead to more effective responses to
ultimately be rendered obsolete? substitution threats, in part by causing them to consider a broader range of strategiC
5. Is the new technology likely to create new marketing requirements that our existing market- options than what might have otherwise been the case.
ing assets cannot adcquately satisfy? In what ways might the new technology relax existing Finally, in future research concerning strategic responses to technological threats,
marketing requirements and diminish the value of these assets?
more direct attention should be given to strategies for influencing the way in which
6. What are the characteristics of competing designs for the new product? What impacts could
the new product comes to be defined and marketed. Basic stratagems for doing so
the widespread acceptance of a given design have on the traditional product?
(along with related issues concerning the time of entry and interorganizational actions)
7. How could the given design affect the competitive value of our existing technical and mar-
keting capabilities in the young industry? were outlined above. However, much needs to be learned regarding how incumbent
8. In what ways could the strategies that new entrants are pursuing erode the value of OUT exist- firms can shape the framework of competition that emerges in ways that favor their
ing marketing capabilities? economic interests, the factors that strengthen or weaken their ability to do so, and the
9. What strategic actions could we lake to reinforce the vaJue of our established marketing difficulties that can be encountered in the process. The purpose of this chapter has
capabilities? been to explore central issues concerning the management of technology in the substi-
! O. Are there viable designs that we could sponsor that would capitalize on our existing techni- tution context. To the extent that it helps stimulate the thinking of researchers and
cal and marketing capabilities? Are there viable alternatives that would reducc the risk that practitioners in a meaningful way, a contribution will have been made.
the traditional product wi1lbe displaced?
I]. What other actions can we take to influence the young industry's development in ways that
favor our economic interests?
22.5 REFERENCES
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Our framework for competition among product models and families builds on two key
aspects of management theory: (1) recognition of the importance of variety and (2)
rcliance on analogies to the biological life cycle. The closely related concepts of prod~
uct differentiation and market segmentation, for example, recognize that product vari-
ety drives key manufacturing decisions: L2 in design. related to developing innovative
products distinguished by features and aesthetics that better serve existing and attract
new customers: in production. related to choices and applications of technologies that
ensure quality manufacture and timely availability of these potentially diverse prod-
ucts; and in sales. related to matching products and product lines to the varied needs
of individual customers.
Analogies to the biological life cycle recognize that these products and product
lines are subjected to forces that occasion change that corresponds to the birth,
growth, maturity, and death of Jiving organisms.3.4 Our framework hence supports the
exploration of product competition in terms of variety and change and the interactions
that characterize competition among products with different life cycles.
In the following sections we define units of analysis employed in the framework
and analyze the key descriptive measures-product variety and rate of design change
at two levels of analysis-for models and for product families. Empirical examples
illustrate the application of these measures in a number of product categories. Final1y,
we identify the forces that drive product variety and rate of change and integrate these
into a life-cyc1e model of product competition.
23.1 UNITS OF ANALYSIS
Models and product families, long and widely accepted in practice as basic units of
analysis, have recently begun to receive attention in academic circles. Researchers
have variously advanced examples of "design families" and "design variants" among
automobiles, jet engines, and aircraft and hovercraft;) demonstrated effective manage-
ment of incredible varieties of product modeh that target customer needs in distinct
international markets;6 suggested as a structural rationale a "design hierarchy" that
includes a "core concept" and solutions to various "subproblems"; 7 and developed an
integrative typology for design projects that includes "platform" as well as enhance-
ment, hybrid. and derivative projects.8
Model distinctions and family relationships are fairly easily established for sophis-
ticated technical products, particularly assembled systems. Few would quarrel. for
example, with Boeing's designation of the 747-200, 747-300. 747-400, and 747-SP as
models that constitute a family.9 Models across passenger-car product families tend to
be consistent, usually including two- and four-door sedans, two-door coupes, three-
and five-door hatchbacks, and perhaps a wagon ranging over the full spectrum of size
and price.
But as one moves away from sophisticated assemblies. reliance on technical crite-
ria increasingly gives way to subjective perceptions of subtler characteristics. At some
point. the concept of family structure begins to have less to do with technical differ-
ences than with market preferences and industry conventiuns. Fur products such as
handtools, furniture, and household linens, a given design can be assigned to a product
family as much for the way it is made or used as for the technology it contains.
Boundaries are particularly fuzzy for product families that are based on recipes.
House paint. for example, is sold in a handful of grades. each tinted at the factory to
produce a few basic colors and a few dozen pigments that can be blended by retailers
to produce an array of hues and tints. What constitutes a model-each basic color or
every mixture a consumer takes home? Is each grade of paint a model or a product
family?
Some contend that such subjectivity imperils any attempt at classification or cate-
gorization,IO but others argue that the threat is overdrawn, that knowledgeable
observers typically make consistent interpretations. 11 For most commercia]]y manufac-
tured products, we believe that the latter tends to be the case. Consensus among indus-
try participants about appropriate model and productfamily structures is often evident
in the organization of suppliers' catalogs and industry buyers' guides.
We define a model to be a product design that differs sufficiently from other designs
that the manufacturer assigns it a distinctive commercial designation and a product
family to be a set of models that a given manufacturer makes and considers to be relat-
ed (see Fig. 23.1). These definitions are subject to two limitations: (1) they rely on data
provided by manufacturers that may be tempted to fudge these definitions to gain mar-
keting advantage and (2) absent independent, corroborating technical information.
manufacturer-provided definitions of models and product families cannot be used to
investigate the nature of product-family and model differences and similarities.
Our objective is to develop a framework that describes broad patterns of innovation
and competition; thus it is more important that units of analysis be easily applied than
that they be fully understood. Lack of understanding can be shored up by supplemen-
tary industry investigations, but measures that are difficult to apply may make any
meaningful investigation a logistic impossibility.
PRODUCT MODEL AND FAMILY COMPETITION 23.5
percent of the more than 1500 products listed in the 1990 Stanley Hand Tool Catalog
were identified as new and most of those models reflected only cosmetic changes. Yet
even slow rates of change can yield extraordinary model variety in a firm that remains
in business for] 50 years.
Products such as software that tend to be characterized by replacement change
exhibit a change-intensive pattern of model evolution (lower right quadrant of Fig.
23.2). Model variety is rare because firms put all their effort into maintaining the pace
of competitive redesign. This gives rise to serial model changes that amount to a race;
a firm must be developing a follow-on model even as it introduces the current onc.
Microsoft's DOS, for example, has since 1981 been marketed in versions 1.1, 2.0, 2.1,
2.2,3.0,3.1,4.0,4.1,5.0, and 6.0, each of which effectively replaced its predecessor
as far as new sales were concerned.
Dynamic random access memory (DRAM) chips provide a more complex example.
For more than a decade, DRAMs exhibited a persistent pattern of serial product and
process innovation, with major new models appearing approximately every 3 years. To
keep up this pace, DRAM manufacturers have had to introduce new models within a
short time of the market leader, with the result that rates of innovation have necessari-
ly been quite similar. No firm can pull very far ahead of the others in the industry, and
any that fall behind must exit.
That DRAM generations until very recently exhibited little model variety is a func-
tion of the nature of DRAM manufacturing. Manufacturers rely on learning-curve
effects to achieve the finer tolerances, higher yields, and increased profitability needed
Lo reach the next den:sity level.14 Diverting factory production from high-volume
learning-intensive products to marginal1y different designs that contribute little knowl-
edge useful for process improvement can impair a firm's ability to achieve that next
plateau.
Associated with cvery product model is a lifetime that is known ex post facto and, DRAM design variety increased dramatically in 1989;15 the reasons for the shift
to the extent that a manufacturer can control its product planning, may be predictable were primarily technological. 16 Previously, each generation of DRAMs had outdone
ex ante facto. The reciprocal of a model's lifetime is an estimate of the rate at which it its predecessor across all relevant dimensions of performance. This became harder
is replaced: a model with a 2-year lifetime. for example. will be replaced at a rate of with the much denser chips that began to emerge, attended by tradeoffs between. for
0.5 model per year. example, information density and access time and voltage. The consequence was a
Estimates of model variety and rate of model change contain a great deal of infor- proliferation of chip designs.
mation that can be used to classify patterns of competitive activity. Juxtaposing model The DRAM example illustrates an important issue of interpretation. Most industry
variety and rate of model change, as in Fig. 23.2, creates four distinctive patterns that observers consider the radically increased density of DRAMs to represent not a model
reflect a firm's competitive reaction to external forces. particularly the introduction of change, but the emergence of an entirely new product family. Semiconductor engi-
new technologies and the actions of competitors. These patterns can be viewed as the neers, on the other hand, consider the technological changes in DRAMs to be funda-
"signatures" or "fingerprints" of the competitive forces acting on the firm. mentally incremental (albeit expensive).
The pattern of model evolution for commodities, eggs, carbon black. soda ash. These contradicting viewpoints underscore the fact that change is harder to mea-
chemical feedstocks, and other products that do not. or cannot, exhibit significant sure than variety. What determines whether a model change is so significant as to
design variety is depicted in the lower left quadrant of Fig. 23.2. Design variants for result in a new product family? Any answer to this question must be qualified by the
these products are not offered. either, because no one can envision an alternative or facts of the industrial environment. That all the major chip makers have managed to
because customers are unwilling to accept a change or substitute. That most early pub- keep pace with the successive generations of chip density we believe tips the balance
lished descriptions of product life cycle resemble this pattern reflects contemporane- in favor of viewing DRAM innovation as an example of change-intensive model com-
ous mass production of, and slow rates of model replacement for. most products. petition. Reasonable people could credibly differ with our interpretation.
Products such as handtools. lightbulbs, and door hardware exhibit a variet.v-inten- A complex and volatile mix of additive and replacement change yields a dynamic
sive pattern of model evolution (upper left quadrant in Fig. 23.2) characterized by pattern of model evolution (upper right quadrant of Fig. 23.2). Design changes can
additive model change. Stanley Works' provides an example. The company's hand- increase variety, reduce variety, or leave it unchanged. In fact, model changes are both
tools are offered in thousands of models and tend to change very slowly, a conse- the source and the enemy of model variety. A growing number of globally competitive
quence, as one Stanley manager put it, of their market lives being "measured in cen- manufactured products-----computers, machine tools, automobiles, specialized semicon-
turies."J-' Packaging changes are frequent, new models much less so; fewer than 3 ductors, and medical equipment, among others-exhibit this pattern.
TABLE 23.1 Evolution of Stanley Handtoo\ Product Lines
Operating YeaTes) No. of New 1989 Representative

unit acquired SKUs' models sales'" products
Stanley tools 1843 1.500+ 50-75/year $560M Woodworking and
construction handtools
Fastening systems: 1986-1989 4,000+ ] 0-20/year $320M Fasteners and fasten-
Bostitch, HafteD, iog systems
Sutton-Landis,
Halstcad, Spenax,
Parker Tools
:\1echanic's tools: 1980-1987 ] 1,000+ 30G-SOO/year $400M Auto mechanic's tools,
MAC Too!s, Proto industrial handtools,
Tools, Peugeot Tools, and toolboxes
~ational Hand Too]
and Beach Industries
'SKU = Stockkeeping unit.

testimated. Shearson Lehman Hutton, March 8, ]989.
The logic advanced thus far suggests three criteria for generational product competi-
tion: (I) powerful and persistent market demand for continuous improvement (without
which major change will not occur), (2) more than one technological way to satisfy
the market need (given only one technological approach, change-intensive model evo-
lution will dominate), and (3) strong market resistance to the simultaneous existence
of more than one product family (without such resistance, diverse or turbulent prod-
uct-family competition will result).
Products that satisfy all three criteria are difficult to find. The DRAM industry
illustrates the potential for confusion, DRAMs almost meeting the criteria, except that
the requisite critical improvements in processing technology are considered by many
engineers to be incremental rather than radical, a violation of the second criterion. The
shift from records to audiotape cassettes to compact discs and, finally, to digital tape is
perhaps the best example of generational product-family change, but even here, prod-
uct-family generations overlap. Are the different media in fact serving distinct niches,
with analog audiotape the inexpensive solution, compact discs the choice for durabili-
ty, and digital audiotape the new standard for fidelity and convenience?
Total turmoil in product-family competition yields a turbulent pattern of product-
family evolution (upper right quadrant of Fig. 23.3). Both generational and turbulent
product-family evolution present major challenges to manufacturers, inasmuch as each
new product family represents a threat to or opportunity for every competitor. Each
must manage its own complex pattern of product-family evolution, while contending
with competition from the similarly volatile product families of its competitors. The
generational and turbulent characterizations of product-family evolution agree with
anecdotal reports of intensified product competition among globally marketed prod-
ucts. According to some observers, competitive pressures are forcing the product-fam-
ily life cycle to contract and thereby gravitate to the diverse, generational, and turbu-
lent quadrants shown in Fig. 23.3.17
An example can be found in the office electronics marketplace, which has evi-
denced an increase in product-family variety over the past 20 years. Ii! Equally striking
is the decline in relative sales revenue for some product families, notably portable
clocks and calculators. The proliferation of relevant product families, many based on
fundamentally different technologies, is capable of generating complex competitive
As competing technological approaches clash, they are progressively eliminated

until one or two survive to dominate the market. When the resulting dominant design
emerges, it has a profound impact on the pattern of subsequent product competition.
Competitive energies are directed away from the search for technological break-
throughs and toward incremental refinement of the dominant design. This shift in
technological activity produces an era of incremental change, with designers. both
supported and constrained by the implicit standards of the dominant design, encour-
aged to make smaller, more frequent model changes that build on that design and on
previous models.22 Inasmuch as this era of incremental change may persist for an
indefinite period, since it takes a new technological discontinuity to end it, Gomory
suggests that as much as 85 percent of products are in an incremental stage at any
given time.23
Technology may promote model variety, although this has been less thoroughly
studied. A greater choice of technologies expands the design options available to prod-
uct designers. Gasoline engines, for example, have been manufactured from steel, alu-
minum, ceramics, and high-temperature plastics; as each material finds a niche, it
becomes a plausible foundation for a product family.
23.3.2 Market Forces
That the market pressures that drive model variety and rate of change are confusing is
due to (I) the conceptual interdependence between model variety and rate of change
and (2) the hidden nature of customer needs, which makes this interdependence diffi-
cult to unravel. Variety and rate of change both rely on the notion of difference; differ-
ences perceived at a particular time constitute variety, those that emerge over time,
change. Confusion arises because the variants in a given variety must have originated
as changes. This subtlety is not a serious concern when one examines model, product-
family, or even technological changes, all of which arc tied directly to tangible prod-
uct designs.
In the marketplace, model and product-family variety and rate of change reflect the
varying and changing nature of customer needs as well as customers' ability and will-
ingness to buy new products or replace old models with new ones. Global markets
bring new customers with differing technical, social. and economic agendas and grow-
ing diversity might reasonably be expected to generate pressures to increase model
and product-family variety, as a number of authors are suggestingJU5 A slowdown of
new offerings in the I 990s will be attributable to firms' efforts to cope with the damp-
ening effects of a worldwide recession on customer demand for goods and services.
23.3.3 Cost Constraints and Other Internal Forces
Models today can become obsolete in as little as a few years or even a few months.26
To cope, manufacturers have developed such techniques as "just-in-time manufactur-
ing," "quick-response marketing," and "simultaneous engineering."2] As product lives
are compressed, planning horizons must contract: planned model variety must take
account of the likelihood that many ncw models will be rendered obsolete shortly after
being introduced. Timing of market entry has consequently become critical.
As this is the case, firms must allocate carefully these scarce resources~designers,
budgets, and technology options~across the portfolio of planned new designs. We
believe that this process forces firms into a tradeoff between model variety and rate of
change. A firm pursuing a variety-intensive strategy will commit its design resources
markets are viewed as more demanding than changes that build on those links.
Changes that rupture links with hoth technologies and markets are deemed most oner-
ous and risky. We previously generalized that change tends to be more strongly associ~
atcd with technological forces, variety to be driven by market forces. A shift to a new
technology pressures a firm to change. Abandonment of an old market for a new one
leads a firm to discard its existing and generate new variety. Together, these forces
might reasonably be expected to generate even greater pressures. One might expect
that firms would elect to juggle variety and rate of change only if forced by changes in
both technology and market.
Wheelwright and Clark's recent work on organizing for innovation suggests ways
to create the flexibility needed to support the juggling of model variety and rate of
change. Their framework, which would be particularly valuable for firms pursuing
strategies that land them in the dynamic or turbulent quadrants shown in Figs. 23.1
and 23.2. suggests that design projects be divided into several categories. with non-
product-specific research and advanced development projects laying the groundwork
for the development of profitable products; radical breakthrough projects creating new
types of products and supporting manufacturing processes (i.e., new product families);
next-generation or platform projects generating major product design and manufactur-
ing changes that provide a base for the refinement of a product or process family;
enhancement, hybrid, or derivative projects that build on existing designs to create
model variants; and alliance or partnered projects that enable a firm to tap into the
technology and design resources of other firms and other product families.3o
The variety-change framework can help firms identify the most suitable mix of
project types. A high rate of model or product~family change will call for research and
advanced development projects, and extensive model or product-family variety for
platform and derivative projects. To compete in the middle of the variety-change
framework would require an appropriate mix of project types.
We suspect that model and product-family variety and rate of change have organi-
zational implications beyond the product design process. Firms operating in the vari-
ous quadrants shown in Figs. 23.1 and 23.2 may be best served by varying manufac-
turing and marketing operations and differing organizational structures.
23.3.4 Standardization and Flexibility

Standardization and flexibility provide the means by which manufacturers and mar-
kets faced with the challenges of variety and rate of change can cope. Standardization
enables manufacturers and customers to resist latent competitive pressures for variety
and change; flexibility enables them to respond to those pressures without incurring
unacceptable damage. Standardization is arguably the more powerful of the two mech-
anisms. It represents the only means by which industry participants can consciously
influence the evolution of model and product-family variety and rate of change. To be
fully effective. standardization requires that manufacturers and markets collaborate.
Standardization employed by a manufacturer within its own product families will
yield limited benefits; the full benefits of standardization accrue only when groups of
manufacturers and customers agree to cooperate.
Firms may explicitly demand that a standard be set and that suppliers conform to it.
as in the case of General Motors' MAP factory communications initiative.}! But more
often. customers create de facto standards. as they did in the home videorecorder
industry.32 If standard models work well or the costs associated with the failure of an
untried approach are high, the market may be able to resist a departure from the stan-
dard for long periods (a case in point is the QWERTY keyboard)Y When change
eventually does occur. industry participants are likely to be surprised.
PRODUCT MODEL AND FAMILYCOMPETITION 23.13
patterns of variety evident at each of these levels into a product competition life-cycle
model that organizes the patterns of variety and rate of change depicted in Figs. 23.1
and 23.2.
The product competition life cycle is initiated by a discontinuity similar to a tech-
nological discontinuity, but not necessarily precipi(ated by technological change. Any
idea sufficiently novel or important to give rise to a new product family can occasion
the requisite discontinuity. When such an idea becomes industry knowledge, compet-
ing firms search for an integrating design concept to support the evolution of the
resulting product family. A particularly volatile technology or market may necessitate
the construction and abandonment of multiple design concepts before the right one is
found. This period of productfamily competition is analogous to the period of ferment
in the technology lifecycle model proposed by Tushman and Anderson.
Innovations are not coordinated across suppliers during periods of productfamily
competition because each firm is intent on following its own development and market-
ing trajectory. Moreover, new products may meet resistance from manufacturers and
customers that delays acceptance of one or more of the product families.37 Rivalries
can ensue at the model level, between families of similar models, and between fami-
lies of dissimilar substitute products. When he traced the early history of the auto
industry. Clark found considerable evidence of this type of product-family competi-
tion.38 Inasmuch as young product families typically contain few models, this is also a
period during which the distinction between product families and models is likely to
be weakest. In fact, given that the earliest model may be identical to the early product
family, the hallmark of this era is competition among product concepts.
Transition from product-family competition occurs when one or more product fam-
ilies achieves long-tenn stability. Often, a single product family will emerge as domi-
nant. At other times, multiple product families may establish niches that permanently
fragment the market and secure long-term futures for all.
As a product family achieves stability, industry forces align to support its position.
Suppliers begin to offer materials, production equipment, and services tailored to the
dominant design. If the product family captures market share, these suppliers enjoy
increased sales volumes and production economies. Resulting Cost reductions offer
further encouragement to competitors to adopt the new dominant design. Growing
availability and variety of attractively priced and configured models reinforce the
dominance of the product family. In the absence of strong patent restrictions, most
competing firms will adopt the dominant design and develop similar product fami-
lies.39
Once the product family makes this transition, competition shifts to model rivalry
which, although likely to generate less technical uncertainty, may be as intense as if it
did. Because competing designs cannot deviate too much from the dominant product-
family standard, firms must exploit small design differences to appeal to different sets
of customers. Inasmuch as the same factors that make models easy to design make
them easy to copy, firms compete by offering superior patterns or portfolios of model
innovations.
Figure 23.6 depicts the transition from product-family competition to model com-
petition with a question mark because any form of product-family competition can
engender any pattern of model competition. This creates the potential for discontinuity
in the middle of a product family's evolutionary development. It also makes it difficult
to construct a single evolutionary model that explains more than a subset of all prod-
uct evolutions.
The potential for uncertainty is demonstrated by the recent history of portable com-
puters. Variety and rate of change in portable computer designs have been driven
largely by the interaction of changes in component technologies and the influence of
23.14 THE NEW-PRODUCTPROCESS
de facto user standards. Consumers generally have compared the performance of

portable computers to that of their desktop counterparts. They have wanted desktop
computer features in a package that is small, Jight, and rugged and can fun for a long
time on batteries.
From 1983 to 1986, manufacturers were hard-pressed to put any useful subset of
desktop features in a transportable package, Jet alone one that ran on batteries. At the
same time, major strides were being made in desktop computing standards, notably in
microprocessor and display technologies. In 1986, component suppliers. operating at
arm's length from computer assemblers, began to offer a stream of new-product mod-
els that enabled portable computers to inch closer to desktop performance. Meanwhile,
the desktop computing standard stabilized on the Intel 80386 processor and VGA
(video graphics array) graphics format.
As consumers decided which subset of desktop performance and features they were
willing to accept, the market split into small niches. Because only they could afford to
develop a new model as each new component emerged, large manufacturers such as
Toshiba, NEC, Compaq, and Zenith dominated the industry from 1986 to 1990.
Then, in late 1990 and early 1991, the portable computer market underwent a mas-
sive change. A flood of small distributors entered the market, selling nearly identical
"notebook" units sourced in Japan, Taiwan, and Korea. Firms with high variety suf-
fered badly. Whereas their models were designed to supply compromise subsets of
desired desktop features and levels of portability, the new notebook computers
demanded little or no compromise. Widespread acceptance of notebook computers
attracted dozens of new firms and triggered a dramatic drop in price. Toshiba, NEC,
Compaq, and Zenith responded by cutting list prices by over 40 percent on all models,
yet comparable units from smaller vendors continued to sell more than 40 percent
below the new prices. Industry reports pegged Toshiba's losses at close to $50 million
in the first half of 1991.40
By late ]991, nearly all manufacturers offered virtually identical notebook comput-
ers that weighed 6 to 7 Ib, contained an Intel 80386SX/SL processor, and had a VGA
display and 40- to 80-Mbyte hard disk. Such was the dominance of this single design
concept that 46 Taiwanese manufacturers pooled funds to commission the design of a
single model, dubbed "Project Teammate," that was shared among all contributing
manufacturers.41 This, more than any other event, illustrates the degree to which the
portable computer had become a commodity.
The major manufacturers had begun to recapture market share by early 1993.
These larger firms were subsequently able to inject new-product characteristics into
the portable computer design, notably color displays, faster processors, longer battery
life, smaller 4-lb) subnotebooks, and pen-driven interfaces. The variety afforded
manufacturers a renewed basis for appealing to radically different sets of customer
needs while remaining firmly rooted in the notebook computer product family.
Moreover, this newfound variety enabled Compaq, Toshiba, NEC, Zenith, IBM. and
other large firms to reestablish control of the market's direction.
The portable computer example illustrates the speed and violence that can attend a
transition in the product competition life cycle. The product and the industry went
from turbulent product-family competition (1983-1990) to commodity model compe-
tition (1990-1992) to dynamic model competition (in 1993). These shifts, which
occurred in the course of less than 3 years. were precipitated by external factors and
blindsided some of the world's most savvy electronics manufacturers ...J2 The story of
portable computers stands as a cautionary tale to those who ignore the potential for
rapid, fundamental shifts in product-family and model structures.
Intensified global competition is quickening the pace of migration along the frame-
work depicted in Fig. 23.6. The interest that has been shown in Wheelwright and
Clark's product development structure and the focus on management of core compe-
emergence of a single design approach that renders other models obsolete. Its accumu-
commercial importance. Because it is more regular and structured, it may lend itself to
lated skill at producing and marketing multiple models would be of little competitive greater generalization and theory building. OUf framework and supporting examples
value, and it would take time for the firm to build the production and marketing skills argue that absence of major technological change does not imply that product compe-
it would need to compete in a commodity product. This was precisely the experience tition is less challenging or less intense. If anything, product competition may involve
of Toshiba and Compaq in 1991.
greater competitive challenges as firms try to achieve a competitive advantage with
smaller and smaller product differences.
A third research opportunity lies in the relationship among product variety, product
23.5 USING THE FRAMEWORK change, and the internal structure and operation of firms. We have presented prelimi-
nary empirical data suggesting that extensive product variety and rapid product change
are mutually exclusive. If confirmed by further research, it would follow that firms
The framework developed in this chapter adopts a multilevel description of product might gain a sustainable competitive advantage by specializing in one dimension or the
competition to help researchers and practitioners characterize patterns of product com- other. If, as we suspect, specialization of this sort is difficult to reverse, firms may face
petition. This description utilizes model and product-family variety and rate of change critical strategic choices that have not previously been identified or articulated.
to conceptually integrate the concepts of product innovation and choice, technological We believe that the product competition life cycle and variety-change framework
change, and diversity in customer perceptions. By explicitly representing these factors can help researchers investigate these as well as many other issues. We suspect, for
at two levels of analysis, the model is able to describe dynamic behavior not account- example, that the patterns of model and product-family competition described here
ed for in previous frameworks and models.
may require very different organizational and managerial approaches. At the same
We believe the framework makes two significant contributions to research on inno- time, a great deal remains to be done to perfect the framework and model, we are
vation and competition: (1) a sensitive and quantitatively applicable tooi capable of acutely aware that both constructs need to be defined with greater precision in order to
describing patterns of variety and change reflected in product competition and (2) the be made more widely applicable. Such refinement can come only from a broader em-
framework's explicit identification of the interactions and tradeoffs between variety pirical testing that exposes latent contradictions and ambiguities.
and rate of change, which offer new challenges for theoretical and empirical research With respect to the latter, we are particularly concerned that whereas our frame-
into product innovation and competition.
work has only two, reality embodies dozens of levels of analysis. The model and prod-
The descriptive aspects of the framework can be used differently. Products for uct-family units of analysis gloss over many important competitive distinctions, in-
which variety and rate of change cannot be quantified can be subjectively classified by cluding components, subassemblies, "platform" designs, brands, divisional product
inspecting patterns of model evolution. If reliable industry definitions of models and lines. business units, industry collaborations, and multinational cartels. Aspects of
product families are at hand, the framework can be used to quantitatively measure and product competition play out in all these levels.
map patterns of variety and rate of change. Variety-change patterns do not. of them- Finally, we hope that other researchers will improve on our definitions of model
selves, indicate competitive success or strategic causality; they do discriminate among and product family. Ours are industry-based and pragmatic, mainly out of conviction,
the behaviors of competitive firms making the same product, even though the firms' but also because we could not do any better. We hope that others will develop stronger
approaches may appear quite similar by other criteria.
definitions that will increase the applicability and relevance of both the variety-change
The examples presented in this chapter contribute to innovation theory by demon- framework and product competition life cycle.
strating that patterns of variety and rate of change, measured at the model and prod-
uct-family levels, provide a means to differentiate among competing firms' product
strategies and behaviors. We have seen that Toshiba pursued a variety-intensive simi-
lar strategy for its portable computer product family and outperformed other firms in 23.6 REFERENCES AND NOTES
the industry during the study period.
By eliciting differences in competitive behavior, the framework sheds light on a 1. Peter Dickson and James Ginter, "Market Segmentation. Product Differentiation, and
number of new and unresolved competitive issues. But although it makes a substantial Marketing Strategy," 1. Marketing. pp. 1-10, April 1987.
contribution to the body of knowledge on innovation. it nevertheless leaves many 2. Peter Dickson, "Toward a General Theory of Competitive Rationality,"' 1. Marketing, pp.
questions unanswered. Perhaps the most important future research opportunity 69-83, Jan. 1992.
involves further identification and mapping of the technological and market forces 3. Theodore Levitt, "Exploit the Product Life Cycle," Harvard Bu.~ineH Review. pp. 8]-92,
that control the dynamics of and interactions among competing models and product Nov.-Dec. ]965.
families. These forces effectively staunched variety in DRAMs and continue to fore-
4. Nariman Dhalla and Sonia Yuspeh, "Forget the Product Life Cycle Concept," HarFard
stall changes in handtools. Given that failure to recognize and control these forces Business Review, pp. 102-]]2, Jan.-Feb. ]976.
accounts for some of the world's most capable computer manufacturers being blind-
5. Roy Rothwell and Paul Gardiner. "Re-innovation and Robust Designs: Producer and User
sided by the] 990 commoditization of portable computers, efforts to understand and
Benefits:' 1. Marketing Management, 3(3): 372-387, ]988.
manage them should reside high on the research agendas of management and innova-
tion researchers. 6. Susan Sanderson and Vie Uzumeri, "Industrial Design: The Leading Edge of Product
Development for World Markets," Design Management 1.. p. 28, Summer 1992.
The competitive dynamics of model competition represents a second important
research opportunity. This form of product competition is of tremendous day-to-day 7. K. B. Clark, "The Interaction of Design Hierarchies and Market Concepts in Technological
Evolution," Research Policy, 14; 235-251. 1985.
27.2 MANAGING MANAGEMENT OF TECHNOLOGY MANAGING INTERFACES 27.3
tion between the different parties is therefore essential, and yet this is one of the areas TABLE 27.1 Instruments for Interface Management
about which most concern is often expressed.
Research studies which confirm the feelings of many managers include those of Orientation Personal Impersonal
Gerstenfeld et al.,4 who concluded that the lack of a continuing, collaborative relation-
Structure Team building in Distance reduction by
ship between R&D and marketing was the main cause for more than half of project Committees Decentralization
failures which occurred for nontechnical reasons. In another study the degree of har- New-product groups Spatial arrangements
mony and joint involvement between R&D and marketing was identified to have a Project teams Planning with decompositioning
significant effect on the success of new-product development projects.5 These results Task forces algorithms
have been supported by more recent studies revealing the effectiveness of information Staff work Programs
transfer and the understanding of user needs to be major variables affecting project Matrix organization Transfer pricing
outcomes.6 Practitioners as well as researchers confirm these findings and agree on the Readiness to integrate various Incentive systems to support
problems facing managers who are continually looking for ways of increasing the effi- subcultures coordination
ciency and effectiveness of the innovation process. In the following sections we there- Consideration of cooperation support-
fore consider some of the basic characteristics of interfaces in general before examining characteristics in choosing personnel
ing more specifically those involving R&D. Factors which are important to the project Process Joint formation of objectives Securing up-to-date information on
level are then discussed, and the chapter concludes with an examination of the impor- and goals plans by information exchange
tant roles which people play in the innovation process. Development of shared visions Networking
for the organization Simultaneous engineering
Avoiding extreme solutions Job rotation programs
for partial or functional objectives Cooperation-supportive company
27.2 ORGANIZATIONAL INTERFACES Learning about differences in culture
activities, e.g., by job rotation or Milestone planning and monitoring
27.2.1 Interfaces Explained further education Quality function deployment
Internal information meetings
In technical terms, interfaces are observed at the point where two or more separate
entities need to be joined together in order to achieve a certain output. Most often,
some amount of material, energy, or information has to be transferred from one to the
other. It is of value to design the interface to ensure that there is no loss of the afore-
mentioned flow of exchanges, and in particular that there is not a one-sided constraint possibility of applying market mechanisms in the strict sense to coordinate the activi-
of the flow. If we observe people who exchange goods, financial resources, or infor- ties. The other approach, essentially a command system, cannot be applied as neither
mation between one another to achieve a common objective, we can identify an analog subunit has hierarchical power over the other. This leaves us searching for other alter-
to the technical interface, namely, the organizational interface between these people. natives, including the following suggestions:
Again, the flows exchanged should not experience significant losses and should not be
constrained in a one-sided manner. To achieve this, organizational interfaces need to 1. Problems arising from organizational interfaces may be handled as a full-time
be managed. However, as people are capable of developing personal objectives and job if these problems occur frequently, if they are relatively important, or if they
producing conflict, this complicates the management problem over and above the absorb a substantial amount of input in their managerial handling. This job can be per-
technical design problem.7 formed by appointing an interface manager such as a coordinator, a project manager,
Specific instruments to handle organizational interface problems therefore need to or a liaison person, or by an individual who has specific skills to perform such a job,
be available. Here, we are concerned with organizational interfaces that occur within for instance, the so-called internal star, who has learned to acquire and to disseminate
one organization, more specifically, within a company. Furthermore, we consider information within an organization to help it to run smoothly.9.10
organizational interfaces which can be observed between two or more subunits of the 2. Organizational interface problems may be handled by the people who are part of
organization in question that are not placed in a hierarchical order such that one is the interface as an activity that is accessory to their main job. Four possible categories
superior to the other and has the power to issue orders, and that cannot resort to a can be identified, which might best be seen as structural-versus-procedural activities,
common superior to solve day-to-day interface problems and conflicts. K This situation and personalized-versus-nonpersonalized activities. In Table 27.1 we give some exam-
has become more and more common as companies have been reengineered by intro- ples for each of these four groups.
ducing strategies of internal decentralization or by establishing group processes, for
instance, in production.
27.2.3 Selection of Managerial Instruments

27.2.2 Approaches to Interface Management
The choice of instruments depends on the conditions under which organizational inter-
This situation rules out two approaches that could otherwise be adopted to solve interfaces occur. A few guidelines have been developed that can help to select appropriate
face problems. As we consider only interfaces within an organization, there is less instruments.ll These are as follows:
MANAGING INTERFACES
27.5
27.4 MANAGING MANAGEMENT OF TECHNOLOGY
1. The level at which the interface problem occurs should be considered. facilitated by establishing a project steering group for large projects or a project
Interfaces may occur between strategic business units (SBUs), between functional review committee for smaller projects that determines when milestones should be
areas within an SBU, and between projects within functional areas, as well as within reached. We shall return to this problem area later after considering some of the char-
projects. If information exchange is involved at all those levels, it is greatly facilitated acteristics of particular interfaces.
by joint committees at the SBU level, and by teams at the project level.
2. The type of exchange should be considered. For example, sequential transfer,
reciprocal transfer, and pooled transfer, in which a multitude of units need to share 27.3.2 R&D and General Management
one common scarce resource, may be considered. In the first case, motivational and
goal conflicts are likely to arise, and in the last case we are likely to observe distribu- In many companies general management is concerned with R&D only on the occasion
tion conflicts, while the case of reciprocal transfers may give rise to both types of con- of major organizational changes and the annual budget decision. The uncertainty
flicts. It is obvious that motivational and goal conflicts can be avoided by sharing inherent in R&D work seems to preclude a more specific inclusion into the strategic
13
information, which, for instance, can be encouraged by participation in a job rotation planning of the company, although this situation is clearly changing. If it is indepen-
program. Conflicts over scarce resources need the development of some allocation dent of corporate objectives, it is too easy for R&D to choose its own long-term goals.
mechanism, such as a program planning rule or a pricing rule. Therefore, one should soon observe severe effectiveness problems. This is particularly
true if the R&D function is centralized, if it is located at a distance from the strategic
3. The reason for creating an interface should be considered. Capacity limits, dis-
business units, and if its budget is taken entirely from the overhead of the company.
economies of scale, and productivity gains from specialization could all be reasons for
Such conditions reduce the felt need to communicate with the other business functions
splitting a task and having it performed by more than one individual. In the first two
and-because of the distance-the likelihood of informal as well as formal exchange
cases standardized qualities need to be achieved to assure comparability of the out-
comes. In the third case the assurance of the appropriate mix of qualities is of prime of information.
Interface problems may be reduced if the head of R&D is represented at the same
importance. Again, this can be achieved by different coordination mechanisms.
level as the other functional areas on the general management committee, whether this
4. Task characteristics determine the choice of the instruments for interface man- is the board in a corporation or the management committee of an SBU to which the
agement. Such characteristics are frequency, repetition, standardization, and complexi- R&D group belongs. It is interesting to observe that board representation of R&D in
ty. It is obvious that parts of a frequently recurring task can be coordinated more 14
larger corporations is often different in Europe, Japan, and the United States. Board
effectively by the use of plans and programs, while a more-or-less unique task may representation may be a prerequisite for continuous involvement of R&D in strategic
require more team building and personal information transfer. planning, 15-18and it must include a discussion of the functions that the company wants
R&D to perform. Thus it is important to agree on the priorities to be given, for exam-
ple, to product support and to innovation through new technologies. To solve the inter-
27.3 R&D INTERFACES face problems at this level is considered as not only a strictly managerial problem but
also a problem of national concern in international competition. 19
27.3.1 Overview
R&D interfaces may be considered at two levels: 27.3.3 R&D and Production
1. R&D is a business function that arises from a specific specialization with the R&D has a considerable influence on the production cost of new products, and it is the
objective of creating new technological knowledge to be used by the company. It can primary supplier of new production technology when a firm develops its own process
be distinguished from other business functions, such as production or marketing, and innovations, such as in the chemical industry. Furthermore, the joint development of
if it is further specialized into a more research-oriented central laboratory and one or new products and their process technology becomes imperative to survive in the com-
more development-oriented decentralized laboratories, we find more interfaces as a petitive battle. The interest of R&D personnel in innovating may not be shared by pro-
consequence of the extension of functional specialization. Little standardization and a duction departments when it tends to. slow production rates, and thus interferes with
small degree of repetitiveness of R&D work should be kept in mind if instruments for reaching their short-term objectives. 20.2 I The work organization and the value systems
interface management need to be selected. of these functional areas can differ as a result of the differing levels of uncertainty
involved and the timeframes to completion in the typical jobs to be performed as well
2. R&D work is split into a number of projects. This gives rise to two types of
as of the differences in the educational level of the average employee in either depart-
interface problems. One problem is due to the fact that the projects compete for the
ment.22.23 Although the two areas have been called "cultural cousins,"24 this does not
joint use of some scarce resource, such as finance, a special type of equipment, spe-
cialized labor, and so on. To solve the resulting conflicts, a preference order over the necessarily mean that they feel familiar with each other.
It has been suggested that the particular interface problems may be eased by joint
projects needs to be developed. This can be supported by different types of project
reward systems that tend to coordinate motives and action plans. However, questions
evaluation schemes which have been well documented in the literature. 12 Another 25
about how to design and administer such systems remain largely unanswered. Joint
problem area results from the fact that the selection of projects and the definition of
formulation of development goals can be considered as a first step toward harmo-
their characteristics (such as performance parameters, cost, time of completion) need
niousness between the functions.26 Job rotation programs that help their participants
to incorporate knowledge that is best available in business functions outside R&D.
understand differences in work conditions and subcultures and that smooth transfers of
The incorporation and the updating of this information in the project planning may be
projects from R&D to production by letting R&D people move into production with improved performance is reflected in a reduced time to market. This can have a signif-
the completed project or joint representation on project management teams appear to icant impact on profitability when product life cycles are being increasingly squeezed
be more efficacious. The more that parallel work needs to be done in the different by new technology and by agile and aggressive competitors in the marketplace.
departments on a specific project as a means to speed up the time to market, the more Having identified some of the key interface problems at the project level, we are in
demand arises for intense, real-time communication exchange. This is greatly facilitat- a strong position to look for ways and means of providing solutions. Here the theory
ed by using CAD systems. and the practice are moving in the same directions, and it is convenient to look at the
approaches suggested under the headings of planning and monitoring, with the man-
agement of uncertainty being a key influence on actions and outcomes.
27.3.4 R&D and Marketing
The R&D-marketing interface could involve sequential transfers in either direction, 27.4.2 Project Planning
depending on whether the company is more interested in technology-push or in mar-
ket-pull innovations. There are two major issues at this interface. The first issue con- As stated in the previous section a key need in project management is to obtain com-
cerns the information exchange on new products and their development at competi- mitment by all people involved not only to the objectives but also to the process by
tively superior levels (which involve timing, cost, and quality). This aspect will be which these goals are most likely to be achieved. The organizational behavior litera-
considered later at the project level. ture emphasizes the importance of clarifying goals, roles, and procedures as early as
The second issue revolves around the definition of a technology strategy and a possible. Doing this is, of course, a team effort and makes it clear that it is not very
marketing strategy per product group that support each other. A high-capacity, tech- sensible to draw up plans for a project without the direct involvement of those who
nology-push strategy is of little value if it is matched with a defensive, low-key, low- will be responsible for carrying them through. Unfortunately, this is not always possi-
capacity marketing strategy. In terms of strategy, empirical research seems to indicate ble in practice, and the results can be seen in the number of failures which occur for
that most companies experience cleavage or discord more than harmony or agreement this reason. The "house of quality" approach is well known as an aid to promoting
between the two functions we discuss here.27-29 This is not always due to a lack of communication between R&D and marketing at an early stage in a project. 37 While
overlapping teams or of meetings that set out to define strategies but about differences this approach can be considered as a planning heuristic that helps to integrate informa-
between the underlying assumptions on the present state of the company (together tion from marketing and R&D, more analytic approaches have also been developed.
with its economic environment), the planning horizons, the available resources, and These approaches use multivariate statistical techniques, such as conjoint measure-
the willingness to bear risks. The identification of such differences can be taken as ment, to arrive at optimal product positioning.38 There is no shortage of techniques
starting points for the selection of instruments for interface management. available to assist in the activity planning process. These are well documented in the
A number of suggestions involve improvements in the integration of marketing and literature and include bar or Gantt charts, various forms of network analysis, prece-
technology planning.30-32 Organizational instruments such as the ones mentioned with dence diagrams, and research planning diagrams or flowcharts.39 All of these have
respect to the R&D-production interface may also be used here. It appears, however, been used in practice with varying degrees of success but the most flexible, and the
that it is more easy to arrange job rotation programs from R&D to marketing than vice one now being increasingly used, is based on the flowchart. The reasons for this are its
versa, and it should be observed that the results of learning by job rotation become ability to handle uncertainty and the clear way it shows important features of projects
effective only with a considerable time lag after taking a new position in a firm.33 It is such as the need to consider repeating activities when the results do not turn out as
also of interest to note that the demands on the managers of both departments to expected and the likelihood of different outcomes. The emphasis on decision points
bridge the interface are slightly different.34.35 Reducing the distance between both and on the prior identification of performance criteria to check progress against also
departments serves to increase communication, which, in turn, helps alleviate inter- makes flowcharts excellent vehicles for monitoring and for resource management. 40A
face problems.36 This idea is relevant to overcome other interface problems as well. simple example of such a flow diagram is shown in Fig. 27.1.
A point which cannot be overemphasized is the real value gained by using such an
approach as a communication device which not only clearly pinpoints issues identified
at the outset of a project but also keeps these in focus at subsequent reviews. Even
27.4 INTERFACES AT THE PROJECT LEVEL more benefit is obtained if a monitoring procedure is established which focuses atten-
tion on key decision points, or milestones, and the progress which is being made
27.4.1 Communication and Commitment toward achieving these goals.
Many interface problems are identifiable at the project level. They can arise for a vari-
ety of reasons, including lack of clarity of objectives, inadequate resourcing, changing 27.4.3 Project Monitoring
priorities, ineffective planning, and poor monitoring of progress. Improvement in all
these areas can be made through better communication across the different functions If we define a milestone as a point at which it is anticipated that an agreed-on level of
within the organization and between all parties who are concerned with and can influ- performance is expected, it is not necessary to force any particular form of planning
ence the outcome. Such improvements inevitably result in a higher level of commit- procedure on a project. In fact, one could foresee situations in which milestones could
ment, a focusing of effort, and an increased likelihood that project objectives will be be identified from past experience with a reasonable degree of accuracy without the
more closely met within agreed-on time and cost estimates. In many cases such use of any formal analysis. Such a situation might arise if the project were very simi-
roles and show the commonality among the various concepts reported in the 27.4.5 Necessary Opponents
literature.43
The basic concept for the division of labor starts from a three-person constellation According to this division of labor in the promotion of the innovation, there can be a
and are based on theoretical ideas which have been modified to include both product corresponding structure of opposition. We argue that opposition is not necessarily of
and process innovations.44 negative influence, but it may raise the quality of the solution.
1. The expert (fachpromoter) has all the technical knowledge regarding the innova- 1. The opposition needs technical experts or technical opponents. They may promote
tion and is the inventor, the idea generator, and the creative genius. The technical a competing idea to raise technical arguments against the innovation.
alternatives, internal mechanisms, and the potential of the new product or process 2. The opposition needs power opponents. According to the principle of countervail-
are known by the expert. ing power, the sponsor may be blocked by means which correspond to this power
2. The sponsor (machtpromoter) disposes resources and starts the process of decision basis. So the power opponent needs high status and/or control of finance or other
making and the realization of the innovation. Decisions on the budget, the capaci- resources. Power opponents restrict the budgets or the capacities for the innovation
ty, and the personnel in favor of the innovation must be based on a broad view and and/or may facilitate investments in competing projects. Both power promoters
long-term perspective of the firm's strategic objectives. The sponsor is a doer and opponents have competing points of view about strategies and long-term
whose promises can be relied on and who has the power to block or hinder opposi- objectives.
tion. 3. The opposition needs counterchampions who act as overall opponents. They have
3. The champion (process promoter) acts as a linkage having the knowledge of the to activate the networks of all those who are silent spectators and might join the
organization, and knowing who should be concerned with the innovation, thus con- opposition. They will identify and coalesce the diffused pockets of resistance.
necting the sponsor with the expert. The strength here lies in the ability to translate They use the informal relations to spread the spirit of opposition. Their most
the technical language of the innovation into one which is commonly used in the important contribution to the innovation process will be that the people in leader-
organization. By becoming a salesperson of the new idea, the champion is able to ship positions will be alerted and the organization as a whole will have a better
develop a plan of action and, using diplomatic talents, provides access to different understanding of the innovation. As a result, their activities will induce manage-
people within the organization. ment to engage in the problem.
In the innovation process the activities of the expert are essential for bringing forth the Is promotion and opposition a question of position or action? If we look into the basis
technical knowledge for information search and processing, alternative development, of power, it seems to be a question of position. This refers mainly to the sponsor and
and evaluation. The champion, who is the navigator of the innovation process evaluat- to the power opponent as well as to the experts. On the other hand, if we look on the
ing the potential of the idea in terms of its salience for the firm, must understand the champions, we will find that either promotion or opposition consists of certain activi-
economic implications, and also needs information about long-term goals and strate- ties, namely, initiating, stimulating, connecting, facilitating, and encouraging.
gies without formally defining them. The champion brings the new ideas to the notice
of the sponsor, arranges for support and allocation of resources, determines the course
of action by decomposition of the problem, and decides on the sequence and timing of 27.4.6 The Roles in a Dynamic Perspective
actions. This person becomes involved in developing a "montage" of partial decisions
to a working whole; steers the goal formation process; resolves conflicts between Most of the studies referred to above have concentrated on projects with narrowly
competing goals, different departments, and controversial information; and helps the defined focus: in one given project, in a given span of time, in one given organization, in
top management to determine the fit between the innovation and corporate strategy. one given environment. But in reality the locus of decision making must move higher up
The champion "sells" the innovation to all members of the firm who are likely to be in the organization as the scope of the project is expanded. The innovation problem may
affected by it and explains, teaches and motivates, deals with opponents by getting the start as a research question in a laboratory. But as the project moves into the develop-
activities legitimized by power centers, and, if necessary, gets opposition blocked by mental phase, other subunits, such as engineering, design, and production, have to par-
the sponsor indirectly. ticipate in the project. Coordination problems will arise and will require hierarchical
The division of labor is efficient only when the members of the innovation team solutions. In a third stage the entire organization, including marketing, finance, invest-
work closely together to develop common goals. In successful cases they meet without ment, and personnel departments, will be engaged in the innovation process. The origi-
formal procedures. They are not isolated from one another and maintain frequent com- nal roles of the incumbents will not be the same when the project is moving from one
munication. They develop and speak a language of their own. They work on mutual stage to the other. People who acted as sponsors on the laboratory base will have to
respect. Their communication is open without any reservation for fear of reprisal. champion the project in the development and construction unit. And if the project moves
Team members are hard-working people and engage themselves enthusiastically. The even higher up in the hierarchy, the same persons may have to act as experts. So in each
traditional view looks on promoters as members of one organization, thus conceptual- of these stages new sponsors and champions have to be found and must meet the chal-
izing the model as an intraorganizational phenomenon. The modern development in lenges of these roles. On the other hand, the communication lines among the people who
technology and organizational processes requires a broader view of the innovation assumed these roles in former stages must remain open to maintain the continuity for the
process, involving multiple organizations in a cooperative, interorganizational mode. flow of information. And moreover, the acting promoters must accept that they have to
Thus, corresponding and interacting promoter teams will emerge in the supplier firms behave and to articulate themselves quite differently, but according to their respective
as well as in the user firms.45 roles. Figure 27.4 shows the development and the roles of the project.
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cessing requirements of the new-product development effort.3.4 With greater levels of

uncertainty associated with a new technology or project, greater amounts of informa-
tion must be processed between decision makers during development. If the technolo-
gy and the market are well understood, then planning can be more certain and precise.
However, if these aspects are not well understood, then information must be acquired
during the development effort. This may necessitate ongoing changes in priorities,
schedules, resource allocations, staffing requirements, etc. Therefore, the greater the
levels of uncertainty, the greater the amount of information that must be processed
among decision makers during development.5,6
Uncertainty can be conceptualized as the difference between the amount of infor-
mation required to complete a task and the amount of information previously pos-
sessed by the organization. With generally increased levels of uncertainty, integration
is affected because planning and decision making are subject to ongoing modification.
This increases information-processing demands across the organization. Specific
sources of uncertainty include customer uncertainty, competitive uncertainty, techno-
logical uncertainty, and resource uncertainty. Customer uncertainty refers to unreal-
ized user requirements.7,g Competitive uncertainty is a function of the absence of
information regarding the activities of competitors.9,lo Technological uncertainty
refers to the lack of knowledge regarding the solution of technical problems.11
Resource uncertainty refers to the absence of information regarding the financial,
technical, or human resources needed (human resource uncertainty) to successfully
develop the new prodUCt.12,13 Specifically, in this fourth category, human resource
uncertainty refers to incomplete information regarding the staffing needed to complete
the project. In some cases, this includes uncertainty regarding manufacturing capabili-
ties. Financial resource uncertainty refers to the level of uncertainty regarding the
costs of development. Technical resource uncertainty is the uncertainty that exists rel-
ative to the laboratory equipment or pilot plant facilities required. 14,15
Figure 28.1 illustrates how these four major sources of uncertainty combine to
influence the general level of uncertainty that many organizations face in starting the
development of a new-product innovation,16 Customer uncertainty and technological
uncertainty are usually positively related. Greater customer and technical uncertainty
generally brings concomitantly greater uncertainty regarding the competitive environ-
ment. These three factors jointly affect the organization's resource uncertainty. 17-19 As
these combined levels of uncertainty increase, the requirements for integration both
within R&D and between R&D and other's (e.g., marketing, manufacturing, procure-
ment) increase. When contractors are involved, integration demands increase further
across these interfaces.
28.3 ORGANIZATIONAL STRUCTURE AND

INTEGRATION
28.3.1 Hierarchy
In order to achieve integration across functional departments or groups, the most basic
structural mechanism is the hierarchy itself. Under conditions of low uncertainty the
organizational hierarchy may be the primary mode of cross-functional integration.
However, with even minimal lateral information processing needs, overreliance on
hierarchical coordination becomes inefficient and problematic.
28.4 MANAGING MANAGEMENT OF TECHNOLOGY INTEGRATION IN TECHNICAL ORGANIZATIONS 28.5
between R&D and marketing divisions, or between corporate research labs and divi- organizational integration. In designing the 777, Boeing created approximately 240
sional product development organizations. Liaison roles may also be necessary in teams which were labeled "design-build teams." These teams included cross-function-
cross-organizational coordination, such as interfaces between government laboratories al representatives from engineering design, manufacturing, finance, operations, cus-
and contractors. The creation of these integrating roles naturally bypasses the lines of tomer support, customers, and suppliers.26 The teams were organized around specific
communication involved in the upward referral of requests for information or techni- components, systems, or parts of the aircraft, rather than around their functional spe-
cal assistance. Thus, these roles overcome organizational blockages that may result in cializations.
selective filtering, time delays in response, or simply the failure to initiate needed Boeing's use of customer participation on these design-build teams was unprece-
communications.22,23 dented in commercial aircraft development. Commercial airlines collaborating with
Boeing on the design included United, American, Delta, British Airways, Quantas,
Cathay Pacific, Japan Airlines, and All Nippon AirwaysY In total, these customer air-
28.3.4 Temporary Cross-Functional Teams lines identified approximately 1200 items that they wanted in the design of the air-
craft. Many of the most important customer needs were in the area of maintainability.
The next-higher level of integration involves the temporary cross-functional team or Traditional approaches to customer input (viz., reliance on the first level of integra-
task force. Liaison positions work well for coordination between two units or function, i.e., hierarchical integration) would have taken the form of correspondence or
tional organizations. However, when a technical problem or decision arises which meetings at an upper management level. However, by having actual airline mainte-
requires inputs from several units or functions, a temporary cross-functional team is nance personnel participate on the teams, improvements resulted that would otherwise
needed.24 These teams may be composed of representative managers and/or technical be imperceptible to design engineers and airline management. 28 Typical examples are
specialists from the relevant functional groups, departments, or divisions. Some team enlarging push buttons on exterior access panels so that maintenance crews working in
members may be assigned temporarily, but on a full-time basis. Others may be cold climates would not need to remove gloves, redesigning the avionics bay so that
assigned on a temporary basis. Personnel assignment decisions will naturally be a workers could physically turn around, and moving light positions to improve night
function of the task requirements. These types of teams must be distinguished from visibility for maintenance crews.29
permanent cross-functional teams. The temporary teams are true temporary groups. Suppliers were also included on the design-build teams. For the Boeing 777, there
They exist only until the technical problem is solved or design decision is reached. were a total of 545 suppliers, with 58 of these headquartered in over 12 different coun-
tries. Integration was facilitated with the use of three-dimensional CATIA computer
aided design software, and the networking of over 2000 workstations. This allowed
28.3.5 Permanent Cross-Functional Teams the suppliers to have real-time interactive interface with the design data.30 Moving to
100 percent digital design meant the virtual elimination of traditional methods of
The next progressive mode of integration extends the temporary cross-functional team using blueprints, large mockups, and master models. It also meant that simultaneous
to the permanent (or semipermanent) cross-functional team.25 In the permanent team, supplier and manufacturing inputs could facilitate concurrent engineering. CATIA pre-
some individuals may be assigned on a full-time basis, while other personnel are assembly checks allowed the engineers to visualize parts and interrogate the system to
assigned on a part-time basis. In this sense, the temporary and permanent teams are determine costly misalignments and interferences. CATIA was also used to locate
very similar. Again, these assignment decisions are a function of the task require- gaps, confirm tolerances, and analyze balances and stresses on parts and systems. This
ments. The use of cross-functional teams must be differentiated from a project organi- system allowed tool designers to get updated design data directly from engineering to
zation, in that personnel typically continue to report to their functional managers in speed the development of tooling.31 This level of integration was made possible by the
their functional organizations. cross-functional and cross-organizational design-build teams, and by networking the
Current developments in the use of teams and concurrent engineering organizations suppliers with Boeing's manufacturing and engineering functions. The result was a
are indicative of the recognition of the inadequacies of traditional cross-functional reduction of rework and factory floor changes by more than 50 percent compared with
integration techniques. Overutilization of functional structures has resulted in lethar- the Boeing 767-the predecessor to the 777.32 More importantly, because the design-
gic sequential new-product development processes. Current applications in reengi- build teams incorporated customer needs and manufacturing requirements, the 777
neering organizational structures and processes are a response to a fundamental prob- development was a cost-based design at the outset. This is a significant contrast to the
lem of poor integration in the past. The movement away from sequential design and classic sequential approach in which the product moves from design to engineering to
development processes, and toward concurrent processes and the use of cross-func- manufacturing, and then finally to the customer.33
tional teams, will reduce cycle times and improve coordination in product develop-
ment in many industries. This movement away from sequential to concurrent coordi-
nation is facilitated by the use of computer-aided design and other information system 28.3.7 Project Manager Positions
innovations.
Leadership is a central issue in the coordination of the activities of cross-functional
teams. With small numbers of teams, leadership and coordination problems can be
28.3.6 The Boeing 777: An Example of Effective Integration managed by the relevant functional managers and/or by the personnel on the teams. In
some cases, leadership responsibilities can be centered in the department where the
The development of the Boeing 777 aircraft is an excellent illustration of the effective work (or technical problem) is centered. Autonomous (or self-managing) teamwork
use of cross-functional teams to achieve optimal levels of cross-functional and cross- principles can often be used in these situations. Although intragroup coordination
problems may thereby be overcome, coordination with other functional units and other
cross-functional teams may still be problematic. In any case, this issue inevitably
leads to the next progressive form of integration: the project or product manager. At
this stage of integration, the project or product managers play integrating roles which
cut across departments. The creation of this cross-functional role in effect creates a
matrix organization, with significant capacity to achieve organizational integration.
28.3.8 Functional Matrix Structures
Three basic types of matrix structures exist: the functional matrix, the balanced matrix,
and the project matrix. In the functional matrix system, a project manager with limited
authority is designated to coordinate the project across different functional areas. In
this model, functional managers retain primary responsibility and authority for their
specific segments of the project. Some personnel may be assigned from the functional
areas to the project manager on either a full-time or part-time basis. However, much of
the work is conducted in the functional areas, with the cross-functional team members
working with the project manager, who then coordinates with the functional managers.
In the functional matrix, the project manager operates primarily on the basis of expert
or referent power.34 A major problem with this model is that the project manager's lim-
ited formal authority can severely restrict that person's ability to coordinate efforts
across departments. One common solution to this problem is to give the project manag-
er budgetary authority. This creates the so-called balanced matrix structure.
28.3.9 Balanced Matrix Structures
In the balanced matrix, the project manager is assigned to "oversee" the project. The
project manager shares the responsibility and authority for completing the project with
the functional managers. Project and functional managers jointly approve a wide range
of decisions relevant to the completion of the project. Thus, this approach is some-
times referred to as the "shared authority" matrix structure.
28.3.10 Project Matrix Structures
The third form of matrix is the project matrix. In this form the project manager assumes
the primary responsibility for completing the project and thus assumes significant
authority. In this model, the role of the functional managers is to assign personnel as
needed and to provide technical expertise. In this model, the functional managers serve
as "landlords" and managers of the up-to-date repository of available resources.
It is important to note that each of these three types of matrix structure has equal
capacity in terms of integration. Therefore, the decision regarding which matrix struc-
ture should be utilized is a function of the personnel needed in functional-versus-pro-
ject tasks, the determination of where authority should be concentrated on the basis of
strategic priorities and organizational size.
28.3.11 Project Organization
The highest level of integration is achieved in creating a project structure by going

one step beyond the matrix and creating completely self-contained projects.35 If one
28.4 INTEGRATION AND COST-EFFECTIVENESS: 28.4.2 Problems with This System and the Decision to Change It
THE CASE OF THE U.S. ARMY MISSILE
As early as 1984, studies were being initiated to modify the project management sys- !,
COMMAND tem MICOM had been using for the previous 20 years.38 Thus, the initial impetus for .
change actually preceded the Department of Defense (000) budget cutbacks follow-
To illustrate the issues involved in achieving the necessary levels of integration in ing the decline of communism in eastern Europe and the former Soviet Union. There
light of the cost-effectiveness criteria, the following case example is given. This case was concern within 000 that some project offices had become self-perpetuating enti-
is based on recent organizational changes at the U.S. Army Missile Command ties, lingering on long after the need for intensive management had passed. In many
(MICOM), implemented in response to the Department of Defense budget reductions cases, project offices had become inflexible organizations that resisted needed changes
and the need to improve efficiency in managing the development of major weapon in structure, staffing level, and skill mix as their programs evolved through the system
systems. MICOM is responsible for research, development, production, and world- life cycle. Concern also emerged over the practice of establishing project offices as I
wide support of U.S. Army missile systems, including foreign military sales. self-contained separate organizations which resulted in some duplicating of functions. I
This self-containment made it quite difficult to reorganize, reduce, or terminate a pro- '
ject organization without extensive personnel turbulence.39 Further impetus for the I
28.4.1 Historical Background of the MICOM Problem modification of MICOM's project management structures was brought about by pres- '
I
sures stemming from the experiences of both the Air Force and the Navy, who had
During the 1950s, early missile systems developed at Redstone Arsenal in Alabama successfully utilized matrix structures since the early 1960s.
relied predominantly on functional structures. In managing the development of these Despite these pressures for changes, it is important to note that MICOM's project
systems across functional units, several modes of integration were used: informal con- management system worked extremely well in terms of achieving internal project inte-
tact, liaison positions, temporary cross-functional teams, permanent cross-functional gration, as well as the necessary integration with MICOM's defense contractors. As
teams, and project managers with limited budget authority. Managing systems across discussed previously, this is a primary strength of the project organization system.
functional areas and contractors proved to be cumbersome for MICOM and coordina- Integration is maximized; but it is maximized at significant cost. On the basis of the
tion problems persisted. logic of Fig. 28.2, moving back one level of integration from self-contained project
In 1958 the Army Ballistic Missile Agency (ABMA) was created. This was the organizations to a project matrix system had the potential to reduce MICOM's overall
immediate predecessor organization to MICOM. During this same time frame, the development costs. From a cost-benefit perspective, strong arguments could be made
National Aeronautics and Space Administration (NASA) was created, and the for MICOM to move to the project matrix system.
Marshall Space Flight Center was born under the leadership of Werner Von Braun.
With this creation of two separate organizations, from an integration perspective, what
occurred next is most interesting.
28.4.3 Implementing the Project Matrix System at MICOM
Both NASA and the ABMA were experiencing a wide range of integration prob-
lems given the nature of the magnitude and complexity of their engineering projects. In moving the large complex MICOM organization back one level of integration from
The solution which NASA adopted in 1961 was the use of matrix structures, which a project organization (with functional laboratories) to a project matrix structure, pro-
assigned individuals from NASA's functional science and engineering organizations to ject office personnel were first grouped into three categories: project core personnel,
program and project offices. This system allowed flexible staffing and the optimal use project direct-support personnel (referred to as collocated support personnel), and the
of specialized technical talent. This system of project matrix structures continues to project general-support personnel.
this day within NASA. The project office core consisted of the project manager (and deputy), administra-
The Army adopted a very different organizational approach by continuing to use tive staff, and secretarial positions. This core is relatively stable and changes only as
their traditional functional directorates with their technical divisions. In 1961, this the project passes major milestones in its life cycle. The project direct-support posi-
structure was augmented with the project (~ff'ice concept, which involved placement of tions or collocated engineers are dedicated to full-time support for a single project
a complete project management office for missile system development under the office. Collocated support positions are not as stable as the core positions and can be
direction of a project manager and a project office. The project manager was responsi- transferred to other project offices or functional units based on workload, skill require-
ble and accountable for the successful accomplishment of all phases of the developments, and shifting resource priorities. However, movement of collocated personnel is
ment and deployment of a particular weapon system. The decision to create a project limited because of the learning curves involved on most missile systems. The general-
organization occurred when a new concept or prototype had been developed in the support personnel are assigned to the functional laboratory directorates in the
functional laboratory directorates, or developed in conjunction with outside contrac- Research, Development and Engineering Center (RDEC). These personnel provide
tors. Once feasibility had been determined, a project office was then created to inten- matrix support to the project offices either through temporary full-time assignment or
sively manage the development, production, deployment, and support of the new sys- temporary part-time assignment, with time split between support for a particular pro-
tem. However, the approval to create each new project office was variously restricted ject office and assignments in their functional (RDEC) directorate.4o
to the Secretary of Defense, the Secretary of the Army, the Army Chief of Staff, and In this project matrix system the project office core and the collocated engineers
the Commanding General of the Army Material command.3? Thus, MICOM did not (i.e., direct-support personnel) are supervised by the project manager. The general-
have the sole authority to create any project management structures that they thought support personnel are supervised by their respective functional manager. The general-
were needed. This system remained in place with relatively little change from the support personnel receive their performance appraisals from the functional (RDEC)
early 1960s through the late 1980s.
TABLE 28.1 Changes in MICOM Modes of Integration Over Time tively by the project offices than had been the case in the past. The change to the pro-
ject matrix system also reduced duplication in some areas, improved flexibility in
Prior to 1961 1961-1988 1989 to present assigning personnel, and aided in maintaining optimal staffing based on project
Hierarchy Hierarchy Hierarchy requirements. One primary benefit of MICOM's move to a matrix system was the
avoidance of severe layoffs and major personnel disruptions caused by the DOD's
Informal contact Informal contact Informal contact budgetary reductions during the early 1990s.43 Clearly, this was a significant benefit to
Liaisons Liaisons Liaisons the long term viability of the MICOM organization and the health of the Huntsville
Temporary cross-functional teams Temporary cross-functional teams Temporary cross-functional teams community.
Permanent cross-functional teams Permanent cross-functional teams Permanent cross-functional teams This case clearly illustrates that achieving integration is a problem of optimization.
Because of integration requirements, organizational design decisions must be made in
Project managers Project managers Project managers
light of overall cost-effectiveness criteria.
Project organizations Project matrix structure
28.5 NONSTRUCTURALFACTORS
manager with input from the appropriate project office. The normal work location for INFLUENCING INTEGRATION
the project office core personnel and the collocated or direct-support engineers is the
project office. The normal work location for the general-support personnel is the func- The integration modes discussed thus far and presented in the MICOM and Boeing
tional (RDEC) directorate, with possible temporary assignment to the project office cases are structural in nature. It would be unrealistic to conclude that the level and
location when requirements necessitate this action. The project manager has the quality of integration achieved is exclusively a function of these structural modes of
authority for the selection of personnel for the project office core. Functional (RDEC) integration. In achieving optimal integration, other factors must also be considered.
management has the authority for selection of personnel for the direct-support posi- These factors could be described as organizational culture or behavioral. Let us now
tions (i.e., collocated engineers) and for general support (i.e., laboratory directorates). turn our attention to these matters.
Long-term training and career development are the responsibilities of the functional
managers for the general-support personnel and collocated engineers, with input from
the project manager in the case of the collocated direct-support engineers.41
28.5.1 Supportiveness
Because each successive mode of integration is inclusive of the preceding modes
(see Fig. 28.2), the preceding modes of integration were implicitly utilized in One organizational cultural characteristic which is important for effective integration
MICOM's matrix system. These included the organizational hierarchy, informal direct is a pervasive norm of supportiveness. An attitude of supportiveness is important to
contact across groups and organizations, liaison positions, temporary cross-functional stimulating initiative in solving cross-organizational problems, and to energizing
teams, and permanent cross-functional teams. In the past, these modes of integration efforts that exceed specific individual or group responsibilities in resolving cross-
operated effectively within the project organizations and across the interface with the functional problems.44 In addition to cross-functional and cross-organizational sup-
contractors. The weakest area of integration existed between the functional laborato- portiveness, management must be supportive of the efforts and cognizant of the prob-
ries and the project organizations. With the implementation of the project matrix sys- lems encountered by engineering personnel.45A6 This includes helping subordinates
tem, conscious effort was applied to enhancing liaison positions and temporary cross- obtain the necessary resources, technical information, or assistance when needs arise.
functional teams to facilitate integration between the project offices and the functional To improve internal supportiveness, each individual should meet with the manager one
laboratory directorates. A chronology of those changes is presented in Table 28.1. level above his or her immediate supervisor as part of the annual evaluation process.
This could provide useful guidance to the engineer, feedback to the manager on how
those supervisors who report to her or him are performing, and give the manager addi-
28.4.4 Achieving Integration under Cost-Effectiveness Criteria tional insights into problems and challenges that subordinates two levels below are
encountering.
In the MICOM illustration, moving back one level of integration from a project orga-
nization to a project matrix system was not accomplished without significant friction.
Many of the project offices resisted the change, performance evaluations were compli-
28.5.2 Management of Conflict
cated by the collocation of engineers, and the dual reporting relationships created role
conflict. In addition, accountability and control of RDEC (functional) support contin- A second organizational cultural characteristic which affects integration is openness in
ued to be a problem, and the budgeting and personnel approval processes were com- the management of conflicts.47A8 Here the assumption is that open communication
plicated by the changes.42 regarding disagreements on technical or administrative matters is ultimately in the
These implementation problems were addressed with varying degrees of success by best interest of the organization. Research on group decision processes has repeatedly
MICOM military and civilian managers. However, what is important is that under shown that superior decisions result when a group has one or more individuals assum-
conditions of major DOD budget reductions, overall efficiencies were realized. ing the role of devil's advocate as opposed to a situation where individuals are reticent
Technical expertise within the functional laboratories (RDEC) is utilized more effec- and afraid to express disagreement.49 Particularly where the higher-level modes of
integration are utilized, conflict can commonly result from staffing decisions (e.g., it is important that accountability also be increased. In cases in which engineers both
matrix assignments resulting in dual reporting arrangements) or from the problem of report to a functional manager and perform work for a project manager, it is important
different frames of reference that are common on cross-functional teams. 50 Under that annual performance appraisals encompass inputs from both managers.
these conditions, it is important that higher-level managers provide clear guidance and
prioritize resource allocations consistently with the organization's strategic objectives.
28.6 CONCLUSIONS
28.5.3 Open Communication
Because today's organizations employ personnel with dissimilar specialties from
Closely related to the need for openness in the management of conflict is the need for many different disciplines who work on complex technologies, organizational integra-
more open communication in generaJ.5I.52 Typical problems which adversely affect tion is vitally important but difficult to achieve in modern technology-based organiza-
integration include a lack of attention to downward communication of information on tions. The situation is further complicated by the existence of various organization
the part of higher-level managers, insufficient staff meetings that facilitate two-way structures for achieving integration that vary in their cost-effectiveness. Thus, the
communication, and an insufficient number of meetings crossing functions or projects choice of the most appropriate integration structure must be viewed as an optimization
aimed at minimizing duplication of effort and maximizing the flow of technical infor- problem in balancing complex tradeoffs in uncertain environments.
mation. In addition, as noted in the Boeing 777 case above, enhanced external com- In general, managers should always favor the use of the least complex organization
munication with suppliers, customers, contractors, and manufacturing engineers in the structure that has the capability to achieve the required levels of integration. Managers
design process will reduce later design changes, reduce the developmental cycle time, should always attempt to develop appropriate organizational cultures and use the best
more effectively meet customer requirements, improve maintainability, and improve state-of-the-art management knowledge to facilitate the effectiveness of their integra-
product quality. tion structures, thereby increasing the effectiveness/cost ratios of these structures.
The current conventional wisdom favors the use of matrix structures or project
organizations as cure-all medicines for organizational integration problems. However,
28.5.4 Organizational Identity as this chapter has shown, these approaches can be unnecessary or wasteful.
Moreover, the indiscriminate use of overpowerful methods can create problems more
Another organizational culture factor which can influence effective integration is a serious than the ones they were intended to solve.
strong sense of organizational identity and identification with the mission and goals of Managers will always face the dilemma between creating a highly integrated,
the organization. This is to be contrasted with a situation in which the sense of identi- steady-state, efficient organization versus a fast-response, environmentally adaptive
fication is primarily with a division or a department of the organization. When the organization. Gradations of each may be achieved in various combinations by blend-
departmental or divisional identification prevails, "we versus them" attitudes can ing elements of functional and project organization structures. But managers must
develop which reduce the potential for effective integration across departments or remind themselves that these blends are compromises that may not fully realize the
divisions. With a higher sense of organizational identity, individuals feel a sense of best features of either extreme. The best long term organization design is necessarily
pride in belonging to the greater organization, loyalty and esprit de corps are high, and the one that preserves the manager's flexibility; it meets the minimum integration
individual or group interests are subordinated to the overall organizational mission requirements for today but can quickly transition to tomorrow's lower or higher inte-
and goals. gration needs. Thus, tomorrow's long-term successful managers of high-technology
A number of factors seem to influence the development of identity. This cultural enterprises will be ultimately familiar with all the methods shown here and in Fig.
characteristic will be enhanced to the degree that the leadership of an organization can 28.2 and with the nonstructural factors discussed in this chapter. They will be compe-
create a sense of mission and articulate a specific goal or goals with which the mem- tent in flexibly applying these methods and factors appropriately, in quick response to
bers of the organization identify. Organizational identity, loyalty, and commitment will emerging environments and dynamically changing needs.
also be enhanced by the degree to which the organization is viewed as an elite group,
pursuing technically challenging goals of significant importance. It is primarily the
responsibility of leadership within the organization to create and foster these values. 53
28.7 REFERENCES
28.5.5 Decentralization of Responsibility I. J. D. Thompson, Organi~.ations in Action. McGraw-Hili, New York, 1967.
2. P. R. Lawrence and J. Lorsch, "Differentiation and Integration in Complex Organizations,"
Another factor which can affect the quality of intraorganizational and interorganiza- Administrative Science Quarterly, 12: 1-47, 1967.
tional integration is the decentralization of responsibility and authority. 54-56
3. J. R. Galbraith, Designing Complex Organizations. Addison-Wesley, Reading, Mass., 1973.
Decentralization allows individuals and teams at the lower levels who possess the nec-
4. R. Moenaert and W. E. Souder, "An Analysis of the Use of Extrafunctional Information by
essary expertise and information to make critical decisions, and then obtain approvals
R&D and Marketing Personnel," J. Product Innovation Management, 7: 213-229,1990.
for these decisions from higher level management. This will encourage higher order
need fulfillment, which, in turn, will foster high degrees of motivationY In increasing 5. Galbraith, op. cit. (Ref. 3).
responsibility at the lower levels, that is, empowering individuals to a greater degree, 6. J. R. Galbraith, Organization Design, Addison-Wesley, Reading, Mass., 1977.
INTEGRATION IN TECHNICAL ORGANIZATIONS 28.15
37. Department of the Army, Army Material Command Program Management Matrix Support,
7. Moenaert and Souder, op. cit. (Ref. 4).
Aug. 11, 1986.
8. R. Moenaert and W. E. Souder, "An Information Transfer Model for Integrating Marketing
38. Ibid.
and R&D Personnel in New Product Development Projects," J. Product Innovation
Management. 7: 91-107,1990. 39. Ibid.
9. K. Clark, "The Interaction of Design Hierarchies and Market Concepts in Technological 40. Ibid.
Evolution," Research Policy, 14: 235-251,1985. 41. Department of the Army, MICOM regulation 10-9, April 3,1989.
10. R. Duncan, "Characteristics of Organizational Environments and Perceived Environmental 42. H. H. Harris, 1. D. Sherman, and E. A. Olsen, Phase II Assessment of RDEC Matrix
Uncertainty," Administrative Science Quarterly, 17: 313-327,1972. Reorganization, U.S. Army Missile Command, DAAHOI-91-D-R002, June 1992.
II. J. Utterback, "The Process of Technical Innovation within the Firm," Acad. Management J., 43. Ibid.
14: 75-88, 1971.
44. A. Gupta, S. Raj, and D. Wilemon, "Managing the R&D-Marketing Interface," Research
12. R. Cooper, Winning at New Products, Addison-Wesley, Reading, Mass., 1986. Management, 30(2): 38-43, 1987.
13. A. Rubenstein, A. Chakrabarti, R. O'Keefe, W. Souder, and H. Young, "Factors Influencing 45. A. Abbey and J. Dickson, "R&D Work Climate and Innovation in Semiconductors, Acad.
Innovation Success at the Project Level," Research Management, 19: 15-20,1976. Management J., 26: 362-368,1983.
14. Moenaert and Souder, op. cit. (Ref. 4). 46. S. Kozlowski and B. Hults, "An Exploration of Climates for Technical Updating and
15. Moenaert and Souder, op. cit. (Ref. 8). Performance," Personnel Psychol., 40: 539-563, 1987.
16. Moenaert and Souder, op. cit. (Ref. 4). 47. W. E. Souder, Managing New-Product Innovations, Lexington Books, Lexington, Mass.,
1987.
17. F. Milliken, "Three Types of Perceived Uncertainty about the Environment: State, Effect, and
Response Uncertainty," Acad. Management Review, 12: 133-143, 1987. 48. Souder and Sherman, op. cit. (Ref. 23).
18. Moenaert and Souder, op. cit. (Ref. 4). 49. I. L. Janis, Victims of Groupthink, 2d ed., Houghton-Mifflin, Boston, 1982.
19. Moenaert and Souder, op. cit. (Ref. 8). 50. S. M. Davis and P. R. Lawrence, Matrix, Addison-Wesley, Reading, Mass., 1977.
20. Galbraith, op. cit. (Ref. 3). 51. P. Shrivastava and W. E. Souder, "Phase Transfer Models for Technological Innovation,"
Advances in Strategic Management, vol. 3, JAI Press, Greenwich, Conn., pp. 135-147, 1985.
21. Ibid.
52. D. Ford and C. Ryan, "Taking Technology to Market," Harvard Business Review, 59(2):
22. W. E. Souder, and A. Chakrabarti, "The R&D/Marketing Interface: Results from an
117-126,1981.
Empirical Study of Innovation Projects," IEEE Transact. on Engineering Management, 4:
88-93, 1978. 53. J. H. Morris and J. D. Sherman, "Generalizability of an Organizational Commitment Model,"
Acad. Management J., 24(3): 512-526, 1981.
23. W. E. Souder and J. D. Sherman, "Organizational Design and Organizational Development
Solutions to the Problem of R&D/Marketing Integration," in R. Woodman and W. Pasmore, 54. Abbey and Dickson, op. cit. (Ref. 45).
eds., Research in Organizational Change and Development. vol. 7, JAI Press, Greenwich, 55. M. McCarrey and S. Edwards, "Organizational Climate Conditions for Effective Research
Conn., 1993, pp. 181-215. Scientist Role Performance," Organizational Behavior and Human Performance, 9:
24. Ibid. 439-459,1973.
25. Galbraith, op. cit. (Ref. 3). 56. W. E. Souder, "Organizing for Modern Technology and Innovation: A Review and
Synthesis," Technovation. 2: 27-44, 1983.
26. P. M. Condit, "Focusing on the Customer: How Boeing Does It," Research-Technol.
Management. 37(1): 33-37, 1994. 57. J. D. Sherman, "The Relationship between Factors in the Work Environment on Turnover
Propensities among Engineers and Technical Support Personnel," IEEE Transact.
27. J. P. Woolsey, "777: A Program of New Concepts," Air Transport World. pp. 60-64, April
Engineering Management. 33(2): 72-78, 1986.
1991.
28. Condit, op. cit. (Ref. 26).
29. P. Proctor, "Boeing Rolls out 777 to Tentative Market," Aviation Week & Space Technol., pp.
36-51, April II, 1994.
30. Ibid.
31. R. G. 0' Lone, "Final Assembly of 777 Nears," Aviation Week & Space Technol .. pp. 48-50,
Oct. 12, 1992.
32. Proctor, op. cit. (Ref. 29).
33. Condit, op. cit.
34. J. R. French and B. Raven, "The Bases of Social Power," in D. Cartwright, ed., Studies in
Social Power, University of Michigan Press, Ann Arbor, Mich., 1959.
35. Galbraith, op. cit. (Ref. 3).
36. Ibid.
BARRIERS TO STRUCTURAL CHANGE WITHIN ORGANIZATIONS 29.3
an external vendor. The manager might not be able to readily develop a contract which
deals with every possible outcome and, as a result, might become the victim of
"opportunistic behavior" by the department. Part of the reason for this is the manag-
er's "bounded rationality." The profit center manager, although quite competent as a
general manager, might not be an expert on stochastic processes, and consequently
might not be able to fathom exactly what ought to be involved in an engineering study
to correct a vibration problem in a process. Another reason for this is that of "informa-
tion impactedness," or the fact that only those engineering department employees
actually working on the study get to see how bad the problem really is, and how much
time and effort are needed to correct the problem. As a result, the profit center might
be overcharged and never know it. In the classic functional organization, no effort is
even made to impute a transfer price for the engineering study because both depart-
ments are part of the same firm.
29.3.2 Specialization
Another source of efficiency is specialization. By putting all of a specific function into

one department, employees can specialize in specific activities. With specialization,
employees can concentrate on a narrow range of activities, and become proficient.
Time is not lost in switching from one activity to another. Moreover, employees can
have their technical skills reinforced by having a manager who is technically compe-
tent in the function, and by having fellow employees in the same field for support and
development. Often, there are economies from fuller utilization of specialized equip-
ment.
29.3.3 Monitoring and Control
Other sources of efficiency are in the areas of monitoring and controI.' In Fig. 29-
I, each manager can supervise or monitor the activities of several subordinates.
Cross-comparisons of performance can be effective within a narrow function.
Decision making is centralized, and the higher-level manager can solicit input from
lower levels.
29.3.4 Communication
Efficiency can also be achieved in communication. If a sales manager in Fig. 29.1

wishes to change the master production schedule which is under the jurisdiction of the
production manager, the request must pass through the vice president of marketing
and the vice president of production. Even though time is consumed as the request
passes through channels, the relevant members of the organization are kept informed.
Moreover, other members of the organization do not have to deal with the information,
as they are not in the channel. When everybody in the organization is presented with
every message or communication, as now can happen with e-mail systems, there is
obvious information overload, and a lot of people's time is wasted wading through
irrelevant information, often missing or never getting to the relevant information.
These sources of efficiency might not be present in the new organizational struc-
tures. As a consequence, the new structures might not be robust; that is, they may
degenerate over a period of a year or two to the old functional structure. An example
may illustrate. One university has a central photo services department that, among
29.4 MANAGING MANAGEMENT OF TECHNOLOGY BARRIERS TO STRUCTURAL CHANGE WITHIN ORGANIZATIONS 29.5
other things, makes slides, transparencies, and charts for presentations. Because of isons with those around us, comparing the ratio of rewards received to contributions
long lead times, and the suitability of some personal computers and workstations for made.4 In the old functional organization, there was typically a management by objec-
graphics, many departments and individuals developed their own capabilities in these tives (MBO) program, in spite of Deming's exhortation against MBO, or some other
areas, at great expense to the university in terms of redundant hardware, software, and type of formalized planning and appraisal system. It may not have been perfect, but it
the opportunity cost of the professional time allocated to developing these capabilities. provided an outlet for us to sing our own praises. In the newer structures, formalized
The driving force behind the duplication of effort was minimization of response time. appraisal systems often are supplanted by team bonuses or other group rewards. Even
One by one, though, the independents started to return to the central photo services though there are good reasons for this, there is a deep-seated urge by many to be
department. It turns out that not all of the independents succeeded in mastering the rewarded individually. Moreover, there is a fear of being totally at the mercy of the
software, or had adequate artistic aptitude to turn out acceptable work. Moreover, system. A desire gradually emerges for some type of retrenchment policy which bases
most discovered that the hours they were spending on graphics were hours they could job security on seniority, and which provides safeguards against arbitrary transfers or
not spend on their own field of specialization. For a new organizational structure to sanctions. Over time, this can lead to a regression to the old system.
succeed, the issue of efficiency must be addressed. Thus, we must be explicit about
how much efficiency we are willing to sacrifice in trade for responsiveness or
wholism, or we must find ways to exploit efficiency in the new structure.
29.7 THE NATURE OF ORGANIZATIONAL
CHANGE
29.4 PRESSURE FOR STABILITY
29.7.1 Elements of Change
Many new organizational forms arise during entrepreneurial phases in an organiza- Chandler pointed out the need for symmetry between strategy and structure decades
tion's history. In the hectic burst of growth which characterizes these phases, almost ago.s If a firm makes a major change in strategy, it needs to make accommodating
any type of free form or organic structure can work because wholism is achieved changes in its organizational structure. Today it is widely believed that in addition to
through the excitement of the moment. Gradually, though, people start craving stabili- strategy and structure, an organization's culture, technology, and people all have to be
ty. Systems and procedures are established to reduce uncertainty, to make the opera- compatible. If you introduce change in technology, you should expect to alter your
tion of the firm more predictable. People seem to have a natural attraction to stable sit- corporate strategy to capitalize on the new capabilities, alter various departmental
uations over unstable ones. For example, in spite of the realities of the 1996 job roles and relations, add personnel with new talents, and attempt to "manage" change
market for college graduates, most indicate preference for a Fortune 500 firm, should in shared beliefs and values needed to facilitate use of the new technology.
one happen to be hiring instead of downsizing, over the tens of thousands of smaller Hall and colleagues6 suggest that six organizational elements are involved in fun-
firms which actually are having problems attracting suitable talent. Excitement is nice, damental change: roles and responsibilities, measurements and incentives, organiza-
but even the soldier of fortune prefers the CIA. tional structure, information technology, shared values, and skills. Many attempts at
bringing about organizational change fail because management attention is focused on
organizational structure alone, or on that and only one or two other elements.
29.5 DESIRE FOR PERSONAL GROWTH AND Johnson and Kaplan argue that failure to change old measurement and incentive
systems, such as equipment and facility utilization measures, in manufacturing firms
DEVELOPMENT
adopting the just-in-time (JIT) approach leads to serious implementation problems.7
There is also general awareness that employee roles and responsibilities, shared values
People naturally want to advance themselves through their work. In the functional or culture, and skills must also change. Even the information technology change need-
organization, there generally is a clear career ladder stemming from each position. A ed to support JIT is now known and accepted. But this wasn't the case in the mid-
college graduate starts in an entry-level position such as a programmer in an informa- 1980s, nor is it the case now with some of the more recent types of changes occurring
tion systems department, and sees a sequence of positions to aspire to over a career. in organizations.
Each position offers opportunities for the growth and development needed to qualify
for higher-level positions. In many of the newer organizational structures, there are no
standard job titles nor clear career ladders. Employees are enthusiastic in the early 29.7.2 Organizational Context
years, but gradually this enthusiasm dissipates. Position titles start to appear and hier-
archy starts to form, perhaps reflecting the relative capabilities or accomplishments of Digging deeper, Goss et al.8 find that organizations that make fundamental changes in
the people in the positions. Gradually, the old structure is re-created. the way they do business, reinventing themselves in the process, must alter the under-
lying assumptions and invisible premises on which the firm's decisions and actions are
based. This "context," they argue, is the sum of all the conclusions that members of
the organization have reached, the product of members' experience and interpretations
29.6 DESIRE FOR EQUITY
of the past, yesterday's mechanism for success. They note that context is generally
hidden and requires real effort to uncover, yet if left unchanged, efforts at organiza-
We all want to be treated fairly, and we all have our own opinions on what fairness is. tional change will be unproductive, or at best, episodic. Consider a successful all-you-
Adams has advanced the notion that always and everywhere we make equity com par- can-eat restaurant which pulls up stakes and moves to a large shopping mall, expect-
29.8 APPROACHES TO SUCCESSFULLY 29.8.5 Presenting a Path to Follow

IMPLEMENT CHANGE
The plan must include a path for employees to follow to learn the new way of doing
things. This includes opportunities to learn needed new skills, and opportunities for
With all the organizational change which has occurred in past 15 years, some methods practice.
for success at implementing change-old, time-tested steps that work-are already
widely known.
29.8.6 Burning Bridges to the Past

29.8.1 Explaining the Need for Change
At some point, the plan must be implemented, and the new system must be the only
First, the employees of the organization, and other important stakeholders such as system. As long as it seems possible to revert to the old way, some employees, and not
stockholders, key customers and suppliers, and major lenders, need to be provided necessarily those at the bottom of the pyramid, will hold on to the thought that it will
with a clear and honest statement of why that change is needed, focusing, where all go away, and we'll be back to the old system. It's like a major railroad wanting to
appropriate, on external forces such as heightened competition, a need to penetrate abandon service to a region; until the tracks are ripped up, there is always the possibil-
foreign markets in order to maintain minimum efficient scale, or changes in technolo- ity of returning service, a fact not overlooked by communities petitioning government
gy which threaten the viability of old-product lines. agencies to bring that about.
29.8.2 Participation in Developing Plan

29.9 DEVELOPING A LONG- TERM SYSTEMS
Participation by a broad segment of the organization in developing a plan for change PERSPECTIVE
may add months to the finalization of the plan, but it will save many many more
months in implementation, particularly if members made real contributions to the
plan. The idea is that it now is "our plan," not just the "boss's plan," and we are much For reasons ranging from corporate quarterly reports of earnings, to periodic MBO
more likely to fight for the success of "our plan." appraisals, to the popularity of job hopping in U.S. industry, organizations, and the
people who populate them, operate with short-term time horizons. Major change pro-
grams such as introduction of new technology or development of JIT or TQM, by con-
29.8.3 Disarming the Resistors trast, take years to unfold.
The pervasiveness of organizations with the functional structure in our culture
It is not particularly difficult to identify those people in the organization who are tends to produce a narrowness in people which management scholars label functional
going to become the most serious resistors to the plan. They often identify themselves isolation, but which industry leaders and popular writers term the "chimney effect."
early in the process. Often, these are the natural leaders in the organization, people Departments in functional organizations tend to be viewed by their members as fief-
who influence many others. Some firms have been successful in working with these doms, with the consequences that departmental goals are given more weight than
people in an honest manner, helping them digest the background information which organizational goals, and conflict among departments is more likely than cooperation.
motivates the change. Other firms find that these are the prime candidates to send Unfortunately, this kind of behavior does not automatically disappear in newer struc-
away to short courses related to the change, so that they become the "experts" who tures. Our educational system which isolates mechanical engineers from accountants,
will shepherd in the new technology. Still other firms find that recalcitrant staff mem- and computer science majors from marketing majors, and our professional and trade
bers are now eligible for special early-retirement programs. journals which reinforce narrow specialization, breed functional isolation too.
Organizations must understand that commitment to technology in the 1990s
requires adjustment of temporospatial orientation. I I Most organizations can march
29.8.4 Presentation of the Plan employees by the numbers through the mechanics of improving processes and ways of
doing things as in the thousands of firms which have made progress with SPC, quality
Once a plan is developed, and ratified by the organization, it must be clearly explained circles, and some of the elementary stages of TQM. This sort of activity can be labeled
to all. In particular, management must beat the gossip circuits to the punch by clearly, operational learning. To get the real benefits of any of these programs, though, con-
and completely, revealing how the plan will affect everyone, particularly in regard to ceptuallearning, or the ability to reframe problems in new contexts and timeframes, is
layoffs and terminations. It is hard to give adequate hearing to a plan when you have a needed. Systems thinking toolSl2 and the action science toolS13 together have potential
deep-seated fear that you will be out of a job. for enhancing conceptual learning.
29.10 FALLACY OF PROGRAMMATIC CHANGE 29.12 SYSTEMS TOOLS
Beer and coworkersl4 point out that many firms have attempted to implement change The structure of effective interactions requires that, if informed technology choice is
by promulgating companywide mission statements, corporate culture programs, train- to be converted into timely action, individuals must change the way they think, the
ing courses, quality circles, and the like, without much success. They argue that to way they act (based on their thinking), and the way they interact. Furthermore, they
succeed in implementing organizational change, firms must align employee roles, must be helped to understand the counterintuitive behaviors commonly exhibited by
responsibilities, and relationships to address the firm's most important competitive complex systems. That is possible only through taking the systems view of the tech-
tasks. "Task alignment" focuses energy for change on the work itself, not on abstrac- nology in a long-term timeframe. The systems thinking based on system dynamics
tions such as participation or culture. Their key point is that individual behavior is offers an opportunity to experience double-loop learninglO and thus to learn about the
powerfully shaped by the organizational roles that people play, rather than the systemic structure and processes which give rise to underlying symptoms. Systems
reverse. Give people new roles to play, a new organizational context, which imposes thinking requires that we develop a particular way of looking at the world. It is differ-
new roles, responsibilities, and relationships, and then attitudes and behaviors will ent from most other problem-solving tools because we are a part of the system we
change. seek to understand and influence. If we are trying to implement a technology we do
not fully understand or if just doing the same thing with more intensity is argued to be
the only solution, the system orientation allows us to step back and map interdepen-
dencies in the organization to generate systemic insights.
29.11 ACHIEVING HOLISM
Holism is the cement that binds the new organizational form together. It is the proper- 29.12.1 System Dynamics
ty of the systems view of the organization by which all parts and subsystems coordi-
nate their activity toward attainment of the organizational goal much like all the System dynamicsll12 helps managers select better data, interpret it better, and reach
anatomic parts of a human being work in concert as the human walks, talks, and goes better conclusions. But the real advantage is that managers learn to question the
about daily activities. To achieve holism, the members of the organization must all implicit beliefs and assumptions which filter the data they select in the first place. The
strive for the organization's fundamental goal such as that of providing customer satis- systems view completely changes the way they think about the problem. IS Thus the
faction, and there must be a free flow of information and understanding among mem- strength of system dynamics lies in the ability to improve the way we view the prob-
bers and customers. Failure to accept the organization's goal or to provide a free flow lems. System dynamics tools facilitate viewing the system by moving out in space and
of information and understanding will threaten achievement of holism. thus understanding the interrelationships among parts, and by moving out in time to be
able observe the evolution of longer-term behavior of the system. The tools also allow
you to test a variety of assumptions about the future.
29.11.1 Accepting the Organization's Fundamental Goal
In order to promote acceptance of the organization's goals, members or employees 29.12.2 Process Consultation and Action Science
must understand why the specific goal exists, and what their department or divi-
Interventions based on action science13 focus on how we think about other people,
sion's role is in the achievement of that goal. A lot of dysfunctional behavior occurs
how we act, and thus how we interact. They do not address how we think about the
when certain departments have false impressions of what their role is supposed to
strategic challenges the organization faces. Standing alone, they are sound methods
be. In some cases, the concept of a departmental charter, which states the depart-
for achieving change in individuals, but they rely on the individual's ability to know
ment's role in attainment of organizational goals, might be a good idea. It could
what to change or where to move strategically.
eliminate the possibility of employees or middle managers behaving dysfunctionally
in good faith. By integrating system dynamics, process consultation, and action science with tra-
ditional strategic management and quality management tools, we have the tools need-
ed to overcome the barriers to implementing structures to manage technologies. It
should be mentioned that the tools should not be the bastion of few individuals, but
29.11.2 Eliminating Barriers should be taught to everybody to be effective.
Barriers to the free flow of information and understanding exist for a reason, perhaps
to safeguard the firm's intellectual property or marketing plans, or perhaps to preserve
inequities or inefficiencies. Proprietary information needs to be identified and its secu- 29.13 CONCLUSION
rity assessed. Everything else should be made available to those with a need to know.
It is interesting that computer mail and distributed computing are accomplishing more
Failure to adopt new technologies that deal with human issues often accounts for why
in this area than most systematic management efforts. Groupware is now available to
technology initiatives do not realize the levels of success hoped for. First, ask a few
allow shared access to data on individual workstations and PCs.
questions to trigger the thought process regarding the existing management processes 4. J. Stacy Adams, " Inequity in Social Exchange," in L. Berkowitz, ed., Advances in
or the organizational structures: Experimental Social Psychology, vol. 2, Academic Press, New York, 1965, pp. 267-299.
5. Alfred D. Chandler, Jr., Strategy and Structure: Chapters in the History of the American
1. Are your management processes vertically or horizontally integrated? Enterprise, MIT Press, Cambridge, Mass., 1962.
2. Where and how do your new technology and customers fit into your management 6. Gene Hall, Jim Rosenthal, and Judy Wade, "How to Make Reengineering Really Work,"
structure? Harvard Business Review, pp. 119-133, Nov.-Dec. 1993.
3. Does your organizational structure or management process allow you to focus on 7. H. Thomas Johnson and Robert S. Kaplan, Relevance Lost: The Rise and Fall of
the customer or simply on elements of technology? Management Accounting, Harvard Business School Press, Boston, 1987.
8. Tracy Goss, Richard Pascale, and Anthony Athos, "Risking the Present for a Powerful
The answers to these questions will show you how deeply you are likely to experience Future," Harvard Business Review, pp. 97-108, Nov.-Dec. 1993.
the physical, mental, or organizational barriers that preclude the adoption of new tech- 9. Chris Argyris, Overcoming Organizational Defenses, Allyn & Bacon, Needham, Mass.,
nologies. Horizontal focus for a management process; clearly understood interdepen- 1990.
dency of new technology, organization, and customers; and willingness by all to 10. Chris Argyris, Reasoning,
Learning, and Action, Jossey-Bass, San Francisco, 1982.
approach every situation with the assumption that you can learn from it and that your
II. Barry Richmond and Steve Peterson, An Introduction to Systems Thinking, High
interpretation is only one of several possibilities are key ingredients for overcoming Performance Systems, Hanover, N.H., 1987, 1992.
barriers to implementation of technology.
12. George P. Richardson and Alexander Pugh III, Introduction to System Dynamics with
Now shift gears and brainstorm the following specific key questions in the context
DYNAMO, Productivity Press, Portland, Oreg., 1981.
of selected value-adding technology:
13. Chris Argyris and Donal Schon, Theory of Action, Jossey-Bass, San Francisco, 1974.
1. How will the technology change jobs (tasks, time, skills needed)? What is the 14. Michael Beer, Russel A. Eisenstat, and Bert Spector, "Why Change Programs Don't Produce
game plan for communicating these changes and making adjustment to accommo- Change," Harvard Business Review, pp. 158-166, Nov.-Dec. 1990.
date the changes? IS. Peter Senge, The Fifth Discipline: The Art and Practice of Learning Organization, Currency
2. Are there clearly established priorities, or are people just given more to do? What Doubleday, New York, 1990.
is the plan for managing day-to-day impact of newly ushered-in technology on
people?
3. What organizational obstacles must be overcome (existing policies, incentive sys-
tems, existing power blocs)?
4. What apprehensions, doubts, and expectations are pervasive?
5. What organizational practices exist that contradict the new-technology message?
6. Is the implementation process designed to be directly relevant to jobs, and does it
make sense to the people doing the job?
7. Are managers espousing the benefits and requirements of new technology, giving a
clear and consistent message?
8. What training is being offered? Is it enough and just in time? Does it improve
employee value and capability?
The core message is that to achieve technological change, management must be aware
that they are dealing with a pattern of employee habits, beliefs, and traditions and
need to ascertain just what will be the social effects of the proposed technological
change.
29.14 REFERENCES
I. Oliver E. Wiliamson and Sidney G. Winter, eds., The Nature of the Firm: Origins, Evolution.
and Development, Oxford University Press, Oxford, 1991.
2. Oliver E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications, Free
Press, New York, ] 975.
3. Mark Casson, "Why Firms Are Hierarchical," J. Business and Economics, 1(1 ):47-76, ] 994.
INTERDISCIPLINARY AND INTERFUNCTIONAL ROLES 30.3
and the greater the degree of specialization of the various functions, then (often) the functional areas (e.g., R&D, design, production, manufacturing, maintenance and ser-
greater is the difficulty of obtaining such necessary integration. 1 vices, internal business and economic strategy of the firm, marketing and market
While industries, or large companies, were organized on tight functional lines (the research) if a more smooth-flowing, organic, and intimate organizational system is to
design unit or department-production planning and the accounting and marketing emerge.6 When the production, or formulation, of a robust product portfolio range is
departments)-and where reliance was placed on hierarchical "Fordist" principles, the aimed at, then if it is recognized, as it should be, that the temporal and strategic
specialization problem received both protection and reinforcement. Increasingly, how- matching between a company's R&D portfolio and its subsequent product range, or
ever, it is recognized that those days are long since past-at least by the aware compa- product portfolio, is to be maintained over long time periods, it is essential that each
ny-and that in order to achieve (say) satisfactory design for manufacture, or "lean subfunction can and should communicate with and comprehend each other7 (see Fig.
production," or great increases in quality of product, increased productivity, defect 30.1 ).
reduction, and so on, more functionally-integrative systems are essentiaJ.2 This, in Perhaps nowhere is this more important than within the aegis of the design "func-
turn, demands much attention to improved interdisciplinary training.3 tion," or more accurately the linkage of design and innovation8.9 To be effective, the
Indeed, as well as the recognition that much more "organic," internally commu- design function must encompass a range of functions-materials science, engineering,
nicative organizational systems-more fluid interdisciplinary systems-permit the ergonomics, economic market analysis, production and manufacturing capability, and
development of more effective performance, is the added challenge of the new sec- so on. III Here we see the true value of interdisciplinary training and functional coordi-
toral, scientific, and increasingly generic areas relating to such areas as biotechnology, nation. We can also observe the market failure of products which can ensue if such
new-materials science, IT (information technology)-systems application, environmen- functional integration is not attended to.
tally friendly products, energy-efficient systems, integrated transport and communica- 2. In some ways an emphasis on simultaneous or concurrent engineering recog-
tion systems, or whatever. All these areas (and many more could be listed) demand the nizes the need for parallel involvement of different functions and therefore, implicitly,
cross-fertilization of numerous subdisciplines and functions. They are necessarily for greater interdisciplinary skills. However, such a position has been subjected to a
cross-disciplinary and multidisciplinary, thereby requiring scientist, engineer, chemist,
biologist, and mathematician to not only pool their skills but now, much more than in
past, to be able to enter the mindframe of their colleagues. Thus, not only is the lead-
ing edge of intellectual advance seen to be at the interstitial boundaries [biochemistry,
biophysics, AI (artificial intelligence) and cognitive psychology, complex systems
analysis],4 the same "leading edge" pertains to industrial organization and commercial
application.
This demands two main requirements: (I) that academe itself be encouraged, orga-
nized, and structured to produce much greater numbers of interdiscipline-oriented
individuals and (2) that industry organizes itself to best utilize such individuals.5 As
we shall note later, there is, however, if not a third requirement, certainly an important
catalyst to those two generic requirements which relates to increased and improved
academic-industrial collaboration programs. Such collaboration pertains both to the
training and research function of higher education.
In the following sections we will examine the ways in which academe and industry
can best encourage and utilize interdisciplinary endeavor and provide examples of
good academic-industrial collaboration which further encourages interdisciplinary
training and exchange-as well as identifying problems which still must be overcome.
30.2 THE NEED FOR AND CHALLENGE OF

INTERDISCIPLINARY TRAINING AND
PERSPECTIVES
-----------------
We can take several perspectives, some of a narrow form, others from a very broad
base or platform, in order to justify and illustrate the need for interdisciplinary
endeavor. We can also apply that perspective to every level of training and retraining.
Thus, from the point of view of perspective, much improved interdisciplinary train-
ing is demanded by the following:
1. At the level of the firm or enterprise. the transition to post-Fordist forms of

work organization necessarily demands new systems organization, crosslinkage of
INTERDISCIPLINARY AND INTERFUNCTIONAL ROLES 30.5
Councils,15 while the introduction of Directorates (e.g., the Biotechnology

Directorate) has also been a means of actively and positively encouraging both inter-
disciplinary coordination, research perspective, and training.16 Such a need is by no
means limited to GECD or industrially advanced nations. Whiston has recently com-
pleted a senior policy analysis outlining a new research and higher-education system
for the whole of South Africa.17 Special emphasis was given to the need for improved
interdisciplinary training and research.
4. If we go beyond the level of the nation (and national research, training, and sec-
toral policies) to the global level, we again come to recognize the enormous interdisci-
plinary challenges which face the world from a science, technology, and socioeconom-
ic perspective. Such a topic is far too complex to be treated in any detail here but has
recently been the subject of wide and detailed study by numerous researchers funded
by the European Union. The work has been undertaken under a program entitled
"Global Perspective 2010: Tasks for Science and Technology," and the results (the
global challenge if you will) have been published in 23 volumes. An overview synthe-
sis report is given by Whiston in vol. 1 of the studies. IS A wide range of global chal-
lenges and needs-new housing, transport, energy systems, communication systems,
agricultural and food production systems-are indicated. All these, it is argued,
require detailed interdisciplinary study, planning, and in particular individuals trained
in an interdisciplinary manner. The need is not only to obtain parallel economic,
social, technologic, and scientific endeavor but also to train individuals and organiza-
tions who can think and perceive in such a manner. This, in turn, demands new global
communication, systems linkage, and new forms of international educational
systems.19
5. Finally, the intellectual and scientific challenges of the future, the leading edge
of research-which ultimately informs industrial and commercial application-
depends increasingly on interdisciplinary, multifunctional endeavor. Thus space
more subtle analysis and interpretation by Gaynor in recent years.11,12 Gaynor argues
research, bionics, biophysics, the science of complex systems, expert systems, artifi-
that a much wider interfunctional integration is necessary to achieve the optimal train-
cial intelligence, pattern recognition, and so on all call for the crosslinking of disci-
ing of the chain of products which a company produces (see Fig. 30.2).
plines and individuals or groups who can simultaneously handle concepts from seem-
In this instance we can easily see the need of much greater interdisciplinary train-
ingly disparate "disciplines." This is particularly so in the case of artificial
ing, experience, learning, and interfunctional cooperation than has previously been
intelligence, pattern recognition, and the computing sciences in which cognitive psy-
considered. A similar argument based on both detailed empirical study of numerous
chologists, neurophysiologists, information theorists, and computer-architecture com-
companies in Britain and a national questionnaire/survey of the barriers to improve-
bine forces. Such an area, presently employing tens of thousands of researchers, is
ment has been developed by Whiston.13 Whiston extends the need of multidisciplinary
most probably the most important scientific-conceptual platform for industrial
integration to a range of areas: highlighting managerial integration, organizational
progress over the early to middle part of the twenty-first century.
integration, and strategic and informational integration. Such integration is highly
dependent on (a) appropriate training and (b) suitable internal organizational struc- All the above establish the "need." But they do not stand alone, and all the "levels"
tures (this can take many forms, e.g., reduction in reporting layers, cross-matrix link- briefly indicated above intertwine and are interdependent. They demand various forms
age, location of management on shop floor-a point we shall return to in Sec. 30.3).
of "response" which we shall discuss in Sec. 30.3.
3. At a level above that of the firm or the enterprise, viz., at the national policy However, before considering the "response and delivery" of interdisciplinary skill
level, numerous countries now recognize the need to coordinate scarce national formation, we would note that such training, such skill formation applies at all levels
research and industrially relevant skills across or within special generic themes. This of the educational process. Thus it is necessary to consider
can be either mission-oriented (e.g., NASA space program, new alternative energy
schemes, advanced robotics and sensing, etc.) or relate to generic areas of study (e.g., The undergraduate level of education
biotechnology, superconductivity, new materials, IT areas). In either case it is essential
The postgraduate level of education
to encourage cross-functional and much interdisciplinary study-and to better train for
such skills. In both the United States and the United Kingdom several approaches The research function
have been taken to facilitate and service such a need. Thus in the United States, "engi- The continuous learning and retraining or updating function
neering centers" (interdisciplinary centers) and a range of academe-collaborative pro-
grams address that need.14 In Britain the introduction of "interdisciplinary research As we shall note below, each of these levels has in recent years been receiving
centers" (IRCs) have been much encouraged by most of the major Research increasing attention from an interdisciplinary training standpoint. To consider these
30.6 MANAGING MANAGEMENT OF TECHNOLOGY INTERDISCIPLINARY AND INTERFUNCTIONAL ROLES 30.7
levels alone is insufficient, however. For the need also is to recognize the different cir- specialized, academic tradition and thereby stimulated interdisciplinary and multidis-
cumstances of industry and science from yesteryear. The new challenges of the twen- ciplinary studies-often through the example areas, which we shall discuss. The
ty-first century20 and the new sociotechnical paradigms that society finds itself in necessity is to maintain, indeed further, that interest, a legitimate self-interest, on a
demand an ever more holistic approach to both study and policy response.2I wider scale albeit at a time of financial constraint.
We indicated in the previous section that improved or enhanced interdisciplinary
training (and research) is required at all levels: undergraduate, postgraduate, faculty
research programs, retraining and "updating" of learning, and lifelong education pro-
30.3 PATTERNS OF RESPONSE TO grams. We also indicated that the need, in industry, is for new structures (see also
INTERDISCIPLINARY AND INTERFUNCTIONAL Chap. 18) and also for improved academic-industrial collaboration as a stimulant to
NEEDS interdisciplinary study. Finally we noted that such a need-for interdisciplinary study
and action-not only pertains to industry and academe but also should be viewed at
We have indicated above the challenges and needs regarding interdisciplinary training. the national and international level. Let us now turn to some interesting examples of
What dominant forms of action and response are being made? Are the academic (and such practice and, inter alia, note some of the important lessons to be learned. (Several
industrial) barriers and obstacles being overcome? Does the ingrained specialization of the examples will be taken from Britain, but similar programs are to be found in
and reliance on disciplinary study act as a brake on the wider, more complex need? other nations.)
Who, or what, is acting as the driving force or catalyst toward much needed change?
The examples we provide here are merely that: examples. It is not possible to con-
clude as to whether there is a degree of sufficiency of response. Whiston22 has under- 30.3.1 The Undergraduate Level of Education
taken several surveys, collated ongoing policy initiatives, but again this primarily
tells us the sort of things that are developing; a quantitative policy analysis of the Many undergraduate degrees are organized, essentially, at a single discipline level
scale and appropriateness of response still awaits us. What we can say, however, is (chemistry, physics, electrical engineering, economics, business management, etc.).
that there is much activity, numerous examples of "best practice," but the final land- However, increasing reliance is placed on cross-disciplinary studies, "joint" degrees as
scape will depend on market forces and wider dissemination of need, publication, and a means of widening horizons. This helps the base on which interdisciplinary studies
wider knowledge of the great social commercial and scientific outcome of the can later develop. But there are problems. Ironically employers are sometimes suspect
endeavors. of the relative value of such students. They sometimes fear (in an elitist fashion) that
And here we must signal one important caveat (although we also comment on this such students are not the best. This can, unfortunately, have a self-fulfilling effort on
in Sec. 30.4 where we briefly consider some of the "remaining problems"). This the pattern of student recruitment. Such a problem cannot be ignored but must be
caveat relates to the contemporary entrenchment, in many countries, of the total faced head on. Industry, in terms of perception of need and recruitment, has a big part
resource allocation given to higher education. Thus for several decades following to play here.
World War II nearly every country-whether Organization for Economic Cooperation There is a second problem which relates (at the undergraduate level) to the degree
and Development (OECD), least developed countries (LDC), or newly industrialized of undergraduate specialization. Thus, for example, in the case of engineering some
countries (NIC)-has recognized the critical importance of their higher-education (many) universities aim, from the very first year of study, to encourage (say) an elec-
"agenda" and made ever increasing resources available?3 This is no longer a universal tronics engineering specialist, or mechanical engineering, or civil engineering, or
trend. Budgets have come to be recognized as finite. A plateauing of funding is spoken whatever. A few universities take a broader view (e.g., Cambridge University), laying
of, and greater selectivity and concentration of resources into particular areas has down broad foundations in the early years and "specializing" in the final year of study.
resulted.24.25 Now under such circumstances departments and faculties are forced to These differences in approach and their implications for future policy have been the
"defend their own turf," their own special interests. Not surprisingly, the "classical subject of much study.27
disciplines" are often better organized, more primed at so doing. Often areas of inter- As the total knowledge base available to humanity increases-as it does year by
disciplinary study (and training) do not have a natural, well-established base or col- year-there also emerges a problem relating to the amount and hence depth that a par-
legium.26 As a consequence, they do not always survive so easily. Individuals who ticular study area can be taught to in a short finite time. This is especially so in such
have, through their own imaginative effort, opened up new interdisciplinary ground areas as chemistry. Will the day come when an undergraduate studies (say) physical,
and forged interdepartmental and new interfunctionallinks are often vulnerable. There organic, or inorganic chemistry as a specialty rather than the whole gamut of chemical
is, here, a tragedy in the making. It is therefore essential that the widest publicity and theory? This has been commented on in some detail regarding future curricula chal-
awareness be given to the importance of interdisciplinary training, research, and view- lenges and indirectly has tremendous implications for interdisciplinary studies.28 The
point. There are several important actors who can playa part in the stimulation and problem of the accumulation of scientific knowledge is a fundamental one. It has to be
maintenance of interdisciplinary endeavor under such circumstances: industry, govern- recognized as a practical brake for many students regarding what can be covered; real-
ment, research councils (or other national policy bodies), and social pressure groups. istically, in a particular syllabus. The answer to this implied dilemma lies in part in
Each of these "actors" represents, in essence, subject matter which is inherently improved teaching methods: teaching by principle, not by rote (unfortunately, the lat-
dependent on the integration of knowledge, which demands real-world multidiscipli- ter still, implicitly, dominates many college syllabuses),29 and by life-long-learning,
nary understanding beyond the more narrow confines of academic allegiance. It is topping-up modules, etc.
such actors who have often been the prime movers in gainsaying the narrower, more
30.8 MANAGING MANAGEMENT OF TECHNOLOGY INTERDISCIPLINARY AND INTERFUNCTIONAL ROLES 30.9
30.3.2 The Postgraduate level address (sometimes at Ph.D. level, although not exclusively) a real-world industrial I
problem. There is both academic and industrial supervision. Detailed study of such I
Postgraduate students usually have two main branches of choice regarding further research programs has demonstrated that industry, academe, the students, and the I
study: a postgraduate research-oriented degree or, alternatively, reliance on some form supervisor gain in terms of improved interdisciplinary knowledge and awareness of
of taught courses. (Naturally permutations of these two approaches exist across interdisciplinary needs.
nations with significant differences. Some countries, such as the United States, require The creation of "interdisciplinary research centers" (IRCs) and "designated
several taught courses in parallel with the research thesis. Much also depends on the research centers" (DRCs) within the United Kingdom can, and do, serve a related
"level" of the previous undergraduate degree and the extent to which easy transition to function and are now generating worldwide interest.34
postgraduate study can ensue.) In one sense the gain is in terms of not only the research topic per se but also the
In relation to postgraduate research, national endeavors have increasingly been interdisciplinary attitude which is improved in the academic involved-a topic to
made to overcome the "specialty problem" of an academic supervisor (and that indi- which we now turn.
vidual's specialized research interest) through the encouragement of interdisciplinary
research programs. For example, in Britain for more than two decades now, two of the
major Research Councils ESRC and SERC have, through a joint committee program 30.3.4 Retraining, Updating, and Continuous learning with Respect to
(ESRC/SERC) encouraged at the national level both M.Sc. and Ph.D. interdisciplinary Interdisciplinary Skills
programs. These were reviewed in some detail by Whiston30 because of the significant
failure rate (nonsubmission of thesis or long study periods) of many students. It is a perennial problem that for many industrialists (whether researchers, operations
Problems of academic supervision were seen as a major problem;30 namely, the single personnel, or managers) much of the knowledge they had acquired during their earlier
discipline training of the previous cohort of faculty members created an "evolutionary formal academic training is now increasingly obsolete. Retraining and updating is
block." called for, more so as new sociotechnical factors emerge-for example, with respect
Interestingly, a comparative analysis by Whiston (privately commissioned by the to IT systems, new technology, new design capabilities, and new materials.
U.K. SERC Research Council) of American and British views relating to interdiscipli- As well as the rapid pace of scientific and technological change, which continues
nary training revealed that the United States takes a much narrower view of what is to accelerate, it is also recognized that new more "up-to-date" graduates will take sev-
understood by the term interdisciplinarity than pertains to the United Kingdom. In the eral (sometimes many) years to rise to positions of power and authority within indus-
United States a mechanical engineer who takes on an electronic problem is "interdisci- try. This dual problem was recognized some time ago in Britain. In response, a nation-
plinary." The U.K. view of combining (say) chemistry, economics, and political regu- al program entitled the "Integrated Graduate Development Programme" (IGD) was
lations was viewed (by U.S. academics) as circumspect. Herein is part of the problem. initiated to address the underlying dilemmas and has been reviewed in some detail by
In terms of the broader reach of taught courses, then numerous programs or cours- Kennedy, Rotherham, and Whiston.3s The programs are organized at a sectoral level
es now exist worldwide which aim to bridge innovation studies, science and technolo- (computing, process industry, transport, manufacturing systems, etc.) and attract
gy, business management, or whatever. Bessant has reviewed a wide number of cours- industrial workers-often at middle and senior management level-who attend on a
es within a broad international setting.31 One of the major challenges of such M.Sc. modular basis (1 week per month for either I or 2 years). The largest national course
programs is to bridge a large number of students from a single-discipline training to a is at Warwick University which involves 300 or so "students" from such companies as
wider interdisciplinary training all within a comparatively short time period. This Rolls Royce, Rover (previously), Lucas Industries, and British Aerospace.
writer is director of one such program and recognizes that fundamental difficulty. From an interdisciplinary perspective we would emphasize, here, several points:
Nevertheless, the broad base ultimately provided to the graduates acts as a superb win- the courses are designed jointly by academe and industry, the lectures and seminars,
dow of opportunity to industry, commerce, and governmental agencies. Such programs etc., are given by both academics and industrialists; the courses are pragmatic with a
of study, nevertheless, are only a basis for the development of further skills as post- strong interdisciplinary content; encouragement is made to crosslink individuals from
graduate students progress through their careers. Industry has much to gain from (say) different disciplinary or functional backgrounds; and common needs under real-world
an engineering student who possesses good knowledge of innovation theory, science conditions are identified. The course participants, in being "updated" and taken for a
policy, or industrial economics. short while from the "day-to-day pressures of commerce," develop significantly and
can reenter their respective companies at senior operative, managerial, and research
levels with much wider revitalized interdisciplinary perspectives.
30.3.3 Collaborative Research Programs and Interdisciplinary Training Such programs have been extremely successful. Some companies (e.g., Rover)
have instituted similar, but even more senior, programs for all their directors and most
Collaborative research between academe and industry is widespread throughout the senior managers (reviewed in some detail by Whiston'"). One of the important find-
world. It is a particularly good mechanism for technology and knowledge transfer.32 ings was that benefit was not only to course recipients but to academe itself The acad-
From an interdisciplinary standpoint, we noted earlier that academe tends (greatly) emic faculties concerned found they took on, understood more fully than would other-
toward the encouragement of specific disciplines while industry, necessarily, has to wise be the case, and were much more sympathetic to the need for interdisciplinary
take an interdisciplinary perspective. Joint research programs between academe and perspectives: often of an economic, production, manufacturing, marketing, and tech-
industry, particularly where research training is involved, can be an invaluable bridge nological nature. Thus the beginnings of a breakthrough of entrenched disciplinary,
across those two viewpoints. Two major programs in the United Kingdom-the "academic" positions often inimical to interdisciplinary needs, ensued; the Gordian
Teaching Company Scheme3' (TCS) and the Total Technology Programme, are infor- knot was broken.
mative in that respect. The TCS scheme encourages postgraduate researchers to
30,10 MANAGING MANAGEMENT OF TECHNOLOGY INTERDISCIPLINARY AND INTERFUNCTIONAL ROLES 30.11
30.3.5 Organizational Change within Industry and Commerce al in a given time period. Specialization of knowledge is highly valuable. The problem
then is to derive and formulate training programs which balance specificity of knowl-
No amount of interdisciplinary training and multifunctional awareness can prosper edge with wider awareness of other functional needs in a realistic but imaginative
unless there exists within industry, or more specifically within a company, an appro- manner. Examples of such programs have been given in Sec. 30.3. Development of
priate organizational structure which encourages multifunctional collaboration. Such a interdisciplinary perspective is, however, an open-ended, never-ending problem. The
structure is often absent in many companies and demands determined efforts of orga- need, therefore, is for continuous updating of skills; close academic-industrial collabo-
nizational and functional restructuring in order to obtain the necessary integrative- ration; emphasis on "teaching by principle," not rote learning; encouragement of cre-
functional environment. This writer has recently devoted a text to the subject based on ative thinking; and the sustaining of a collaborative, cooperative atmosphere within
detailed empirical study and national surveys;37 also a series of papers summarize both academe and industry-which takes us to our final problem:
salient aspects.38 What is demanded of that organizational environment? The answer
is: an organic, multifunctional, intimately crosslinked structure. It demands a much S. As noted by Faulkner et al.,41 academe encourages in many ways a competitive
"flatter" organizational pyramid; managers who spend much time on the "shop floor" outlook: competition to publish, establish reputations, be first with one's findings.
(il la the Japanese tradition); matrix managerial structures; R&D "departments" which Industry depends on teamwork, collaboration, and cooperation within the enterprise.
are not at "green-field sites" but closely linked to all the operational, manufacturing, These two attitudes are not complementary. For interdisciplinary work to prosper the
and marketing functions; total systems integration as outlined in some detail by need is for collaboration and cooperation. The final obstacle, therefore, like much in
Gaynor;39 and above all an ethos of mutual involvement of all employees. life may be more of an attitudinal, an emotional form than one due to analytic or intel-
Under such conditions an interdisciplinary and multifunctional-integrative environ- lectual difficulties.
ment can thrive. Product strategies, company learning, wider diffusion of "tacit
knowledge,"40 corporate success is given a much greater opportunity of being True interdisciplinary endeavor, rich multifunctional linkage, and integrative organiza-
achieved. Dynamics and systems fluidity rather than organizational sclerosis can then tional structures, therefore, may be both a stimulus to and a consequence of future
come to characterize company performance. In recent years 3M, DuPont, ICI (U.K.), industrial, commercial, and much wider societal challenges. Specialization of knowl-
and numerous Scandinavian and Japanese companies have increasingly followed such edge, individual prowess, has a strong history of success in both performance and
principles to much good market effect. motivational terms. The challenge is to balance individualism with wider cooperation,
All the above illustrate the response to interdisciplinary and multifunctional needs. without diminishing either.42
In some cases they are only beginnings. Much remains to be done and problems
remain, which we now finally consider.
30.5 REFERENCES AND NOTES

30.4 REMAINING PROBLEMS
I. T. G. Whiston, Manaf?erial and Orf?anisationallntegration Springer-Verlag, London, 1992.
2. Ibid., pp. 73-102.
Against the backdrop of the general case made above, we have to accept that there are
numerous practical problems to be overcome or continually addressed. The more obvi- 3. Ibid., pp. 125-156.
ous ones are listed below: 4. Many such areas constitute the generic intellectual (academic) and industrial innovation
pathways of future decades.
1. There still exists within academe much resistance to true interdisciplinary train- 5. Jupiter, "Management of Technology: The Invisible Advantage," statement by the Jupiter
ing. Individual departments, disciplines "defend the turf' in many ways. Thus individ- Consortium Technology Management Group, Brunei University Science Park. 1988.
ual disciplines are often suspicious of wide, deep collaboration; academics themselves 6. B. Twiss, Manaf?ing Technologica/lnnovation, 3d ed., Pitman, London. 1990, chap. 7.
who have been previously trained as "specialists" can be defensive-and have true
7. Whiston, op. cit. (Ref. I), pp. 197-212.
legitimate limits-regarding the form of knowledge they are either prepared or capa-
ble of transmitting. This, in turn, yields a self-perpetuating problem. Few academics 8. R. Rothwell, P. Gardiner, and K. Schott, Desif?n and the Economy, The Design Council,
London, Sept. 1993.
constitute a Leonardo da Vinci, a Linus Pauling, or a Buckminster Fuller-although
they would aspire to be Newtons or Einsteins. 9. R. Rothwell and T. G. Whiston, "Design, Innovation and Corporate Integration," R&D
Management, 20(3): 193-201, July 1990.
2. Professional bodies (who are often responsible for accrediting degrees and
10. M. Oakley, ed., Design Management, Basil Blackwell, Oxford, 1990.
approving changes in the syllabus) are often very conservative bodies. The rate of
change perceived as needed (or achieved) is therefore often insufficient. II. G. H. Gaynor, Achieving the Competitive Edge throuf?h Intervated Techn%gv Manaf?ement,
McGraw-Hill, New York, 1991.
3. Industry itself is often loath to overturn the organizational structures of yester-
12. G. H. Gaynor, Exploiting Cycle Time in Technology Management, McGraw-Hill, New York,
year. Departments, divisions, or subfunctions have their own microempires and see
1992.
specialist knowledge within their own specialist departments as a form of power.
13. Whiston, op. cit. (Ref. 1), pp. 125-156.
4. But perhaps the most important (and realistic) problem of all relates to the
14. T. G. Whiston, Report to the SERC on the "Workshop on Interdisciplinary Engineering
degree and depth that true interdisciplinarity can be encouraged and nurtured within
Research," held at Purdue University (USA), Nov. 16-18 1983; SPRU Mimeo 1983, 19 pp.
many individuals. An individual can cover only a certain amount of conceptual materi-
30.12 MANAGING MANAGEMENT OF TECHNOLOGY INTERDISCIPLINARY AND INTERFUNCTIONALROLES 30.13
15. Science and Engineering Research Council (SERC), Interdisciplinary Research Centers 35. A. J. Kennedy, L. Rotherham, and T. G. Whiston, A Review of the SERC Integrated Graduate
(monograph), Swindon, U.K. (undated). Development Programme, 2 vols., Report TCCR-83-005, Technical Change Centre, London,
April 1983.
16. J. Senker and M. Sharp, The Biotechnology Directorate of SERC: Report and Evaluation of
Its Achievements 198i-1987, Science Policy Research Unit. University of Sussex, U.K., 36. T. G. Whiston, The Management of Technical Change. Training for New and "High"
1988, 205 pp. Technologies, a report to the U.K. Manpower Services Commission on the Programme for
Directors and Senior Managers of Austin-Rover held at Warwick University, 1985/86;
17. T. G. Whiston, Research Policy in the Higher Education Sector of South Africa, Science and
Science Policy Research Unit, University of Sussex, 2 vols., Feb. 1986.
Technology Policy Series no. 3, FRD South Africa, 1994, 325 pp.
37. In the studies (see Ref. I) it was found that numerous companies could not achieve satisfac-
18. T. G. Whiston, Global Perspective 2001: Tasks for Science and Technology, vol. 1: A
tory organic integration of subfunctions because of lack of interdisciplinary skills.
Synthesis Report, Commission of the European Communities, Brussels, 1992. (The entire
range of publications encompasses 23 volumes obtainable from the European Commission, 38. T. G. Whiston, "Managerial and Organizational Integration Needs Arising out of Technical
Brussels; vol. I summarizes the findings of the 23 volumes.) Change and UK Commercial Structures," part I-Technovation, 9: 577-606, 1989; part 2-
Technovation, 10(1): 47-58,1990; part 3-Technovation, 10(2): 95-108; part 4-
19. This is given considerable emphasis in the EC-FAST papers; see Ref. 18.
Technovation, 10(3): 143-161, 1990.
20. T. G. Whiston, The Training and Circumstances of the Engineer in the Twenty-First Century,
39. Gaynor, op. cit. (Ref. 12); see especially chap. I, "Perspectives on Managing Cycle Time,"
a study undertaken for the Fellowship of Engineering (U.K.) March 1987. Science Policy
Research Unit, University of Sussex, U.K., 1987,234 pp. pp.3-17.
40. P. Patel and K. Pavitt, Technological Competencies in the World's Largest Firms:
21. C. Perez, "Microelectronics: Long Waves and World Structural Change: New Perspectives
Characteristics, Constraints and Scope for Managerial Choice, STEEP Discussion Paper no.
for Developing Countries," World Development, 13(3): 441-463, 1985.
13, Science Policy Research Unit, University of Sussex, May 1994.
22. T. G. Whitson, Management and Assessment of Interdisciplinary Training and Research,
41. W. Faulkner, J. Senker, and L. Velho, Knowledge Frontiers: Public Sector Research and
ICSU and UNESCO Press, Paris, 1986.
Industrial Innovation in Biotechnology, Engineering Ceramics, and Parallel Computing"
23. T. G. Whitson and R. Geiger, eds., Research and Higher Education: the UK and the USA, Oxford University Press, Oxford, 1994.
O.U. Press, Buckingham (U.K.), 1992.
42. T. G. Whiston, "The Last Empire: The Corporatisation of Society and the Diminution of
24. J. Ziman, "Science in a Steady-State": The Research System in Transition. Science Policy Self," Futures, 23(2): 163-178, March 1991.
Support Group, London, Concept Paper no. I, 1987.
25. ABRC, A Strategy for the Science Base, Advisory Board for Research Councils, London,
1987.
26. Whiston, op cit. (Ref. 22).
27. Whiston, op. cit. (Ref. 20).
28. Ibid., chap. 2.
29. By "rote learning" we imply not a simple repetitive commitment to memory of repetitive
facts but reliance on numerous examples of a "horizontal" nature which do not really take
the student that much deeper into the subject matter. Teaching by "principle" emphasizes the
more generic, fundamental principles which underpin a subject. The important thing is to get
the balance correct.
30. Science and Engineering Research Council (SERC), U.K., 'Interdisciplinary Research:
Selection. Supervision and Training-A Summary (if the 'Whiston' Report. SERC monograph,
Swindon. April 1983.29 pp.
31. Professor J. Bessant of University of Brighton, U.K. (CENTRIM Group), undertook an ex-
tensive international survey and identified several hundred courses of this type.
32. M. Dodgson, Technological Collaboration in industry: Strategy. Policy and
intemationalisation in innovation. Routledge, London, 1993.
33. P. Senker and J. Senker, "The British Teaching Company Scheme: An Example of a
Successful European Scheme for Technology Transfer," in Competitiveness, Growth and Job
Creation-What Contrihution Can Education and Training Make? Commission of the
European Communities. Brussels, 1994.
34. An "interdisciplinary research center" aims to bring together several disciplines into a coher-
ent focus. Usually the IRC is located at one university for the whole country. It can act as a
"hotel" for expensive equipment. lead to a critical mass of expertise, and host visiting facul-
ty. A "designated research center" (DRC) does not have to compete for research funding for
several years (8 or so). thereby permitting continuity of work and building up of research or
training excellence.
31.1 BACKGROUND
31.1.1 Definitions
Research is the pursuit and production of knowledge by the scientific method.

Research productivity is the generation of tangible and intangible products from
research. Research efficiency is the productivity of research per unit of input resource.
Research impact is the change effected on society due to the research product.
Research effectiveness is a measure of the focus of impact on desired goals.
31.1.2 Increased Interest in Research Impact Measurement
In research sponsoring organizations, the selection and continuation of research pro-

grams must be made on the basis of outstanding science and potential contribution to
the organization's mission. Recently, there have been increasing pressures to link sci-
ence and technology programs and goals even more closely and clearly to organiza-
tional as well as broader societal goals. This is reflected in a number of studies,I-3 in
the controversial National Institutes of Health strategic planning process, and in the
controversial strategic goals proposed for the National Science Foundation.
In tandem with the pressures for more strategic research goals are motivations to
increase research assessments and reporting requirements to ensure that the increas-
ingly strategic research goals are being pursued by proposed and existing research
programs. The 1992 Congressional Task Force report on the health of research I stated,
as one of its two recommendations: "Integrate performance assessment mechanisms
into the research process using legislative mandates and other measures, to help mea-
sure the effectiveness of federally funded research programs."
*The views expressed in this chapter are solely those of the author and do not represent the views of the
Department of the Navy.
31.1
31.2 MANAGING MANAGEMENT OF TECHNOLOGY RESEARCH PERFORMANCE EFFECTIVENESS 31.3
The Government Results and Performance Act of 1993 (Public Law 103-62) munication channels and would identify the multitude of near- and long-term research
requires the establishment of strategic planning and performance measurement in the impacts (impact on other research fields, on technology, on systems, on education,
federal government, and for other purposes. Not only will the federal agencies be etc.). Having this data would provide more substantive arguments for continuing to
required to establish performance goals for program activities, but as the law states, provide the necessary funds to those who control the allocation of research funds.
they will be required to establish performance indicators to be used in measuring or
assessing the relevant outputs, service levels, and outcomes of each program activity.
Because of increased world competition, and the trends toward corporate downsiz-
ing, parallel pressures exist for industrial research organizations to link research pro-
31.2 RESEARCH IMPACT ASSESSMENT
grams more closely with strategic corporate goals and to increase research perfor- METHODS
mance and productivity. In tandem with the increasing governmental interests in
research impact assessment (RIA) stated above, there is considerable industrial inter- 31.2.1 Retrospective Methods
est in RIA as well. These actions toward increased accountability in government and
industry make it important that research managers and administrators in government, Background and Overview. In the evaluation of research performance and impact, a
industry, and academia understand the assessment approaches which could be utilized spectrum of approaches may be considered. At one end of the spectrum are the subjec-
to evaluate research quality and goal relevance, and that researchers gain an under- tive, essentially nonquantitative, approaches, of which peer review is the prototype.4
standing of these evaluation approaches as well. After a brief discussion of the pros At the other end of the spectrum are the mainly quantitative approaches, such as eval-
and cons of RIA, this chapter will describe the three main categories of research per- uative bibliometrics and cost-benefit.5.6 In between are what can be termed retrospec-
formance assessment techniques: retrospective, qualitative, and quantitative. tive or case-study approaches.78
These retrospective methods make little use of mathematical tools, but draw on
documented approaches and results wherever possible. In practice, there are two major
31.1.3 Underutilization of RIA reasons why research sponsoring organizations perform retrospective studies of
research. Positive research impact on the organization's mission provides evidence to
The reasons for reluctance of research sponsors and customers to implement RIA vary. the stakeholders that there is benefit in continuing sponsorship of research. Also, if the
The rewards in research and research management go to new discoveries, not quality study is sufficiently comprehensive, the environmental parameters which helped the
assessments. Neither the costs nor the time requirements of RIA are negligible, and research succeed can be identified, and these lessons can be used to improve future
have to be weighed against additional research which could be performed. More research.
immediate organizational requirements are assigned higher priority than RIA. The out- There are two major variants of retrospective studies. One type starts with a suc-
come of an RIA is not always predictable or pleasant for managers, and "pet" projects cessful technology or system and works backward to identify the critical R&D events
may be terminated after a rigorous evaluation. Negative results from an RIA may pro- which led to the end product. The other type starts with initial research grants and
vide executive or legislative branch overseers, or corporate management, ammunition traces evolution forward to identify impacts. The backward-tracing approach is
for budget reductions. Finally, since there is very little experience with the use of favored for two reasons: (I) the data is easier to obtain, since forward tracking is
advanced evaluation techniques, there is insufficient evidence that their use will result essentially nonexistent for evolving research; and (2) the sponsors have little interest
in better payoff than use of rudimentary techniques. To many research managers and in examining research that may have gone nowhere.
administrators, there is little to be gained from RIA, and a potential for loss. While methods for performing retrospective and case studies may differ within and
across industry and government,8 especially concerning the research question, case
selection, and analytic framework, the fundamental evaluation problems encountered
31.1.4 Benefits of Increased Utilization of RIA are pervasive across these different methods. In the remainder of this section, a few of
the more widely known case studies will be reviewed, and the key pervasive problems
One major benefit would be to improve organizational efficiency. A properly executed and findings will be identified. These retrospective studies include Project Hindsight,
RIA would target the people and the exogenous variables (management climate, fund- Project TRACES and its follow-on studies, and Accomplishments of Department of
ing conditions, infrastructure, etc.) necessary to increase research output relevant to Energy (DOE) Office of Health and Environmental Research (OHER) and of the
the organization's goals. An RIA which increased communication among researchers Advanced Research Projects Agency (ARPA).
and potential research customers during the conduct of research would allow a
smoother conversion of the products of research to technology, through better integra- Specific Retrospective Studies
tion of the users with the research performers.
Another major benefit would be to identify the diverse impacts of basic research.
The impacts of basic research are pervasive throughout a technological society, but for Project Hindsight. Project Hindsight was a retrospective study performed by the
the most part the impacts of basic research are indirect on technologies, systems, and Defense Department in the mid-1960s to identify those management factors important
end products. A major limitation of articulating the benefits of basic research has been in assuring that research and technology programs are productive and that program
the lack of data which could show the pathways and linkages through which the results are used.9 The evolution of the new technology represented in each of the 20
research impacts the intermediate or end products. A credible RIA of completed weapons systems selected was traced back in post-World War II time to critical points
research would trace the dissemination of the research products through the many com- called "research or exploratory development (RXD) events."
Original Traces Study. In 1967 The National Science Foundation (NSF) institut- entreprenuer who sees the technical opportunity and recognizes the need for innova-
ed a studylO to trace retrospectively key events which had led to a number of major tion, and who is willing to champion the concept for long time periods, if necessary.
technological innovations. One goal was to provide more specific information on the Also valuable are strong financial and management support coupled with many con-
role of the various mechanisms, institutions, and types of R&D activity required for tinuing inventions in different areas to support the innovation.
successful technological innovation. Similar to Project Hindsight, key "events" in the As the historiographic analyses (Hindsight and TRACES) of a technology or sys-
research and development history of each innovation selected were identified, and tem have shown, if the time interval in which the antecedent critical events occur is
their characteristics were examined. arbitrarily truncated, as in the two-decade-time-interval Hindsight case, the impacts of
basic research on the technology or system will not be given adequate recognition.
Follow-on Traces Study. In a follow-on study to TRACES, the NSF sponsored The number of mission-oriented research events peaks about a decade before the tech-
Battelle-Columbus Laboratories to perform a case-study examination of the process nology innovation. However, the number of non-mission-oriented research events
and mechanism of technological innovation. II For each innovation studied, the signifi- peaks about three decades before the technology innovation, and eight, nine, or more
cant events (important activity in the history of an innovation) and decisive events (a decades may be necessary in some cases to recognize the original critical antecedent
significant event which provides a major and essential impetus to the innovation) events. Over a long time interval, the majority of key R&D events tend to be non-mis-
which contributed to the innovation were identified. The influence of various exoge- sion-oriented. Thus, future studies of this type should allow time intervals of many
nous factors on the decisive events was determined, and several important characteris- decades to ensure that critical non-mission-oriented research events are captured.
tics of the innovative process as a whole were obtained. Even in those cases when an adequate time interval was used, and critical non-mis-
sion-oriented events were identified, the cumulative indirect impacts of basic research
Recent Traces Study. In a modern version of the TRACES study, the National were not accounted for by any of the retrospective approaches published or in use
Cancer Institute initiated an assessmentl2 to determine whether there were certain today. A recent studyl6 which examined impacts of research on other research and
research settings or support mechanisms which were more effective in bringing about technology through direct and indirect paths using a network approach showed that
important advances in cancer research. The approach taken was analogous in concept the indirect impacts of fundamental research can be very large in a cumulative sense.
to the initial TRACES study, with the addition of citation analyses to provide an inde- Future retrospective studies would be more credible if they devoted more effort to
pendent measure of the impact of the TRACE papers (papers associated with each key identifying indirect impacts of research. While indirect impacts of research are much
"event"), and by adding control sets of papers. more difficult to identify than direct impacts, and the data-gathering effort is much
larger and more complex, neglect of indirect impacts reduces appreciation of the value
DARPA Accomplishments Study. The Institute for Defense Analysis produced a of basic research significantly. Use of some of the advanced computer-based technolo-
documentl3 describing the accomplishments of the Defense Advanced Research gies available today, such as the network approach mentioned above or citation analy-
Projects Agency (DARPA). Of the hundreds of projects and programs funded by SiS,I2 could identify many of the pathways of the indirect impacts of research.
DARPA over its then (1988) 30-year lifetime, 49 were selected and studied in detail, While some studies concluded that the technical entrepreneur was extremely
and conditions for success were identified. important to the innovative process, it does not appear (to the author) to be the criti-
cal-path factor. Examination of the TRACES historiographic tracings, which display
DOE OHER Accomplishments Book. The approach taken by DOE was to significant events chronologically for each innovation, as well as the ARPA and
describe the 40-year history of OHER, [4.15 and present selected accomplishments in OHER case studies and accomplishments books, showed that an advanced pool of
different research areas from different points in time. This technique allowed impacts knowledge must be developed in many fields before synthesis leading to an innovation
and benefits of the research to be tracked through time, and in some cases to be quan- can occur. The entrepreneur can be viewed as an individual or group with the ability
tified as well. to assimilate this diverse information and exploit it for further development. However,
once this pool of knowledge exists, there are many persons or groups with capability
Retrospective Studies Conclusions. Project Hindsight, TRACES, and, to some to exploit the information, and thus the real critical path to the innovation is more
degree, the OHER and DARPA accomplishment books had some similar themes. All likely the knowledge pool than any particular entrepreneur. The entrepreneurs listed in
these methods used a historiographic approach, looked for significant research or the studies undoubtedly accelerated the introduction of the innovation, but they were
development events in the metamorphosis of research programs in their evolution to at all times paced by the developmental level of the knowledge pool.
products, and attempted to convince the reader that (I) the significant R&D events in A detailed reading of those studies which attempted to incorporate economic quan-
the development of the product or process were the ones identified; (2) typically, the tification showed the difficulties of trying to identify, assign, and quantify costs and
organization sponsoring the study was responsible for some of the (critical) significant benefits of basic research, especially at a project-investigator level. As TRACES and
events; (3) the final product or process to which these events contributed was impor- other similar studies have shown, the chain of events leading to an innovation is long
tant; and (4) while the costs of the research and development were not quantified, and and broad. Many researchers over many years have been involved in the chain, and
the benefits (typically) were not quantified, the research and development were worth many funding agencies, some simultaneously with the same researchers, may have
the cost. been involved. The allocation of costs and benefits under such circumstances is a very
Six critical conditions for innovation were identified through analysis of these ret- difficult and highly arbitrary process. The allocation problem is reduced, but not elim-
rospective studies. The most important condition appears to be the existence of a inated, when the analysis is applied at the macro level (integrating across individual
broad pool (~f knowledge which minimizes critical path obstacles and can be exploited researchers, organizations, etc.).
for development purposes. This condition is followed in importance by a technical One goal of all the studies presented was to identify the products of research and
some of their impacts. In addition, the Hindsight, TRACES, and ARPA studies tried to A rational process
identify factors which influenced the productivity and impact of research. The follow-
A fair process
ing general conclusions about the role and impact of basic research were reached:
A valid and reliable measure of scientific performance
The majority of basic research events which directly impacted technologies or sys-
tems were non-mission-oriented and occurred many decades before the technology High-quality peer reviews require as a minimum the conditions summarized from
or system emerged. Ormala:32
The cumulative indirect impacts of basic research were not accounted for by any of
The method, organization, and criteria for an evaluation should be chosen and
the retrospective approaches published.
adjusted to the particular evaluation situation.
An advanced pool of knowledge must be developed in many fields before synthesis
Different levels of evaluation require different evaluation methods.
leading to an innovation can occur.
Program and project goals are important considerations when an evaluation study is
Allocation of benefits among researchers, organizations, and funding agencies to
carried out.
determine economic returns from basic research is very difficult and arbitrary, espe-
cially at the micro level. The basic motive behind an evaluation and the relationships between an evaluation
and decision making should be openly communicated to all the parties involved.
While these approaches do provide interesting information and insight into the transi- The aims of an evaluation should be explicitly formulated.
tion process from research to development to products, processes, or systems, the
arbitrary selectivity and anecdotal nature of many of the results render any conclu- The credibility of an evaluation should always be carefully established.
sions as to cost-effectiveness or generalizability suspect. Supplementary analyses The prerequisites for the effective utilization of evaluation results should be taken
using other approaches are required for further justification of the value of the R&D. into consideration in evaluation design.
Assuming that these considerations have been taken into account, three of the most
31.2.2 Qualitative (Peer Review) important intangible factors for a successful peer review are motivation, competence,
and independence. The review leader's motivation to conduct a technically credible
Background. Peer review of research represents evaluation by experts in the field, review is the cornerstone of a successful review. The leader selects the reviewers,
and is the method of choice in practice in the United States.4,17-20 Its objectives range summarizes their comments, guides the questions and discussions in a panel review,
from being an efficient resource allocation mechanism to a credible predictor of and makes recommendations about whether the proposal should be funded. The quali-
research impact. ty of a review will never go beyond the competence of the reviewers. Two dimensions
of competence which should be considered for a research review are the individual
Requirements for High-Quality Peer Review. Many studies related to peer review reviewer's technical competence for the subject area and the competence of the review
have been reported in the literature, ranging from the mechanics of conducting a peer group as a body to cover the different facets of research issues (other research
review, to examples of peer reviews, to detailed critiques of peer reviews and the impacts, technology and mission considerations and impacts, infrastructure, political
process itself (e.g., Refs. 4, 17-19,21-34). A nonstandard peer review approach for and social impacts). The quality of a review is limited by the biases and conflicts of
concept comparisons is the Science Court. As in a legal procedure, it has well-defined the reviewers. The biases and conflicts of the reviewers selected should be known to
advocates, critics, a jury, etc, It was applied by the author to a review of alternate the leader and to one another.
fusion concepts in 1977.35 This procedure generated substantial debate and surfacing The best features of different organizations' peer review practices can be combined
of crucial issues, but it was time-consuming compared to a standard panel assessment. into a heuristic protocol for the conduct of successful peer review research evaluations
While these reported studies present the process mechanics, the procedures fol- and impact assessments. The main aims of the protocol are to ensure that the final
lowed, and the review results, the reader cannot ascertain the quality of the review and assessment product has the highest intrinsic quality and that the assessment process
the results. In practice, procedure and process quality are mildly necessary, but and product are perceived as having the highest possible credibility. The protocol ele-
nowhere sufficient conditions for generating a high-quality peer review. Many useful ments are described in the following paragraphs.
peer reviews have been conducted using a broad variety of processes, and while well-
documented modern processes (e.g., Ref. 29) may contribute to the efficiency of con- Peer-Review Research Evaluations. The objectives of the assessment must be
ducting a review, more than process is needed for high quality. There are many intan- stated clearly and unambiguously at the initiation of the assessment by the highest lev-
gible factors that enter into a high-quality review, and before examples of reviews are els of management, and the full support of top management must be given to the
presented, some of the more important factors will be discussed. assessment. In turn, the objectives, importance, and urgency of the assessment must be
The desirable characteristics of a peer review can be summarized as4 articulated and communicated down the management hierarchy to the managers and
performers whose research is to be assessed, and the cooperation of these reviewees
An effective resource allocation mechanism must be enlisted at the earliest stages of the assessment:
An efficient resource allocator
The final assessment product, the audience for the product, and the use to be made
A promoter of science accountability
of the product by the audience should be considered carefully in the design of the
A mechanism for policy makers to direct scientific effort assessment.
One person should be assigned to manage the assessment at the earliest stage, and ed as part of a total vertical structure R&D review. In the nominal vertical structure
this person should be given full authority and responsibility for the assessment. review, quality and relevance should preferably be evaluated separately. Thus,
The assessment manager should report to the highest organizational level possible research evaluation must take into account how research is structured, integrated, and
in order to ensure maximum independence from the research units being assessed. managed within an organization. Research quality criteria should include research
merit, research approach, productivity, and team quality. Relevance criteria should
The reviewers should be selected to represent a wide variety of viewpoints, in order include short-term impact (transitions and/or utility), long-term potential impact, and
to address the many different facets of research and its impact. 31 These would some estimate of the probability of success of attaining each type of impact. While the
include bench-level researchers to address the impact of the proposed research on emphasis is on peer review, bibliometric and other types of indicators should be uti-
the field itself, broad research managers to address potential impact on allied lized to supplement the peer evaluation.
research fields, technologists to address potential impact on technology and the
potential of the research to transition to higher levels of development, systems spe- 3. The third level would be a minimum of triennial peer review at the work unit
cialists to address potential impact on systems and hardware, and operational per- (principal investigator) level (e.g., Ref. 29). Most of the program-level issues
sonnel to address the potential impact on downstream organizational operations. described above are applicable and need not be repeated here.
The reviewers should be independent of the research units being evaluated, and
For each of these three levels of review, the following criteria and issues should be
independent of the assessing organization where possible. The objectives of, and
considered during the review as appropriate.
constraints on (if any), the assessment should be communicated to the reviewers at
the initial contact. Criteria for Organization Reviews
Maximum background material describing the research to be assessed, related
research and technology development sponsored by external organizations, the Quality and uniqueness of the work
organization structure, and other factors pertinent to the assessment should be pro- Scientific and technological opportunities in areas of likely organization mission
vided to the reviewers as early as possible before the review. This will allow the importance
reviewers and presenters to use their time most productively during the review.
Need to establish a balance between revolutionary and evolutionary work
Recommendations resulting from the assessment should be tracked to ensure that Position of the work relative to the forefront of other efforts
they are considered and implemented, where appropriate. For research programs,
planning, execution, and review are linked intimately. Feedback from the review Responsiveness to present and future organization mission requirements
outcomes to planning for the next cycle should be tracked to ensure that the review- Possibilities of follow-on programs in higher R&D categories
planning coupling is operable. Appropriateness of the efforts for organization (in lieu of) other organizations
Other organization connection (coordination) of the work
Levels of Organizational Research Evaluation. Evaluations should be performed
at three levels of resolution in the organization: Questions to Be Asked of Organization Programs
1. The highest level would be an annual corporate-level review of how the organi- What is the investment strategy of the larger management unit? This would include
zation performs research. If the organization has a separate research unit, then the unit the relative program priorities, the actual investment allocation to the different pro-
should be evaluated as an integrated whole. If research is vertically integrated with grams, and the rationale for the investment allocation. For each program being
development, then the research should preferably be evaluated as part of a total orga- reviewed, what is the investment strategy for its thrust areas?
nization R&D review. The charter of this highest-level assessment would be to review, What are we trying to do (in a systems concept)?
at the corporate level, general policy, organization, budget, and programs (e.g., Ref.
Can specific advantage to the organization be identified if the program is success-
36). Total inputs and outputs, including integrated bibliometric indicators, would be ful?
examined. Overall research management processes would be examined, such as selec-
tion, execution, review, and technology transfer of research. The overall investment How is the system done today, and what are the limitations of the current practice?
strategy would be evaluated, and would include different perspectives of the program, Would the work be supported if it were not already under way?
such as technical discipline, performer, and end-use allocation. The integration of the Assuming success, what difference does it make to the user in a mission area con-
research objectives with the larger organization objectives would be assessed. The tent?
evaluators would include, but not be limited to, representatives of the stakeholder,
customer, and user community whose potential conflicts with the organization are What is the technical content of the program, and how does it fit with other ongoing
minimal. efforts in academia, industry, organization labs, other labs, etc.?
2. The second level would be triennial peer review of a discipline or management What are the decision milestones of the program?
unit at the program level (e.g., Refs. 31, 37), in which a program is defined as an How long will the program take, how much will the program cost, and what are the
aggregation of work units (principal investigators). If the organization has a separate midterm and final objectives of the program?
research unit, then the discipline should be evaluated as an integrated whole. In the
nominal review, quality and relevance could be evaluated concurrently. If research is In Europe, another development line has been to commission evaluation experts
vertically integrated with development, then the research should preferably be evaluat- either to support panels or to conduct independent assessments which may involve
surveys, in-depth interviews, case studies, etc.38 Barker21 describes how evaluation then the capabilities of the peer review instrument are well matched to its require-
experts coming from two main communities (civil servants and academic policy ments.
researchers) interact in evaluation of R&D in the United Kingdom. The performance However, the value of peer review as a predictive tool for assessing the impact of
of evaluations, including the synthesis of evidence and the production of conclusions research on an organization's mission (other than research for its own sake) rests on
and recommendations, is done by professionals, as opposed to panels of eminent per- faith more than on hard documented evidence. Also, for serious panel-type peer
sons. reviews or mail-type peer reviews, in which sufficient expertise is represented on the
panels, total real costs will dominate direct costs. The major contributor to total costs
Problems with Peer Review. Peer-review problems include4.19,39-41 is the time of all the players involved in executing the review. With high-quality per-
formers and reviewers, time costs are high, and the total review costs can be a nonneg-
Partiality of peers to impact the outcome for nontechnical reasons. ligible fraction of total program costs, especially for programs that are people-inten-
An "old boy" network to protect established fields. sive rather than hardware intensive.
Most methods used in practice include criteria which address the impact of
A "halo" effect for higher likelihood of funding for more visible scientists, depart-
research on its own and allied fields, as well as on the mission of the sponsoring orga-
ments, and institutions.
nization. Nearer-term research impacts typically playa more important role in the
Reviewers differ in criteria to assess and interpret. review outcome than longer-term impacts, but do not have quite the importance of
The peer review process assumes agreement about what good research is, and what team quality, research approach, or the research merit. A minimal set of review criteria
are promising opportunities. should include team quality, research merit, research approach, research productivity,
and a criterion related to longer-term relevance to the organization's mission. More
These potential problems should be considered during the process of selecting important than the criteria is the dedication of an organization's management to the
research impact assessment approaches. highest-quality objective review, and the associated emplacement of rewards and
Another problem with peer review is cost. The true total costs of peer review can incentives to encourage quality reviews.
be considerable but tend to be ignored or understated in most reported cases. For seri-
ous panel-type peer reviews, in which sufficient expertise is represented on the panels,
total real costs will dominate direct costs by as much as an order of magnitude or 31.2.3 Quantitative Methods
more.37 The major contributor to total costs for either type of review is the time of all
the players involved in executing the review. With high-quality performers and
reviewers, time costs are high, and the total review costs can be a nonnegligible frac- Background. Quantitative approaches to research assessment focus on the numerics
tion of total program costs, especially for programs that are people-intensive rather associated with the performance and outcomes of research. The main approaches used
than hardware-intensive. are bibliometrics and econometrics such as cost-benefit and production function
The issue of peer review predictability affects the credibility of technological fore- analysis. This section focuses on these three main approaches, briefly describes the
casting directly. A few studies have been done relating reviewers' scores on compo- bibliometrics-related family of approaches known as cooccurrence phenomena, briefly
nent evaluation criteria to proposal or project review outcomes. Some studies have describes a network modeling approach to quantifying research impacts, and ends
been done in which reviewers' ratings of research papers have been compared to the with an expert systems approach for supporting research assessment.
numbers of citations received by these papers over time.42,43 Correlations between
reviewers' estimates of manuscript quality and impact and the number of citations Bibliometrics
received by the paper over time were relatively low. The author is not aware of report-
ed studies, singly or in tandem, that have related peer review scores and rankings of
proposals to downstream impacts of the research on technology, systems, and opera- Foundations. Bibliometrics, especially evaluative bibliometrics, uses counts of
tions. This type of study would require an elaborate data-tracking system over lengthy publications, patents, citations, and other potentially informative items to develop sci-
time periods, which does not exist today. Thus, the value of peer review as a predic- ence and technology performance indicators. The choice of important bibliometric
tive tool for assessing the impact of research on an organization's mission (other than indicators to use for research performance measurement may not be straightforward. A
research for its own sake) rests on faith more than on hard documented evidence. 1993 study surveyed about 4000 researchers to identify appropriate bibliometric indi-
cators for their particular disciplines.44 The respondents were grouped in major disci-
Peer-Review Conclusions. Peer review is the most widely used and generally credi- pline categories across a broad spectrum of research areas. While the major discipline
ble method used to assess the impact of research. Much of the criticism of peer review categories agreed on the importance of publications in refereed journals as a perfor-
has arisen from misunderstandings of its accuracy resolution as a measuring instru- mance indicator, there was no agreement about the relative values of the remaining 19
ment. While a peer review can gain consensus on the projects and proposals that are indicators provided to the respondents. For the respondents in total, the important per-
either outstanding or poor, there will be differences of opinion on the projects and pro- formance indicators were
posals that cover the much wider middle range. For projects or proposals in this mid-
dle range, their fate is somewhat more sensitive to the reviewers selected. If a key pur- Publications-publication of research results in refereed journals
pose of a peer review is to ensure that the outstanding projects and proposals are Peer-reviewed books-research results published as commercial books reviewed by
funded or continued, and the poor projects are either terminated or modified strongly, peers
Keynote addresses-invitations to deliver keynote addresses or present refereed in a specific subject area. Finally, conventional information retrieval tends to deal with
papers and other refereed presentations at major conferences related to one's pro- identifying individual papers, patents, inventors, and clusters of interest to an individ-
fession ual scientist or engineer or research manager working on a specific research project.
Conference proceedings-publication of research results in refereed conference Problems with Bibliometrics. Problems with publication and citation counts
proceedings include30,40,45,46
Citation impact-publication of research results in journals weighted by citation
impact 1. Publication counts
Chapters in books-research results published as chapters in commercial books Indicate quantity of output, not quality.
reviewed by peers Nonjournal methods of communication ignored.
Competitive grants-ability to attract competitive, peer reviewed grants from the Publication practices varying across fields, journals, employing institutions.
ARC, NH&MRC, rural R&D corporations, and similar government agencies Choice of a suitable, inclusive database is problematical.
Undesirable publishing practices (artificially inflated numbers of coauthors,
These bibliometric indicators can be used as part of an analytical process to measure artificially shorter papers) increasing.
scientific and technological accomplishment. Because of the volume of documented
2. Citations
scientific and technological accomplishments being produced (5000 scientific papers
published in refereed scientific journals every workday worldwide; 1000 new patent Intellectual link between citing source and reference article may not always
documents issued every workday worldwide), use of computerized analyses incorpo- exist.
rating quantitative indicators is necessary to understand the implications of this tech- Incorrect work may be highly cited.
nicaloutput.5 Methodological papers among most highly cited.
Narin states three axioms that underlie the utilization and validity of bibliometric Self-citation may artificially inflate citation rates.
analysis. The first axiom is activity measurement: that counts of patents and papers Citations lost in automated searches due to spelling differences and inconsisten-
provide valid indicators of R&D activity in the subject areas of those patents or cies.
papers, and at the institution from which they originate. The second axiom is impact Science Citation Index (SCI) changes over time.
measurement: that the number of times those paients or papers are cited in subsequent SCI biased in favor of English-language journals.
patents or papers provides valid indicators of the impact or importance of the cited Same problems as publication counts.
patents and papers. However, there could be weightings applied to the raw count data,
depending on the perceived importance of the journals contallling the citing papers. A major problem with bibliometrics is cross-discipline comparisons of outputs. For
Also, the impacts would be on allied research fields or technologies, not necessarily example, how should the paper or citation output of a program in solid-state I '1ysics
long-term impacts on the originating organization's mission. The third axiom is link- be compared to that of shallow-water acoustics? What types of normalization are
age measurement: that the citations from papers to papers, from patents to patents, and required to allow comparisons among these different types of programs and fields?
from patents to papers provide indicators of intellectual linkages between the organi- Three types of normalization solutions are proposed by Schubert and BraunY
zations which are producing the patents and papers, and knowledge linkage between
their subject areas.5 1. The publishing journal as reference standard. By relating the number of
Use of bibliometrics can be categorized into four levels of aggregation:5 citations received by a paper (or the average citation rate of a subset of papers pub-
lished in the same journal-the mean observed citation rate) to the average citation
Policy-evaluation of national or regional technical performance rate of all papers in the journal (the mean expected citation rate), the relative citation
Strategy-evaluation of the scientific performance of universities or the technologi- rate will be obtained. This indicator shows the relative standing of the paper (or set of
cal performance of companies papers) in question among its close companions: its value is higher or lower than unity
as the sample is more or less cited than the average.
Tactics-tracing and tracking R&D activity in specific scientific and technological
areas or problems 2. The set of related records as reference standard. Bibliographic coupling
uses the number of references a given pair of documents have in common to measure
Conventional-identifying specific activities and specific people engaged in the similarity of their subject matter. Comparing a set of papers that are "similar" in
research and development this sense to a given article of the same age will yield an ideal reference standard for
citation assessments.
Policy questions deal with the analysis of very large numbers of papers and
patents, often hundreds of thousands at a time, to characterize the scientific and tech- 3. The set of cited journals as reference standard. A promising method is
nological output of nations and regions. Strategic analyses tend to deal with thousands based on the journal in the reference lists of the articles of the journal in question.
to tens of thousands of papers or patents at a time, numbers that characterize the publi- These journals are selected by the most reliable persons, the authors of the journal, as
cation or patent output of universities and companies. Tactical analyses tend to deal references (in both senses of the word) and, therefore, can justly be regarded as stan-
with hundn js to thousands of papers or patents, and deal typically with activity with- dards of the expected citation rate.
Bibliometric Studies. Macroscale bibliometric studies characterize science activi- devices, survey), and stated that "comparisons of scientific impacts should be made
ty at the national (e.g., Refs. 48, 49), international, and discipline level. The biennial only with laboratories that are comparable in their primary task and research outputs."
Science and En[?ineering Indicators report50 tabulates data on characteristics of per- The report concluded further that
sonnel in science, funds spent, publications and citations by country and field, and
many other bibliometric indicators. Another study at the national level was aimed at Bibliometric indicators and scientific publications are not the only outputs that
evaluating the comparative international standing of British science. 51 Using publica- should be measured, but the other types of outputs differ for different laboratories.
tion counts and citation counts, the authors evaluated scientific output of different
Bibliometric indicators are not equally valid across different types of laboratories.
countries by technical discipline as a function of time. Much more understanding is
required as to which indicators are appropriate and how they should impact allocation Bibliometric indicators are less useful for the evaluation of research laboratories
decisions. involved in closed publication markets.
There have been numerous microscale bibliometric studies reported in the litera-
ture (e.g., Refs. 52-61). The NIH (National Institutes of Health) bibliometrics-based Cooccurrence Phenomena. One class of computer-based analytic techniques which
evaluations33 included the effectiveness of various research support mechanisms and tends to focus more on macroscale impacts of research exploits the use of cooccur-
training programs, the publication performance of the different institutes, the respon- rence phenomena. In cooccurrence analysis, phenomena that occur together frequently
siveness of the research programs to their congressional mandate, and the comparative in some domain are assumed to be related, and the strength of that relationship is
productivity of NIH-sponsored research and similar international programs. assumed to be related to the cooccurrence frequency. Networks of these cooccurring
Two papersl2.62 described determination of whether significant relationships exist- phenomena are constructed, and then maps of evolving scientific fields are generated
ed among major cancer research events, funding mechanisms, and performer loca- using the link-node values of the networks. Using these maps of science structure and
tions; compared the quality of research supported by large grants and small grants evolution, the research policy analyst can develop a deeper understanding of the inter-
from the National Institute of Dental Research; evaluated patterns of publication of relationships among the different research fields and the impacts of external interven-
the NIH intramural programs as a measure of the research performance of NIH; and tion, and can recommend new directions for more desirable research portfolios. These
evaluated quality of research as a function of size of the extramural funding institu- techniques are discussed in more detail in Kostofr4-76 and Tijssen and Van Raan.77
tion. Most of the NIH studies focused on aggregated comparison studies (large grants The Tijssen-Van Raan paper contains an excellent exposition on mapping techniques
vs. small grants, large schools vs. small schools, domestic vs. foreign, etc.). for displaying the structure of related science and technology fields.
Patent citation analysis has the potential to provide insight to the conversion of sci- In particular, cocitation analysis has been applied to scientific fields, and cocita-
ence to technology.63-69 Much of the federal government support of the development tion clusters have been mapped to represent research-front specialties.77 Coword has
of patent citation analysis was by the NSF (e.g., Refs. 70, 71). Some recent studies been utilized to map the evolution of science under European (mainly French) govern-
have focused on utilization of patent citation analysis for corporate intelligence and ment support, and has the potential to supplement other research impact evaluation
planning purposes (e.g., Ref. 72). Some of the data presented verify further Lotka's approaches. Conomination, in its different incarnations, has been used to construct
productivitv law, in which relatively few people in a laboratory are producing large social networks of researchers and has the potential, if expanded to include research
numbers of patents. In the example presented in Narin,72 the patents of the most pro- and technology impacts in the network link values, for evaluating direct and indirect
ductive inventor are highly cited, further demonstrating his key importance. Narin impacts of research. Coclassification is based on cooccurrences of classification codes
concludes that highly productive research labs are built around a small number of in patents, and is used to construct maps of technology clusters.78
highly productive, key individuals.
Despite its limitations, bibliometrics may have utility in providing insight into Cost-Benefit and Economic Analyses. A comprehensive survey examined the appli-
research product dissemination. For laboratories, these studies cation of economic measures to the return on research and development as an invest-
ment in individual industries and at the national level. 33This document concluded that
Examine distribution of disciplines in coauthored papers, to see whether the multi- while econometric methods have been useful for tracking private R&D investment
disciplinary strengths of the lab are being utilized fully. within industries, the methods failed to produce consistent and useful results when
applied to federal R&D support. A more recent analysis focused on economic and
Examine distribution of organizations in coauthored papers, to determine the extent
cost-benefit approaches used for research evaluation.79 The methods involve comput-
of lab collaboration with universities, industry, and other labs and countries.
ing impacts using market information, monetizing the impacts, and then comparing
Examine the nature (basic or applied) of citing journals and other media (patents), the value of the impacts with the cost of research. Principal measures described
to ascertain whether the lab's products are reaching the intended customer(s). include surplus measures and productivity measures. With known benefit and cost
Determine whether the lab has its share of high-impact (heavily cited) papers and timestreams, internal rates of return to R&D investments are then computed. The
patents, viewed by some analysts as a requirement for technical leadership. paper notes both the standard technical difficulties with these approaches and the
political and organizational difficulties in implementing them.
Determine which countries are citing the lab's papers and patents, to see whether
there is foreign exploitation of technology and in which disciplines.
Cost-Benefit Analyses. Cost-benefit analyses are a family of related techniques
Identify papers and patents cited by the lab's papers and patents, to ascertain degree which include cost-benefit, net present value, and rate-of-return.79-81 These approach-
of lab's exploitation of foreign and other domestic technology. es tend to be more widely used in industry than government. For one, or many, pro-
jects, the basic approach is similar. A starting point in time for the research is defined.
A recent comparative bibliometric analysis of 53 laboratories 73 clustered the labs
The timestream of costs for product development is estimated, and the timestream of
into six types (regulation and control. project management, science frontier, service,
benefits from the product is estimated. Using the time value of money, the costs and against input variables (quality of the investigator's department, quality of the investi-
benefits are discounted to the origin of time, and the net benefits are compared with gator, etc.). The results gave some idea of the importance of the input variables, alone
the net costs. The main differences in the approaches to cost-benefit analyses are in or in combination, on the output variables. One obvious potential application would be
the sophistication of the methods used to estimate the cost and benefit streams, and the prediction of proposals likely to have high productivity based on prior (input) knowl-
time value of money. edge. Much, however, remains to be done in identifying the appropriate output mea-
Cost-benefit analyses have limited accuracy when applied to basic research sures, the appropriate input measures, and the nature of the interactions among these
because of the quality of both the cost and benefit data due to the large uncertainties measures for different disciplines.
characteristic of the research process, as well as selection of a credible origin of time
for the discounting computations. As an illustrative example, a deterministic cost-ben- Network Modeling for Direct and Indirect Impacts. A network-based modeling
efit analysis was performed by the author on a fusion reactor variant. 82 Its real prob- approach was devised which would allow estimation of the direct and indirect impacts
lem, which pervades and limits any attempt to perform a cost-benefit analysis on a of a research program or collection of research programs. The research program
concept in the basic research stage, was the inherent uncertainty of controlling the impacts would be multifaceted, including impacts on advancing its own field, on
fusion process. This translated to the inability to predict the probabilities of success advancing allied fields, on advancing technology, on supporting operations and mis-
and time and cost schedules for overcoming fundamental plasma research problems sion requirements, and so on. A major feature of the model is inclusion of feedback
(e.g., plasma stabilities and confinement times); no credible methods were available. from the higher development categories (e.g., exploratory development, advanced
Thus, the main value of the cost-benefit approach was to show that the potential exist- development) on the advancement of research.
ed for positive payoff from the hybrid reactor development, and that there was a credi- The model and a subsequent pilot study related to U.S. Navy R&D have been
ble region in parameter space in which controlled fusion development could prove described in detai1.16 In summary, a network was constructed in which each node rep-
cost-effective; what was missing was the likelihood of achieving that payoff. resented an area of research or development. The values of the links connecting each
A 1991 marginal cost-benefit study weighed the costs of academic research against node pair represented the impact of results from the first node area on the second node
the benefits realized from the earlier introduction of innovative products and processes area. The total impact of an area of research on other research or development was
due to the academic research.6 The study used survey data to show a very high social obtained by integrating over all paths from the research node to the node(s) of interest.
rate of return resulting from academic research. While the method is innovative, future
applications using more objective data sources would provide higher confidence in the Expert Networks. Research impact assessment is, in essence, a diagnostic process
computed rates of return. with many diagnostic tools. In other fields of endeavor, such as medicine and machin-
ery repair, expert systems are being used increasingly as diagnostic tools or as support
Production Function. Production function approaches to evaluating research to diagnostic processes. Recently, there have been efforts to develop expert-system
returns invoke economic theory-based assumptions relating outputs to inputs to gener- approaches combined with artificial neural networks (expert networks) for use in
ate an estimatable model. One only needs time-series data on output, capital, labor, R&D management, including RIA.90-92 A brief summary of these efforts follows.
and research expenditures to estimate empirically the marginal contribution of The product of these efforts is the research-management expert network (R-MEN),
research to value-added. However, the relationship of research to value added is non- which is characterized by two complementary tools: organizational and professional
linear and indirect. Variables such as other inputs to technology and production and development (O/PD) and expert network. The latter technology comprises an expert
marketing functions complicate the research/value-added relationship. system (left side of brain) and an artificial neural network (right side of brain). Given
Much of the major recent economic work relating economic growth and productiv- a set of research, and research management, policies, and strategies, R-MEN learns
ity increases to R&D spending has been performed by three economists.6.83-87 concepts that hierarchically organize those policies and strategies and use them in
Mansfield's earlier study typifies the strengths and weaknesses of the production func- classifying and triaging research proposals.
tion approach. This study83 attempted to determine whether an industry's or firm's rate The R-MEN framework consists of a knowledge base and a database. Feeding into
of productivity change was related to the amount of basic research it performed. the knowledge base are four modules: a policy-strategy impartation module and a pro-
Mansfield developed a production function which disaggregated basic and applied posal data-acquisition module, both of which receive input from the O/PD process;
research, then regressed rate of productivity increase with many different variables. and a research impact calculation module and a proposal review module. The knowl-
The regressions showed a strong relationship between the amount of basic research edge base then feeds into the database through five modules: a project selection mod-
carried out by an industry and the industry's rate of productivity increase during ule, a resources allocation module, a project evaluation and control module, an inves-
1948-1966. tigator evaluation module, and an organization evaluation module.
The study exemplifies the problem inherent in multiple regression analyses: deter- R-MEN is implemented in three phases. Phase I includes the development of the
mining cause and effect from what is essentially correlation. As Mansfield points out, strategic plan, which defines and communicates longer-term research directions, and
"It is possible that industries and firms with high rates of productivity growth tend to the development of the operating plan, which specifically identifies the projects that
spend relatively large amounts on basic research, but that their high rates of productiv- will implement the strategic plan, taking into consideration the goals, quantifiable
ity growth are not due to these expenditures."83 Nor does Mansfield's model specify objectives, and development of the individual investigator and the organization.
the path(s) by which R&D investment supposedly leads to productivity improvements. Phase 2 represents the necessary education and management support needed to pre-
A production function approach to cost-efficiency of basic research essentially pare the staff to participate in such an "action research" effort. This phase identifies
used a regression analysis between outputs and inputs.88.89 For proposals, the method and utilizes the critical components required to develop an environment that facilitates
involved regressing output variables (citations per dollar, graduate students per dollar) participative research management activities. A significant activity occurring during
this phase is daily verification of individual scheduled training and development. If an rence, network modeling, and expert networks described above will become more
individual has no recorded training and/or development within a preset period, the commonplace in research assessment.
system will generate and send a report through e-mail directly to the office of the
director for R&D. The system will be able to look at a training and/or development
description(s) and compare it (them) with the background of the individual to deter-
mine whether the training and/or development is (are) suitable for that individual. 31.3 REFERENCES
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Japanese firms are willing to take on high levels of debt in order to in-vest in new pro-
duction capabilities and marketing infrastructure.
Longer time horizons are particularly important for technology-based firms, oper-
ating in rapidly growing markets and rapidly changing environments. These compa-
nies must build their technological base3 and continuously invest in knowledge. They
must develop their core technological competencies,4 and make sure that they are
preparing the necessary infrastructure for the future, and for coming generations of
products. Leading-edge companies do not wait for competitors to tell them where the
industry is going. They are mobilized to create and dominate emerging opportunities.
Furthermore, they do not compete within the boundaries of existing industries, but
make any effort to shape the structure of future industries.5
Even in less dynamic environments, a significant portion of present industrial
results are not an outcome of recent managerial decisions. Rather, they are results of
decisions taken 5, 7, and even 10 years ago. And when looking into the future, most of
the strategic decisions made today will normally have an impact on the business only
5 or more years from now. Several known examples will illustrate our point. Classic
as it is, the VCR industry case must still be remembered. When JVC and Sony made a
lifelong commitment in the early 1960s to set specific goals on developing and mar-
keting a home videorecorder, no American company was doing the same. Although
American firms possessed the technology and were the world leaders in commercial
videorecording, none of them had the vision needed to foresee or even match the
introduction of the Japanese home VCRs in the mid-1970s. An entire market was lost
for many years, if not forever. Similarly, Lee Iacocca admitted, in retrospect, that it
would have been impossible to save Chrysler in the 1970s if it wasn't for the previous
investments made by Chrysler several years before he joined the company.6 These
decisions involved some new models, such as the K car, and they served as a major
component in Chrysler's successful turnaround. The second time around when Iacocca
got the company out of trouble was in the late 1980s. This time, again, the solution
was based to a large extent on the very successful and profitable lines of minivans
whose initial investment were made in the late 1970s and early 1980s.
How, then, would companies know they are preparing for the future? Obviously,
they must focus their attention on decisions and plans dedicated to tomorrow.
However, they must do so while assessing their effectiveness in both the short and the
long terms. The purpose of this chapter is to address these issues. It is based on a col-
lection of studies we conducted at different organizational levels and on the experi-
ence of leading companies around the world. Our underlying premise is that "what
gets measured gets done" and "you can't manage what you don't measure." As we
found, technology-based organizations would benefit from adapting a multidimension-
al framework which would be used for scanning their entire success horizons. Such a
framework will serve as a basis for the development of specific success measures for
each organization at different organizational levels. The theoretical framework pre-
sented in this chapter will discuss three levels, each encompassing the previous one:
the single project, the business unit, and the entire company or corporation. For each
level we will describe four distinct success dimensions, each addressing a different
managerial concern and directed toward a different time frame.
Although none of the companies we studied is using the entire multidimensional
framework, some organizations are using various portions of it, and several come
closer than others. We believe that the development of a comprehensive framework is
feasible as well as practical. There is plenty of rewarding potential for any company
willing to achieve better and more focused results.
32.6 MANAGING MANAGEMENT OF TECHNOLOGY SUCCESS DIMENSIONS IN TECHNOLOGY-BASED FIRMS 32.7
before success can be really evaluated and until initial expectations are met. To com- This dimension may also apply to projects not aimed at building new products, or
pound for these complexities, project success assessors should consider the following to internal organizational projects. For example, organizations may need to assess the
four major dimensions. 13 success of their reengineering projects,15 or the building of new manufacturing
processes. This is the measure with which such an assessment could be done. It will
include measures of performance time, cycle time, yield, and quality of the process;
all of them will assess the direct impact that the project had on the organization.
32.3.1 Project Efficiency
The first dimension is the short-term measure expressing the efficiency with which the
project has been managed. It simply tells us how the project met its resources con- 32.3.4 Preparing for the Future
straints, whether it was completed on time, and whether it was finished within the
specified budget. This is the immediate dimension, which is usually used for project The fourth dimension addresses the issue of helping prepare the organizational and
assessment during execution and right after completion. Although meeting time and technological infrastructure for the future. How did the project contribute to future
budget constraints may indicate a well-managed, efficient project, it may not prove businesses and additional innovations? Did it produce a new technology? Did it create
that this project was successful in the long term and has benefited the organization in a new-product line? And did it create a new market? Did we also build during this pro-
the longer term. On the other hand, with increased competition and shorter product ject new skills that may be needed in the future? Did we develop enough core compe-
life cycles, time to market (i.e., time from initial concept to market introduction) tencies to be used later across different business lines?
becomes a critical competitive component, and therefore enhanced project efficiency Project success, therefore, should be considered as a dynamic concept in which
should be seen as adding to product competitiveness. both short- and long-term implications are considered. The first dimension can be
Some organizations may find it beneficial to consider additional measures of effi- assessed only in the very short term, during project execution and right after project
ciency, such as the number of engineering changes before final design release, cost of completion. The second dimension can be assessed after the project's product has been
materials and tooling, and efficiency and yield of production ramp.14 Other measures delivered to the customer, and the customer starts using it. Customer satisfaction (and
may involve efficiency of purchasing (time to get orders out and materials in), relia- particularly customer feedback) can therefore be assessed only after several months
bility (or inverse number of prototype failure), and safety measures (number of acci- from the moment of delivery. The third dimension, business success, can be assessed
dents or injuries). However, one must realize that all these measures only relate to suc- only after reaching a significant level of sales, which usually takes between I and 2
cessful implementation of project execution and do not necessarily mean product years, while the fourth dimension must be assessed in the long term. Usually several
success. years may pass before this dimension can be fully exploited and judged.
32.3.2 Impact on the Customer 32.3.5 Discussion
The second dimension relates to the customer. This dimension addresses the impor- The relative importance of each of these dimensions is therefore time-dependent.
tance one should place to the customer's requirements, and to meeting that person's Different dimensions are more important at different times with respect to the moment
needs. As was found, meeting performance measures, functional requirements, and of project completion. As mentioned, in the short term, and particularly during project
technical specifications are all part of this second dimension, and not, as commonly execution, the project efficiency dimension is the most important. In fact, this is the
assumed, part of meeting the project plan. Meeting performance has clearly a great only dimension that can be assessed or measured at this time. Once the project is com-
impact on the customer. Customers, above all, are best to assess whether the product is pleted, however, the importance of the first dimension declines. As time goes by, it
serving their needs. Within this framework, meeting performance objectives is one of matters less and less whether the project has met its resources constraints; and in most
the central elements. From the developer's point of view, this dimension also includes cases, after about I year, it is completely irrelevant. In contrast, after project comple-
the level of customer satisfaction, the extent to which the customer is using the prod- tion, the second dimension-impact on the customer and customer satisfaction-
uct, and whether the customer is willing to come back for another project or for the becomes more relevant. The third dimension, business and direct success, can only be
next generation of the same product. Obviously, the impact on the customer is one of felt later. It takes usually a year or two until a new product starts to bring in profits or
the most important dimensions in assessing project success. establish market share. And finally, preparing for the future can be recognized and
assessed only much later. The long-term benefits from projects will affect the organi-
zation only after 3 or even 5 years. The relative importance of the four dimensions as
32.3.3 Business Success a function of time is illustrated in Fig. 32.3.
The perspective of different stakeholders (developers, users, and contracting offi-
The third dimension addresses the immediate and direct impact the project may have cers) with respect to these dimensions was tested in a separate study dedicated to
on the developing organization. In the business context, did it provide sales, income, defense development projects. 16As the results indicate, almost all participants per-
and profits as expected? Did it help increase business results and gain market share? ceive "impact on the customer" as the most important dimension, followed by "project
Most important, did the project produce enough return on investment, and did it result efficiency." The other two dimensions-"business success" and "preparing for the
in a positive cash flow? future"-have received much less attention and were perceived as less important.
its profit margin is doing relative to similar businesses in the industry and compared to
its own profitability goals.
32.4.2 Orders and Marketing
This dimension involves the next step of success in the market. It includes measures
indicating prospective revenues from existing orders scheduled for delivery in the near
future. It addresses the question of how successful the business is in achieving sales
objectives and in creating additional orders. Is there a continuous flow of orders, and
what is the current level of backlog? Of particular interest is the issue of how these
orders will influence future cash requirements.
32.4.3 New Opportunities
This dimension is focused on the somewhat longer range. It measures outcomes that
influence longer-return results since exploiting new opportunities may take time. It
addresses the question of how successful is the organization in opening up new oppor-
tunities for new products and new services and new markets. What are the prospects
of entering into these markets in the foreseeable future? This dimension also includes
assessing customer satisfaction and loyalty. Are customers happy with the quality of
the products and services of the business unit, and are they willing to come back for
additional purchases?
32.4.4 Preparing the Infrastructure for the Future
This very long range dimension addresses the question of how well the business is
prepared for future opportunities and changes. It reflects past investments that may
determine the business unit's results in the years to come, and sometimes may even
hurt business results in the short term. Had the business identified and made the neces-
sary strategic decision on future technologies and future types of products? Had it
invested enough in developing skills required for future markets? Does it have enough
long-term programs, whose goals are beyond 2 or 3 years from now; and is it working
on next generations of technology and products which are focused on 5, 7, or 10 years
away?
While most organizations are using the first and second measures (profits and back-
log), only a few are formally looking at longer-term dimensions. Several technology-
based companies, such as Hewlett-Packard and 3M, have instituted a longer-term per-
spective. To focus their businesses on continuous innovation, they are assessing, among
other things, the percentage of sales from new products developed within the last few
years (part of the third dimension-opening the window for new opportunities).
32.4.5 An Example from the Electronics and Computer Industry
The four-dimensional framework of business-unit success was used in a study of 76

business units in the electronics and computer industry in Israel. 20 The results indicate
that the success of a business unit may be divided into two parts: one encompassing
the first two dimensions (profitability level and orders) and reflecting the short-run
SUCCESS DIMENSIONS IN TECHNOLOGY-BASED FIRMS 32.13
decline and so indeed happened later. The data on unit d supports our theoretical 32.5.2 Market Response
framework. Its profitability level is quite low, while all its longer-term scores are
Market response is the first dimension which aggregates various business-unit activi-
higher. As can be anticipated from the data exploiting the new opportunities, using a
ties and the corporation's contribution to a synergistic result. This dimension reflects
strong technological infrastructure might improve the profitability situation. That is
the cumulative effect of company and business units' strategic decisions taken in
exactly the course that unit d has taken, and in fact, their profitability returned to an
recent years and represents the integrative impact that the company has made on the
acceptable level. The data on unit e presents probably the ]ast moment before consoli-
markets and industries in which it is functioning. Market response may be assessed
dation. Prior to the study, unit e reduced its workforce by 50 percent and during the
through annual growth percentage, the company's stock price, and the rate of stock
study's course it had actually taken desperate actions which proved to be too late and
growth. However, it should also include an assessment of the company's reputation
too little.
and its image in the industry, among customers, and among competitors.
32.5 THE COMPANY LEVEL

32.5.3 Strategic Leverage
The company or the corporation level rcprcsents a collection of business units and This dimension represents the stratcgic strength and the competitive advantage
central units usually built to provide common services to the business units and the achieved by the corporation as one entity (in contrast to a collection of separate busi-
corporation (e.g., centra] research and development laboratory, computation center). A nesses) and how well the company is prepared to compete in the market at the present
company or a corporation is then a diversified organization whose main goal is to cre- time and in the near future. The most important part of this dimension is the compa-
ate and increase value. Since competition occurs only at the business level and manag- ny's set of core competencies developed during recent years in various businesses and
ing a company which consists of a collection of businesses adds costs and constraints its ability to deliver these competencies to its different collection of businesses while
to the business units, the corporation cannot succeed unless it truly adds value to the exploiting them as fundamental customer benefits. A core competency may be in the
business units by providing tangible benefits that offset the costs of lost independence. form of a key technology which creates the product's advantage over competing prod-
In order to achieve such an added value, there must exist some kind of interre]ation- ucts. However, it may also be expressed in the company's developed capability in
ship between the business units that creates synergy. Porter identified two types of re- process- and manufacturing-related competencies that yield sizable cost and quality
lationships:21 the company's ability to transfer skills or expertise among similar value benefits, or its marketing, advertising, or distribution capabilities as a company
activities in different business units such as basic technologies, manufacturing pro- beyond those possessed by competition.
cesses, or marketing techniques and ideas; and the ability to share assets and activities The second part of a company's strategic leverage is the extent to which it estab-
such as sales force or logistics networks. The ability to transfer competitive skills lished strategic vision, strategic goals, and strategic imperatives to achieve these
across businesses and use them for gaining company advantage over competitors is goals. Within this dimension the company should assess its strategic thinking (or, for
expressed by the core competency concept, representing the sum of learning across that matter, the planning that follows this thinking). Did it produce a clear vision of
individual organizational units.22 the company's direction in the coming years? Did it articulate this vision in a well-
The corporation success of effectiveness depends, therefore, on integrative deci- defined, well-understood, and well-shared set of goals that will guide development
sions and activities which cross business boundaries, some of them having an immedi- and action in the coming years? And did the company establish a collection of impera-
ate impact, and others whose impact can be recognized only in the long term. The suc- tives in the form of development projects, programs, and companywide activities that
cess in achieving synergy by operating as a unified company has to be measured from are aimed at achieving its articulated goals?
several angles. It has to reflect the company's short-term performance (financial per-
formance) on one hand, and its success in creating an atmosphere of cooperation
between the various business units, exploiting capabilities and core competencies 32.5.4 Creating the Future
across business boundaries, and establishing the vision, direction, and foundations for
the future, on the other hand. Transforming these inferences into a framework of suc- This last and longest-range dimension is aimed at assessing the company's initiative
cess dimensions at the company level results in the following four dimensions. taken to create a new future for the company, one which is beyond existing trends and
predictable developments. It is its ability to see the future prior to its competitors and
customers and define new needs no one has been able to articulate before.23 Within
this dimension the company should strive to write the rules in its industry and define
32.5.1 Financial Performance
its insight. It must have the foresight to do things that others will copy later and find
This is the standard shortest-term dimension of organizational success. ]t reflects ]ast- new customers and uses not addressed at the moment. It should try and make a differ-
quarter results such as sales, profits, and overall cash. All these indicators are based on ence to customers by exceeding their expectations, by creating unimagined products,
sales from existing products and services which are the result of strategic decisions and by making the future real and tangible to customers and competitors.
made years ago. Obviously, financial performance of the entire organization repre- Several questions should be asked for assessing this dimension. For example, does
sents an integration of the financial results of separate businesses and is simply an the company's opportunity horizon extend sufficiently far beyond the boundaries of
indication of total sale results of these businesses. existing product markets? Is there an explicit process for identifying and exploiting
SUCCESS DIMENSIONS IN TECHNOLOGY-BASED FIRMS 32.15
5. C. K. Prahalad and G. Hamel, Competing for the Future, Harvard Business School Press,
opportUnItIes that lie between or transcend individual business units? Are these
Boston, 1994.
processes identifying new and unarticulated needs for existing and new customers
which are not served at the moment? And are management and employees committed 6. L. A. Iacocca, Iacocca: An Autobiography, Bantam Books, New York, 1984.
to these processes and to their level of aspiration? 7. S. E. Seashore and E. Yuchtman, "Factorial Analysis of Organizational Effectiveness,"
Administrative Science Quarterly, 12: 377-395, 1967; see also P. S. Goodman and J. M.
Pennings, New Perspectives on Organizational Effectiveness, Jossey-Bass, San Francisco,
1977.
32.6 IMPLICATIONS AND CONCLUSION 8. P. R. Cowely, "Market Structure and Business Performance: An Evaluation of Buyer/Seller
Power in the PIMS Database," Strategic Management J., 9: 271-278, 1988.
Success of technological organizations is a multidimensional concept. Essentially it 9. R. G. Cooper and E. J. Kleinschmidt, "New Products: What Separates Winners from Losers,"
has four major dimensions, two of them in the short term, and two in the long term. J. Product Innovation Management, 4: 169-184, 1987.
Measuring success by using only one dimension may be misleading and may not pro- 10. J. K. Pinto and D. P. Slevin. "Project Success: Definitions and Measurements Techniques,"
vide a complete picture of the organization's strengths or weaknesses and its future Project Management J., 19:(1): 67-72, 1988.
prospects. Specific measures of success should be developed for each unit and for 11. M. Freeman and P. Beale, "Measuring Project Success," Project Management J., 23(1):
each project, business unit, and organization at large. Such measures should match the 8-17,1992.
organization's mission, strategy, and line of products, and the industry. The preceding 12. F. Guter!, "Design Case History: Apple's Macintosh," IEEE Spectrum, pp. 34-43, Dec. 1984.
discussion demonstrates the viability of the multidimensional approach to success, 13. A. J. Shenhar, D. Dvir, and O. Levy, "Mapping the Dimensions of Project Success" 4th
particularly in the realm of technology-based organizations. Managers at all levels International Conference on Management of Technology, Florida, Feb.-March, 1994.
must be aware of the danger in evaluating business success by short-term measures
14. S. C. Wheelwright and K. B. Clark, Revolutionizing Product Development, Free Press, New
only. Profitability is merely a snapshot of a momentary situation, and it may change
York, 1992.
almost instantaneously. Good financial performance is obviously the result of good
15. M. Hammer and J. Champy, Reengineering the Corporation, HarperBusiness, New York,
previous decisions. However, present short-term success must be accompanied by sat-
1993.
isfactory performance assessment in other areas. Failing to do so will lead an organi-
zation into trouble. An acceptable level of orders, new business opportunities, and par- 16. S. Lipovetsky, A. Tishler, D. Dvir, and A. J. Shenhar, The Relative Importance of Success
Dimensions of Defense Projects, Working Paper, Tel-Aviv University, School of Business,
ticularly build up of the future in terms of technology, people, facilities, and other
1995.
areas, are the organization's royalty for long-term profitability and success.
Organizations, in particular, must establish the long-term vision while making all busi- 17. A. J. Shenhar, D. Dvir, and O. Levy, Project Success-a Multidimensional Strategic
Concept, Working Paper, University of Minnesota, Center for the Development of
nesses aware of the pitfalls of short-term thinking.
Technological Leadership, 1995.
Establishing new frameworks for assessing organizational success is not easy. It
requires a departure from present practices and a new way of thinking. One of the dif- 18. A. J. Shenhar, "From Low to High-Tech Project Management," R&D Management, 23(3):
ficulties in creating a working framework for the organization is that some of the mea- 199-214,1993.
sures discussed here are subjective and could not easily be transformed into quantita- 19. D. Dvir and A. J. Shenhar, "Measuring the Success of Technology-Based Strategic Business
tive measures. Such transformation is not impossible, however, as we have seen in Units," Engineering Management J., 4(4): 33-38, 1992.
several of the cases we studied. It requires a careful assessment of the issues that are 20. Ibid.
important to the organization at different levels. It will entail the development of spe- 21. M. E. Porter, Competitive Advantage, Free Press, New York, 1985.
cific criteria and rank assessment measures for the organization and a companywide 22. Prahalad and Hamel, op. cit. (Ref. 5).
learning process in which the organization will learn to rank itself compared to its past
performance and to its competitors. 23. Ibid.
32.7 REFERENCES
I. R. H. Hayes and W. J. Abernathy. "Managing Our Way to Economic Decline," Harvard

Business Review, 58: 67-77,1980.
2. M. L. Dertouzos, R. K. Lester, and R. M. Solow, Made in America: Regaining the Productive
Edge, Harper Perennial, New York, 1989.
3. A. J. Shenhar and P. S. Adler, "The Technological Base of the Company," in G. Gaynor, ed.,
Handbook of Technology Management, McGraw-Hill, New York, 1996.
4. C. K. Prahalad and G. Hamel, "The Core Competence of the Corporation," Harvard Business
Review, pp. 79-91, May-J une 1990.
33.2 MANAGING MANAGEMENT OF TECHNOLOGY MEASURING THE BENEFITS FROM MANAGING TECHNOLOGY 33.3
hard macro numbers that originate in manufacturing. Managing creativity and innova- amount of rework, number of drawings, number of drawing changes, and lines of
tion requires more detailed insight, and that measurement includes all the business- code. Other activities such as hours of education; attendance at conferences; number
unit functions-even the firm's top management. of patents; number of confidential processes; number of new programs initiated relat-
This chapter does not provide the "how to" for measuring MOT performance. It ed to quality, concurrent engineering, and so on; and many other what I term "single-
raises the issues that managers must face as they think about measuring performance. issue programs." These measurements indicate level of activity but not performance.
There are no answers today. This chapter raises some of the issues involved in the When quality mania infected this country, many organizations began tracking cost
process of measuring professional performance. Toward this end the chapter considers of quality. The objective was to reduce it. Managers interpreted Crosby's "quality is
free"l concept to mean that no up-front investment was required. These elaborate cost-
Current approaches to measuring functional performance of-quality reports which showed major reductions in the cost of quality in the first
Doing the "up front" work months of the program resulted in misplaced optimism. In reality there were few bene-
Measuring MOT performance-the scope fits. A review of manufacturing costs would often show an increase in manufacturing
cost. It became a game that managers played to win the blessings of top management.
Redefining research and development
Subsequently managers began counting the number of quality circles as though that
Management of technology-point of origin was an indication of performance. Such measurements are meaningless. The numbers
MOT process model are not too important. The importance lies behind the numbers.
Organizations also use such figures as sales per employee, percentages of payroll
MOT measurement model
allocated to various functions, and number of new products without distinguishing
Selecting the measurement parameters among the various types of new products. Sales per employee are meaningless unless
Scaling the parameters inflation and capital investment are taken into account. Introducing me-too products,
upgrading current products, and using the same platform for a new product are quite
An approach to measuring MOT performance
different from introducing a new-to-the-market or a breakthrough product that devel-
Questions that must be answered
ops into a completely new business or perhaps a new industry.
Summary and conclusions
There is no consistent definition of management of technology. Current definitions

Statistics of this type do not relate the performance level in the associated func-
tions or project teams to the final macro result. Will these statistics impact future per-
formance in any significant way? Do these statistics give us insight into the quality of
generally restrict MOT to managing research, managing engineering, and so on. I pro- the professional work? Do they tell us how professionals approach their work? Do
pose a broad definition of technology: they measure professional-level effectiveness and efficiency? Do they tell us anything
about the use of the resources and the infrastructure (the percentage of high-level peo-
Technology includes the tools, the techniques, the processes, and the knowledge ple doing low-level work)?
required to accomplish a task. Focusing on the "project process" provides a baseline for MOT. Revisiting the fun-
damentals always forces an appraisal of work methods. Business activities and espe-
cially technical activities revolve around some form of project management. Research
Management of technology takes on many different meanings. To many, MOT means
clearly demonstrates that most projects are poorly managed from the start. If there
managing engineering. To others it means managing information, managing research,
were laws against the malpractice in project management, most organizations might be
managing development, managing manufacturing operations, managing the activities
forced to substitute lawyers for engineers and scientists-not only engineers and sci-
of engineers and scientists, or managing functional activities without concern for the
entists but also executives and managers. Most project activity focuses on obtaining
total spectrum of activities that encompass the business concept-to-commercialization
authorization for the project and then managing it to some conclusion. Recognizing
process. Those interrelated activities must be integrated into a technology manage-
that probably less than 5 percent of all projects meet the specifications and require-
ment system. There is one key word that must be emphasized in the management of
ments, schedule, and cost commitments should force managers to review their current
technology: integration.
project management model. Research clearly shows that projects seldom have a well-
developed and integrated statement of purpose, a project specification (not boiler
MOT involves managing the system-it also involves managing the pieces. Neither plate), and the identified means for accomplishing the up-front work.
the system nor the pieces can be subordinated. MOT involves integrating the "pieces" into
an acceptable "whole" by focusing attention on the interdependence of the pieces.
33.3 DOING THE UP-FRONT WORK -_._------~ ..,~---
33.2 CURRENT APPROACHES TO MEASURING

FUNCTIONAL PERFORMANCE The up-front work is that work that must be performed before any major effort can be
pursued to acquire the funds. During this up-front period decisions are made which
impact future project performance. This up-front period requires a delineation of the
Current approaches to measuring performance of the technology related functions cen- essential competencies. Those competencies must go beyond the traditional approach
ter on such factors as cost, schedule, performance to requirements or specifications, of asking for so many electrical, computer, or mechanical engineers or so many poly-
MEASURING THE BENEFITS FROM MANAGING TECHNOLOGY 33.5
mer or physical chemists. Effective project management requires delineation of the laboratory, the marketing organization, or any group or person. Measurement provides
specific competencies-competencies that are current. This up-front period requires understanding because it deals from fundamentals. Some measurements may be quan-
determination of the adequacy of the infrastructure to support the project. titative; others, qualitative. There is no reason to look for third decimal point accuracy.
Technical and operational decisions made during this up-front work period seldom The purpose is to determine as realistically as possible the rationalization and the jus-
can be retracted. It is important that those decisions take into account alternative and tification for managing the technology issues as an integrated function. To this extent
contingency solutions. The decisions that involve implementing new technologies measurement of MOT focuses on measuring performance levels of business integra-
must be based on fact. There is little justification for attempting to implement a new tion and the manner in which the results are achieved. The following question must be
technology on a tight schedule if that technology has not been reduced to practice or answered: What factors must be considered in developing a viable means for measur-
validated in such a way as to allow a fairly high level of confidence. Operational deci- ing MOT performance and impact?
sions must follow the same principles-validation in some form or at a minimum an The scope of issues includes
understanding of the potential problems that may be incurred.
Doing the up-front work differs from emphasizing the project planning and pro- Defining performance
gramming tools. These project tools often lead project managers down the wrong path. Defining impact
Project tools deal with the details-essential details that come after the foundations Redefining research and development
have been laid. The emphasis must be placed on the thinking processes and the think-
Management of technology-point of origin
ing that the process generates. Project planning and scheduling tools are simply tools.
They are not the end. They are the means for tracking progress. They provide no intel- Integrating research, development, design, manufacturing, and marketing
ligence into the technologies or processes. The business process
MOT process model
33.4 MEASURING MOT PERFORMANCE:

THE SCOPE 33.4.1 Defining Performance
Performance and impact, although related, are quite different. Performance is basical-
The word integration will be used throughout this discussion of measuring MOT per- ly a measure of output versus input. In essence, what benefits were received from the
formance and impact. MOT is equivalent to integration: integration of functions, inte- investment in resources and infrastructure? These performance figures do not measure
gration of technologies, integration of learning, integration of competencies into capa- what could have been accomplished. The performance may have been marginal at best
bilities, and so on-all precursors for MOT. The segmented approaches of the past because the objectives did not include any significant stretch targets. The performance
must be brought together as a cohesive and effective operating system. Integration may have been marginal, but bottom-line figures were enhanced through unpre-
means bringing together but bringing together is a complex process. Integration goes dictable competitive conditions that required no effort on the part of the firm. The per-
beyond intellectual agreement. It goes beyond philosophical considerations. It goes formance may have been marginal because of emphasis on short-term results-no
beyond theory. MOT resides in the domain of the practitioner-the problem solver. consideration about investing for maintaining the financial viability of the company-
Integration means bringing together-bringing the pieces into the whole so that the no analysis or measurement of the risk that may have provided greater benefits.
whole is greater than the sum of the pieces. That means breaking up the fiefdoms and Performance measurement must be based on fact, and not on the rationalization of
bringing them to focus on the objectives for the benefit of a larger entity. This does extenuating circumstances-no excuses. The measurement must demonstrate the reali-
not imply breaking up the centers of excellence or the critical mass of talent so essen- ty and not the illusion of reality.
tial in a technologically oriented organization. These centers are essential, must be
maintained, but must be operated effectively. These are not retirement positions for
those who have made a contribution in the past.
33.4.2 Defining Impact
MOT cannot grow in the command and control environment. At the same time it
cannot grow in total freedom. MOT demands discipline with accommodation for Impact, on the other hand, measures the value added by an activity to the business. A
many different levels of freedom. New ideas seldom emerge in the command-and- minor and obscure effort can make a significant impact on business performance. A
control environment. At the same time they seldom emerge in sufficient quantity and modest change in a polymer may significantly enhance the performance of that poly-
of sufficient quality in a totally undisciplined environment. Innovators need freedom. mer. A change in strategy may redirect the organization into new markets with existing
but they also need direction and acceptance of accountability to do what they said technologies, production facilities, and distribution systems. A change in the measure-
they would do. ment of process parameters often yields significant manufacturing efficiencies. A
The following question may be asked: Why measure performance and impact? The proactive effort on the part of the accounting department in relation to providing man-
opposite may also be asked: Why not measure? Whatever activity an organization ufacturing with timely costs could yield vital information that affects future manufac-
undertakes requires resources and use of the infrastructure. That implies an investment turing costs. Similar opportunities exist in all business-unit functions.
and an investment must be justified whether it applies to the factory floor, the research
33.5 REDEFINING RESEARCH AND Development work, in contrast, can be planned on a more controlled schedule after
DEVELOPMENT the required resources and infrastructure are identified and synthesized, and the priori-
ties established. While some research may be required, that research most likely
involves a relatively small segment of the project. This does not imply that the
The term R&D leads organizations to distort the value of their investment in research.
research effort can be ignored. The issues that require research can be identified with a
After many years in integrating the technology-related functions in the real world, I
high degree of specificity very early in a project.
concluded that R&D must be considered as two distinct but related functions and
Distinguishing between the needs of research and those of development allows dif-
activities. Separating R&D into research and development as two distinct functions
ferentiation of the two functions and their activities. There is no doubt that research
allows placing research and development in their proper position. Financial statements
and development must be integrated into a whole, but the difference in processes used
that show x percent of sales invested or expensed in R&D give a false impression-
to achieve results must be resolved. There are no formulas for this process, and each
most of those funds are expended on development and not research. Obviously this
organization must determine the extent to which the management processes are differ-
depends on how research is defined but the description of research cannot be minimal-
entiated. Those processes will be quite different for a firm that is technology driven
ized to the point where it focuses largely on development. This distinction becomes
and a firm that is product driven.
important for two major reasons: selecting people and defining the scope of the work.
33.5.1 Selecting People

33.6 MANAGEMENT OF TECHNOLOGY: POINT
OF ORIGIN
Assignment of a critical mass of the essential talent determines project success.
Researchers approach a project from the perspective of understanding the "how" and Figure 33. I illustrates the various phases of MOT. The level of integration is divided
the "why"-they approach a solution from the input to the process. Development spe- into five arbitrary phases for convenience only. The number of phases and the func-
cialists approach the same problem from the perspective of finding a solution-a tions to be included in a phase must be determined by the organization's needs. What
much more pragmatic approach that focuses on the output. Finding that solution may should be measured depends on where MOT begins. Phase I of Fig. 33. I, if it includes
require only demonstration of the answer for the development specialist while the an integrated research and development department that focuses its efforts on system
researcher searches for a full understanding. The distinction does not suggest greater requirements, provides a starting point for managing technology.
importance of the developer or the researcher but emphasizes the different approaches Phase 2 adds design and manufacturing which expands the scope, but it is not until
used in problem solving. phase 3 that an organization assembles the critical mass necessary to implement an
Assigning the wrong type of talent to a project extends not only the total cycle time MOT process management approach. Although the integration begins in phase I,
but also the total project time as well as the project timing. A researcher may go far MOT does not begin until phase 3. Phase 3 includes the operating groups in the con-
beyond the requirements for an adequate solution and look for some new breakthrough cept to commercialization process. Anything less than a phase 3 effort is equivalent to
solution. The developer working in a research-oriented program may take certain managing functions with the hope that some level of integration will be achieved.
shortcuts that are bound to cause future problems. In both cases the cycle time and the
total time may be significantly extended.
Consider the following example: A physicist involved in developing a specialized
measurement device required certain optically sensitive materials. Instead of contact-
ing organizations that possessed the expertise, she began her own research into the
solid-state physics of the materials-a discipline totally unfamiliar to her. Eventually
the project was canceled when the equipment became commercially available. This
same project under a development-type person would have been completed in less
time and with better results.
33.5.2 Defining Scope of Work
Defining the scope of work in research and in development requires different perspectives.
Most researchers contend that research cannot be planned. Granted that some exploration
of the unknown may not be planned but parts of that process can be planned. For example,
the literature and information search can be planned. Some may argue that even a literature
search cannot be planned. They argue that information research is an ongoing process-it
is-but it is not a full-time activity. There comes a time when the "searching" must stop
and the "doing" begins. The new competitive paradigm does not allow the extravagances
of the past. The old model is no longer applicable. The work effort may also be planned.
The contingency approaches can be developed. Failures can be anticipated.
degree. The number of variables that can be applied to a single person limit our ability
to neatly quantify not only skills, experience, and competence but all those other
human characteristics that determine competency in social interaction.
People work within an infrastructure that must be managed. If no support exists for
innovation and acceptance of risk, innovators-people-most likely receive little sup-
port. A continuous flow of new ideas and concepts and subsequent innovations to the
marketplace cannot be expected in such a situation. Support for innovation requires
degrees of risk. Support for innovation without acceptance of the inherent risk yields
nothing but antagonism toward management. If the CEO in the annual liturgy empha-
sizes the need for innovation and then fails to follow through with resources, perhaps
greater prudence should have been exercised. If the firm lacks management expertise,
the resources may be poorly allocated. Directing the activities of an organization may
be difficult if the purposes, objectives, and strategies exist only on paper-they must be
communicated in meaningful language. What do they mean to the bench chemist or the
designer or the salesperson? Are they platitudes, or are they guidelines for improving
performance? Similar comments apply to all the other elements of the infrastructure.
33.7.3 Activities
The classification of "activities" in Fig. 33.5 under "management processes" includes

seven broad categories which interact with the resources and infrastructure. In
essence, the management process evolves to a three-dimensional model that includes
resources, infrastructure, and activities. The "activities" classes are arbitrary, provide a
reference point, and span the continuum that embodies every business activity. These
activities can be reclassified into many subcategories. Organizations must classify
these activities in a way that best serves their purposes. That classification must
include the system perspective.
33.8 MOT MEASUREMENT MODEL
The MOT measurement model describes the relationship between resources, infra-
structure, and activities. Figure 33.6 illustrates this relationship on a typical x,y,z coor-
dinate system. The three-dimensional model provides a more realistic approach since
each of these three axes interacts with the other two. For example, activities depend
on adequate resources and infrastructure. In turn, those activities influence the
resources and infrastructure either through what has been learned during the specific
activity or what has not been learned. Figure 33.6 illustrates this relationship in a unit
cube in which resources, infrastructure, and activities can each have a maximum value
of one (the value of I is arbitrary-it could be 10, 100, 1000, etc.). This relationship
can be expanded or subdivided as necessary. In some instances it may be reasonable to
use different scaling of the cube. For example, resources could be valued at 10, infra-
structure at 5, and activities at 7. The objective however would be the same: Optimize
this relationship. The optimum solution lies at endpoint B of the three-dimensional
vector A-B as shown in Fig. 33.6. This may be utopia and may not actually exist, but
it provides a direction-it provides a target.
situation? Because a person understands the fundamentals does not assure ability to sitivity. The process of appraisal can destroy people and that process can also attribute
apply those fundamentals. knowledge, skills, and performance that do not exist. Appraisal of the "as is" demands
There are two types of measurement for human performance: quantitative and a great amount of integrity; otherwise it is a useless process. This applies not only to
qualitative. The quantitative presents no problem. There is no difficulty in measuring people but to all other resources and the infrastructure and activities elements.
formal learning and the experiential results of that learning that are transformed into People function as individual participants as well as in teams. Use of teams is a
usable skills. Knowledge of calculating even the most complex, simulating, modeling highly overworked and over publicized concept that is promoted without sufficient
both physical and mathematical, understanding of work processes, and using manage- data to quantify the benefits. Nevertheless, teams will continue to be used as they have
ment by objectives intelligently-not only computer literacy but computer usage and been for millennia. The gurus attempting to spread the gospel of self-selected teams
application-and so on are examples of measurements that can be quantified. If no and self-disciplined teams have never been forced to meet a deadline, meet some
other means exist, normal testing procedures are available. This is not a recommenda- undefined specifications, and deliver at the projected cost. Teams not only have their
tion for massive testing programs, but only recognition that sources for securing such place but also are an absolute essential ingredient in managing an organization. But
information are available. teams are composed of individuals, and people produce results. The touchy-feely
The qualitative issues include the intellectual and the interpersonal. The intellectu- approaches and the camaraderie are not necessary. If it is there, fine; if not, do not
al include become concerned. An organization cannot wait for 6 months to determine the com-
patibility index of a team. The team cannot spend an excessive amount of time arguing
Creativity and innovation minutiae. Doing must accompany philosophizing. Asking the difficult questions
Conceptualization requires developing answers. Differences that affect the use of specific technologies
Entrepreneurship must be resolved.
Teams probably provide the best organizational approach, but-like any grouping
Usable subject or disciplinary knowledge that involves two or more people-some one individual must be accountable.
Multidisciplinary understanding and experience Problems cannot be considered as "our" problems. Problems are solved only when the
Process of knowing-thought and thinking rose has been pinned on some one individual. The problem is either "yours" or
"mine," but not ours. The "our problem" approach probably means no one's problem.
Analysis and synthesis
Individual and team performance must be differentiated. Both are essential.
Problem/opportunity finding Much has been written about appraising people performance. Perhaps too much.
Problem/opportunity resolving Multipage appraisal forms provide little, if any, useful value. Appraisal processes
would be more beneficial if human resource departments eliminated the annual
These intellectual characteristics cannot be assigned a number but can be identified appraisal ritual and substituted an appraisal based on project performance when it
and rated. Establishing the baseline begins with describing in simple terms each char- occurs and not on some arbitrary calendar. People appraisal must be more realistic.
acteristic. Creativity does not imply genius. It must be defined in its context. Every Inflation of individual performance ratings has followed the same disastrous policies
creative act does not involve reaching the moon. that have infected all academic institutions. Inflating appraisals only continues to
Qualitative scales of measurement also apply to interpersonal characteristics. These lower the standards of performance.
characteristics or skills include
General people skills 33.9.2 Projects

Participation
People and projects provide a base for measuring MOT-people for their individual
Acceptance of ambiguity and uncertainty
and group contributions and projects as the base around which all work can be orga-
Acceptance of risk-personal and business nized. Figure 33.7 shows some possible "project" subcategories. Project type includes
Search for objectivity product, process, technology, and management. Each of these four types can be small
or large. They can be simple or complex. They can be routine or creative. In reality,
Observation
projects fall on a continuum from small to large, from simple to complex, and from
General attitude-proactive, reactive, or inactive routine to creative. Within this classification a product project could be small, com-
plex, and routine. It could be both large and simple, yet require high levels of creativi-
These interpersonal characteristics impact performance and cannot be ignored. ty. A product project could be small, simple, and routine or large, complex, and cre-
However, their meanings are not universal. For instance, the characteristic "aggres- ative. Managers must recognize the significance of these combinations because each
sive" must be defined in a workable context. What does "aggressive" mean? Does it must be managed with different types of managers as well as different management
imply laying the issues on the table, or does it imply berating an individual, demand- tools. A major project that deals with known technologies and known tools requires an
ing unrealistic performance without adequate resources, or generally harassing peo- approach different from that for a project whose success depends on creativity. The
ple? Unfortunately the word "aggressive" as often used does not imply aggressive; it major critical issue: Understand the project requirements and assign the people who
may just mean that a question was asked that demanded an answer. possess the necessary competencies.
Measuring people performance in its many aspects demands a great amount of sen- This vast array of project configurations forces managers to view "people" with a
axes of Fig. 33.6. Managing by the MOT principles requires at least recognizing the The proposed approach for measuring MOT performance focuses attention on Fig.
amount of space occupied within the cube. This type of evaluation may cause man- 33.5, the MOT process. The measurement process begins with understanding input
agers to disengage themselves from such a process. The results force a realistic look at I-the known, the control1ed, and the predictable information.
the situation and the conclusions demonstrate that although the bottom-line figures
may have reached the expected targets, greater opportunities exist for optimizing the Input I. Identify, define, and understand input 1. Input I provides the management
investments from technology. process with the known, the control1ed, and the predictable inputs. In the mechani-
Consider the following conditions if resources, infrastructure, and activities are cal process model these inputs would include materials and their characteristics,
rated equal1y at the processes used, the process parameters that must be measured and controlled,
and the al10wable tolerances. In the MOT application of the process model, input I
0.5, the overall rating is 12.5 percent: 87.5 percent of the cube is empty provides the known, the control1ed, and the predictable parameters about the re-
sources and the infrastructure.
0.6, the overal1 rating is 21.6 percent: 78.4 percent of the cube is empty
Input 2. Identify, define, and understand the unknown, the uncontrol1ed, and the
0.8, the overall rating is 51.2 percent: 48.8 percent of the cube is empty
unpredictable elements of input 2. In the mechanical process these "un-"s include
0.9, the overall rating is 72.9 percent: 27.1 percent of the cube is empty such characteristics as out of specification materials, uncontrol1ed process fluctua-
0.95, the overall rating is 85.7 percent: 14.3 percent of the cube is empty tions for many reasons, unpredictable environmental conditions, and unanticipated
process interactions. How can the "un-"s be quantified? Anticipation, speculation,
The three-dimensional model provides a more realistic approach. What appears as 25 breadth of knowledge, projection of data, observation, statistical tools, and similar
percent effort in a two-dimensional model translates into 12.5 percent in the three- efforts present possible approaches. Decisions can be made with assigned al1ow-
dimensional mode1. Reaching a 1,1,1 solution may not be possible. Like all other mea- able percentages of error and fol1owed by if/then questions and responses.
surements, the objective focuses on improvement.
This measurement process may involve many projects: in some situations more
than 1000 projects. Those projects wi11vary in scope and size, as noted in this chapter.
The output is merely the sum of the individual projects. But not every project must be
33.11 AN APPROACH TO MEASURING MOT measured. Priorities must be established not on the basis of size but on the basis of
PERFORMANCE impact on business performance. In a multi-billion-dollar company a million-dol1ar
project may severely impact future performance.
The objective of this chapter was and is to raise the issues that might lead to some mea- Similar factors apply to the MOT process mode1. For example, loss of critical talent
sures that provide meaning in measuring MOT performance. The preliminary discussion can be predicted and fol1owed with a contingency plan, and industry and business per-
has provided some fundamentals. The conclusion is that the "process approach" may formance as a function of economic conditions can be predicted within acceptable lim-
provide some insight. Measurement of any kind provides many dilemmas that general1y its. Competitive pressures can be predicted. While major introduction of a new technol-
lead to questionable and inconsistent numerics. Those numbers are also subject to misin- ogy may not be predictable, it is possible through knowledge and observation to
terpretation. They often lack integrity because of some underlying agenda. They often project, anticipate, or predict future directions. Such speculation may not provide defin-
attempt to quantify what cannot be quantified. Evaluation, assessment, and subsequent itive answers, but the deliberate speculation forces gaining knowledge about the possi-
measurement derive from judgment and the environment in which that judgment is ble. Such assessments fal1 into the if/then category. Was the Japanese entrance and
made. A judgment made in a profit year may be quite different from a judgment, using domination of the automotive and electronic industries predictable? Definitely, yes.
the same set of information, made under the influence of negative results. Was the decline of companies like IBM, Kodak, and other wel1-respected corporations
Effective management of technology depends on resources, infrastructure, and predictable? Definitely, yes. It is only necessary to look at the hiring practices and the
activities. This trilogy of issues must be satisfied at some minimum acceptable level. "responsible for" philosophy that pushed their managements down the wrong path.
The process begins with an evaluation of all the elements suggested in Fig. 33.8. The
evaluation involves people and projects. People represent only I resource of II, but
people determine the value-adding power of the other 10. At the same time, people 33.11.1 Management Process
define the organizational infrastructure. People also determine the success level for
activities, the third member of this trilogy. In the final analysis, MOT performance can Inputs I and 2 impact the management process in Fig. 33.5, which includes the
be reduced to measuring people performance, project performance, and the level of resources, infrastructure, and activities. Your knowledge of the relation of this trilogy
integration of people in project activities. shown in Fig. 33.6 determines the expected output. This management process node is
Implementing MOT principles requires making a decision as to the starting point. the organization. Figure 33.8 shows the relative ranking of the resources, infrastruc-
As shown in Fig. 33.1, phase 3 is the starting point for MOT. Phase 3 begins the con- ture, and activities. The vector relating these elements of the trilogy shows the relative
cept to commercialization approach without including the staff functions. While inte- percent output of the trilogy. The numbers al10cated to the elements of Fig. 33.8 may
grating phases I and 2 is essential to varying levels in all organizations, these phases or may not meet your organization's needs. If so, create your own starting point. Then
do not include the necessary functions for MOT. Phase 3 begins by integrating compare the information of the as-is study with the information of Fig. 33.8 or your
research, development, design, manufacturing, marketing, sales, physical distribution, own ranking of importance. Your numbers wil1 obviously by qualitative.
and customer service. Do not discount qualitative information. Information about people, as an example,
cannot be quantified-it is always qualitative. Information about people is always sub- 33.11.4 Controlling the Process
ject to some form of bias. Numerics assigned to qualitative information must be
viewed with some skepticism when high levels of accuracy are suggested. Qualitative Recycle, recycle, recycle, and recycle. The mechanical example does not make the
measurement is not a seat-of-the-pants process. People present the greatest problem. process corrections in one single adjustment. The adjustment is continuous and is
Qualitative measurements regarding people must be based on some guidelines. What made in steps. A machine cannot reach its optimum performance in zero time, and nei-
do you mean by competence, breadth of knowledge, meeting objectives, individual ther can a people-dominated process. An electric motor that is rated at 1800 revolu-
contributor, team member, creative, innovative, and so on? What do you mean by peo- tions per minute (r/min) does not reach 1800 r/min at the time (instantly-zero time) it
ple person, productive, reactive, proactive, and so on? These responses cannot occur is activated. The same applies to the MOT model. Many iterations will take place in
with the shrug of the shoulder that says this person is a great performer. At the same order to bring the system in control. Some of those iterations may even deteriorate the
time it does not take hours to make an evaluation. process before gaining a benefit.
33.11.2 Expected Output 33.11.5 Developing the" As Is" Situational Analysis
This expected output results from input I and input 2 acting on the "management Developing an as-is situational analysis is fraught with many problems. Third-deci-
process." Input 3 describes all the information that defines the business requirements. mal-point accuracy provides no benefit and consumes time that results in volumes of
Just as the manufacturing process requires a statement of the requirements, our appli- reports but not much usable information. People resources provide the greatest chal-
cation of the process approach to MOT requires a clear statement of the expectations lenge. Evaluation of the people resources involves understanding the usable compe-
from the resources, the infrastructure that affects the utilization and output of the tencies. The fact that an individual made a major contribution in the past does not pre-
resources, and the type of activity to which the resources and the infrastructure are dict the future. What research has been done does not provide any guidance. The
applied. Input 4 provides a means for measuring the expected output; input 3 and Leonardo Da Vincis, the Edisons, and other prolific creative people represent a discon-
input 4 must be compared. In a manufacturing process this comparison is made auto- tinuity in human behavior. How many are there? The majority of people devote and
matically without human intervention. In our management process MOT model this dedicate their talent and energy to resolving problems and in the process creating new
comparison is made through human intervention. At some time in the future it may be knowledge. So this appraisal of human capability must be realistic. Evaluating the
made through some form of expert system using the principles of fuzzy logic. This other resources can be performed by known methods and once again without time-
comparison identifies the differences between inputs 3 and 4 that must be satisfied by consuming teams that focus on the minutiae.
some means-the control system. Evaluating the infrastructure requires a look at past history. Most of the responses
to the infrastructure elements are almost yes/no-type decisions. At most they require
categorization in a format such as
33.11.3 Control System
Do not meet minimal requirements
While the control system in the manufacturing example comprises various combina-
tions of electronic, pneumatic, hydraulic, and mechanical actuating devices, the con- Need major improvement
trol system for the "management process" involves people. People-individuals and Marginal but acceptable
teams-provide the means for control. The control system for the mechanical example Meet requirements
requires a set of equations that links all the variables and their interactions and toler-
Exceed requirements
ance limits. When hundreds of variables are involved with wide ranges in tolerance,
the equations (algorithm) become very complex. Keep in mind that this is a mechani-
cal system in which input I can be clearly defined and even input 2 (the "un-"s) can
33.11.6 Measuring Integration
be defined within the required operational limits. If those limits are exceeded, the sys-
tem can be shut down in a systematic manner.
The MOT process model and the three-dimensional model determine levels of integra-
The control system for the MOT process resides in people. That control system must tion. The process involves integrating the three-dimensional model that synthesizes
link the II resources, the II elements of the infrastructure, and the 7 major types of resources, infrastructure, and activities within the MOT process model. Gaining an
activities. People as individuals and in teams must decide what parameters must be mod- understanding of the inputs, confirming the expected output, specifying the business
ified, how those parameters can be modified, and the possible impact of the modified requirements, and then managing those interrelationships in a holistic manner pro-
parameters on the system. There is no perfect answer, but there are possibilities from vides a workable approach. This may appear to be an insurmountable task, but most of
which the best choice can be selected. As mentioned previously no expert system exists the information is available. As stated, there is no need for third-decimal-place accura-
to aid in this process. But developing a baseline does not require inordinate talent. It cy. Pareto's 20/80 rule applies-20 percent of the information provides 80 percent of
only requires a very high level of integrity. The evaluation of the resources and infra- the information. A word of caution: Make sure you focus on the 80 percent of the
structure elements must be realistic. Everything will no' be a lOon a scale of I to 10.
information that is important for your particular situation.
33.12 QUESTIONS THAT MUST BE ANSWERED 3. How is the intellectual property managed? Has the company attempted to instruct
about intellectual property?
Raising questions provides a means for evaluating. This section considers each of the 4. Does the organization record use of intellectual property and publish internally
elements of the management process as a prompt for gaining insight into the state of how that intellectual property was used to the benefit of the organization?
the resources, infrastructure, and activities and their linkage and interdependence. 5. Documentation of all types is an asset of the organization. In functions such as
research, development, design, manufacturing, and marketing, what type of docu-
mentation is used? Are research notebooks a part of the system? Are design draw-
33.12.1 Resources ings updated when changes are made?
6. Document security classification presents special problems. Is there a realistic
People document classification process? Is that process managed? If a policy exists not to
1. Do you know your people-their skills, their competencies, their interpersonal patent certain processes, how is that policy enforced?
qualifications? Do you understand the interpersonal characteristics of your people
Information
in order to optimize the output of the system?
2. Are people qualifications documented in such a way to provide input for project 1. Does the organization differentiate between data, information, and knowledge?
assignment? What is the basic philosophy regarding information? Does the process result in
3. Does the classification show up-to-date skills and competencies-specific rather reams of meaningless data? Is information provided in such detail that it loses its
than general? What is the basis for your conclusions? What do you do when skills significance?
are no longer required? 2. Managing information plays a major role in business performance. What is the
4. On a scale of I to 10, how would you rate the performance of every employee? competence level of this group of professionals? Can they discriminate between
Can you be realistic in this appraisal? What is your approach to appraisal-once a what is essential and what is wanted? Do these professionals bring the users into
year panic button or continuous appraisal? the process? What is the value added of information in relation to its acquisition
cost?
5. Do you have a system for meeting individual requirements? Are the doors open
for easy access? Is there sufficient flexibility to take into account individual dif- 3. Most surveys show that organizations seldom provide sufficient information. Do
ferences? people have sufficient information to perform their jobs? Is that information used?
Does the availability or nonavailability affect job performance?
6. Management by objectives has had minimal success. Do you know why it has
failed? Do you use it? If you do practice management by objectives, do you con- 4. In a technology-oriented organization, technology transfer presents a major chal-
sider yourself as part of the objective? Is it a paper mill or a management tool? lenge. How is technology transferred in your organization? Is there a formal pro-
cedure? Are the necessary contributors engaged in the early stages of a project?
7. What attempts are made to focus the organization? Are objectives clearly delineat-
Do they remain connected to the project to completion?
ed? Do people understand their role in the system?
5. Feedback is a major factor in business processes. This was demonstrated in Fig.
8. What opportunities are provided for discussing or presenting unsolicited propos-
33.4. How is feedback communicated? How is feedback used? Are the results of
als? Is freedom of expression encouraged? Are people asked to raise unpopular
feedback tracked and communicated when necessary? Is the feedback timely so
issues? In project reviews, what is the policy on telling all? Do you tend to shoot
that it can be used effectively?
the messenger?
6. There is no doubt that decision processes require information. But how is informa-
9. Specialization is important, but has it gone too far? What programs allow for
tion extracted from that mass of data? Does the accuracy fit the need, or is third-
increasing breadth of knowledge and experience? What programs promote inter-
decimal-place accuracy provided when plus or minus 10 percent is sufficient?
functional and interdisciplinary understanding?
Achieving that accuracy may cost valuable time. How do you manage the price of
10. What do your people know about the company, the management, the immediate information and its accuracy? Are you even aware of the cost of information?
department, and so on? Purposes, objectives, and strategies form the basis of an
7. Have you bought into the concept that information is a competitive weapon? Has
organization: Are these clearly communicated to people at all levels in meaningful
it made you competitive? Has it allowed you to overtake your competitors? How
terms so that they can respond accordingly?
long did the competitive advantage last? Were you able to isolate information as a
competitive weapon? Did the information system add value at any point in the
Intellectual Property
concept -to-commercialization process?
1. Does the organization understand the meaning of intellectual property? Is that 8. What is the organization's policy relative to information management? Is informa-
understanding comprehensive, or is it limited to the technical functions? Has the tion measured by gross weight or timely contribution to decision processes? Is it
organization defined what intellectual property includes? used to promote understanding? Is information used to guide the future activities?
2. Are processes available for recording, saving, and protecting the intellectual prop- Or is information part of the organization's historical society? Is the information
erty of the organization? Are those processes used and monitored? Are those relevant, or does it obscure the important? Is acquiring more information used as a
processes reviewed periodically? delaying tactic? Is it used to obscure reality?
9. Information is of value only if it is timely and accurate within specific needs. Is set high enough? Does the word "excellence" imply 98 out of 100, or has that
information tailor made to the needs of the group? Must manufacturing wait for 15 term been inflated as in our academic institutions?
days after the close of the month to know its costs? Is the right kind of informa- 8. Why is it that a sense of excitement can be perceived by visitors in some groups
tion delivered to the factory floor, research laboratory, marketing and sales, and and not in others? Which factors determine the spirit that can coalesce around
other functions? How about the feedback of information in the reverse direction resolving a problem or taking advantage of an opportunity? Do managers expect
and across functions? 8:00-to-5:00 performance and think they can develop a creative and challenging
10. Benchmarking may be an overstated concept, and it certainly is not a competitive community?
weapon, but is the information system and its transfer function benchmarked 9. Integration is not a choice; it is an imperative. How do different levels of integra-
against some standard? This does not necessarily mean against the best. Is it tion impact the group's performance? Do people understand what is meant by
benchmarked at least against an internal standard? Is that standard clearly "integration"? Is integration ever discussed? Does anyone ever consider the sim-
defined? Is the benchmark suitable for your organization? Do you think it is nec- ple mathematical approaches to integration (remember integral calculus)?
essary to benchmark against some external standard? 10. Does the organization support innovation and entrepreneurship? Is this demonstrat-
ed by management's actions? Can you describe where management recently sup-
Organizational Attributes ported an innovation or entrepreneurial program? What was the payoff of such
1. Acceptance of change continues as a major business issue. How does the organi-
efforts not only on the bottom line but also in excitement and human performance? I
zation manage change processes? Is sufficient in-depth thinking included to deter-
mine the consequences of the change ("in-depth thinking" does not mean exces- Technology ,
I
sive time for decision)? Are the precursors for implementing changes given due 1. How is technology linked to business strategy? Is technology considered in the
considerati on? strategy development process? Is there a technology strategy? Does that strategy I'
I
2. What approaches are used for implementing change? The peace-and-quiet direct the entrance into new technologies? Does that strategy tend to focus on
approach or the cognitive dissonance approach? What are the potential sources of technology platforms (technologies that can be applied across a broad range of
change? How is diversity in thinking managed? Are the concepts of complete products or processes)? Does the technology strategy take into account the limita-
buyin hindering progress? How does the organization educate participants in the tions of other resources and the infrastructure? Is any consideration given to
change process? developing technology through a virtual organization concept?
3. Openness and the open-door policy are good public relations, but are the princi- 2. Is the importance of technology understood at all levels beginning with the board
ples practiced? What is the attitude of the organization for stimulating this open- of directors? Do any board members have the competency to make decisions that
ness among all levels of participants? Classification of information is critical, but involve technology? Does management know at what level technology decisions
does it prevent people from understanding the objectives? Is business-unit strategy are being made? Are there multiple levels of management approval without under-
communicated effectively at all levels? standing the significance of investing in technology?
4. The call for freedom of action sounds good, but do employees understand the 3. Is technology a technology issue or a major business issue? Does the organization
implications of that freedom? Are responsibility and accountability part of the differentiate between technology and business decisions? What percentage of the
freedom equation? Is freedom of thought encouraged? Are the free thinkers sales value of production involves technology? Does management take an inte-
allowed to voice their ideas and concepts? Have you established the guidelines for grated approach to technology?
that freedom? What are your expectations from the person who presents diverse 4. What is the role of technology in the organization? Are technologies classified rel-
ideas? Do you encourage thought before action? ative to their importance? How are new technologies implemented? Is there any
5. Organizations spend large sums of money on what is loosely termed "education technology scouting activity? Who tracks the latest technology directions? How is
and training." How much is education? How much is training? Is there any sup- the latest information transmitted to those who have a need to know? Are tech-
port for intellectual pursuit-intellectual pursuit in all matters? Does that intellec- nologies limited to those in research, development, design, and manufacturing, or
tual pursuit extend to executive literacy? Does that support include understanding do they encompass all technologies?
the basics? Is that support limited to what is generally referred to as the "tools of 5. How are investments in technology justified? Are investments in technology justi-
the trade"? fied, or are those investments evaluated? Is the investment in technology an
6. People are a major contributor to organizational attributes-culture is not dictated expense or an investment? Does the justification of the investment include the
from the top-it can be stimulated from the top but develops from the bottom up. rationalization of competitive technologies? Is the process systems-based?
Are the differences that people bring to the table encouraged? Are those differ- 6. Technologies are associated with products and processes. Are products and
ences reinforced? Are they seriously considered? Are they allowed to emerge processes considered as one activity or as two separate and distinct activities inde-
without recrimination? pendent of each other? Is sufficient consideration given to situations that involve
7. Organizational commitment and loyalty, according to some researchers, is on the new technologies in new products? How about new technologies in new products
wane. Was it ever there in the first place-loyalty to the corporation and from the in existing markets? How about new products with new technologies in new mar-
corporation, and what were the sources of the loyalty? If so, for what percentage kets? Are these relations understood?
of the people? Do people generally do what they say they will do? Are the sights
7. Technologies come in many different types and sizes. Does the firm's technology 6. Have the following issues extended cycle time? Lack of clearly defined and com-
allow building a technology platform? Does that platform provide synergy with municated objectives? Lack of integrated business planning? Lack of integrated
other existing technologies? What is the value of such a platform for the future? project plans? A nonsupportive attitude by management? Inability of management
Does management understand the benefits of building technology platforms? to think of the business as a system? Unresolved differences in business priorities?
8. Has the organization defined its critical technologies? Has it defined its technolo- 7. Have you identified where the major cycle time losses occur in your organization?
gy base in meaningful terms? Are technologies classified according to any desig- Research-development interface? Development-design interface? Research-manu-
nated system? Do those definitions provide direction in technology development? facturing interface? Research-marketing interface? Linkage between research,
Is the appraisal of technologies performed effectively? Does that appraisal provide development, and design? Information transfer throughout the whole organiza-
a benefit?
tion? Indecision on the part of the originator? System-imposed lost time? Boss-
9. What is management's approach to technology? Inactive? Reactive? Active? imposed lost time?
Proactive? Does management push not for the latest technology but for the most 8. Can you identify the cycle time losses due to lack of literacy by executives and
adaptive technology for the short and long terms? What percent of general man- managers about technology and cycle time? Literacy related to the business by all
agement understands the related technologies? What percentage of research, employees? Literacy about marketing? Literacy about technology? Literacy about
development, design, and manufacturing managers understand their technologies? integration? Literacy about what makes the organization function? Managing by
Are they capable of making intelligent technology decisions? What have they wandering around is a great idea but what happens during that wandering around
done in the past to keep current in the important related technologies (not as is far more important.
experts but from the breadth of understanding)?
9. What is your organization's attitude about managing cycle time? Is it accepted as
10. Does the organization benchmark its technologies? If so, against whom? Does part of a requirement for effective and efficient management? Does it require spe-
management consider benchmarking an important issue? If you are at the leading cific top-down programs directed toward improving cycle time? Does cycle time
edge, do you need to benchmark? Does management understand what it takes to management take care of itself through normal management processes? Is cycle
do intelligent benchmarking? time management an important factor in the current competitive climate?
Time 10. Does cycle time management relate principally to the functional groups and those
involved in products and processes? Does it permeate the total organization? Does
1. Does management differentiate between cycle time, total time, and timing? Is it also include total time and timing? What is your organization's philosophy
cycle time being emphasized? Is it important in your business and your particular regarding cycle time? Can you list any specific situations where managing cycle
industry? Has your organization quantified the impact of cycle time on business time provided a benefit to your organization? What factors affect cycle time in
performance? Are the cycle time data relevant? What does the data tell you? Are your organization (positive and negative)? What are the consequences of long
you comparing apples and apples? cycle time for your business?
2. Has your organization developed a program to focus attention on the negative
Customers
impact of extended cycle time? Does your top management consider it necessary
to focus attention on cycle time? If so, what has it done to focus attention? Is it 1. Are customers your partners? How do you define "partners"? Are those partner-
action or rhetoric? Are the fundamentals understood? Do people understand the ships real or imaginary? How many customers do you have that fall in the class of
ramifications of cycle time management? Does it cost more or less? partners? How many can you rely on? How many understand your products and
3. Do the business unit managers accept cycle time management as an important your business?
issue? Do the functional managers accept it as an important issue? Have they done 2. Disregarding the hype in the business press, are you trying to work with your cus-
anything to reduce cycle time in real terms? If they made significant strides in tomers? Have you become so attached to voice mail that there is no way to contact
cycle time management, how were the results quantified? Was it possible to iso- you directly without spending time listening to babble about "press I," "press 2,"
late the benefits from cycle time management? and so on? What kind of service do you provide your customers? Is it on time?
4. Does your organization provide any special education regarding the issues related Does it meet the customer's requirements?
to managing cycle time? For executives? For managers at all levels and in all dis- 3. Customers are often used as beta sites. Do you work with customers in the early
ciplines or functions? For the professional staff? For administrative personnel? stages of product development to ascertain the value of selected new features?
For production workers? If education in cycle time management is a priority, can What is your confidence level in the feedback that you receive? What are the risks
the benefits be quantified?
in using customers as beta sites? Do you plan these beta sites in such a way as to
S. Extended cycle time represents an added cost to the organization. Have the fol- avoid disclosing your proposed products to the competition?
lowing issues extended cycle time? Undefined business strategy? Undefined mar- 4. Have you taken the time to critically evaluate the information that customers are
keting strategy? Undefined technology strategy? Insufficient integration of providing? Do they understand the basics of your products? Is their system for
research, development, design, manufacturing, and marketing? Overspecialization providing you feedback verifiable? Do you try to corroborate their information
in all professional areas? Segmentation of the organization? with other sources of expertise?
5. Information from your customers is only as good as their integrity. What are the Do you support your suppliers with education and training? Is that education and
possibilities of customers leading you down the wrong track? Are you placing too training effective?
much confidence in customer feedback? Do they provide you with a wish list
6. How much freedom do your suppliers have? Do you accept ideas from your sup-
without recognizing what that wish list may cost? Have you made a decision that a
pliers? How do you manage the proprietary issues? Is the process formalized?
specific customer can contribute to your effort?
6. Customer input is beneficial, but have you considered the geographic differences Plant and Equipment
that might influence product design? How about the demographics? What is the
difference in input based on the organization's culture? What about market differ- 1. At what level do plant and equipment meet current needs? When was the plant
ences? What about the ability of the customer to use the new technologies? Are built? How old is the equipment? Is the plant and equipment state-of-the-art? Has
they a mystery, or are they usable and provide an added value? plant and equipment been upgraded or replaced over the years?
7. Do you fully understand the customer's use of your product? Have you taken the 2. Will the plant and equipment provide for the needs during the next 5 years? Should
time to determine whether the product is used according to specifications? Have plant and equipment be upgraded or replaced in the future?
you taken the time to work with the customer to optimize the output of the equip-
3. Do you benchmark your plant and equipment periodically? If you do, what has
ment or service? Do you know the competence level of the people using the prod- been the result during the last 5 years? If you do not benchmark, why not? Can you
uct? Are you capable of determining the competence level of the user?
provide a good reason?
8. How do you use customer input? How broadly do you survey your customers? Is
4. What has been the automation protocol? Is automation accepted as a means for
one concern or complaint sufficient reason to modify designs? Do you systemati- improving productivity? Are management and employees aware of the implica-
cally track field problems and the circumstances under which they occur so as to
tions of automation? If you have automated, has that automation been effective?
make appropriate decisions? Do you push the panic button every time a field prob-
lem surfaces? 5. Environmental and safety issues are vital for many reasons. What is your accident
record? What are you doing about it? What is your approach to environmental is-
9. Do customers want to buy oranges when you are selling apples? Do they want to
sues? Is there a continuous improvement program?
buy Washington State red delicious apples when you are selling crab apples? Do
you come back with orders for oranges when you have only apples to sell? These Facilities. Facilities include all the other physical resources that are required to
are not facetious questions. They are part of daily life-always being able to sell
operate the business effectively. Since these facilities requirements (buildings, com-
something that is not available. How do you manage such inputs from the field? puters, communication equipment, automobiles, etc.) vary considerably depending on
Do you ignore them? Do you consider them seriously for future activities?
the size and type of industry, we raise only one issue: Define those facilities and deter-
10. Is there a written policy relative to customers? Is that policy reinforced by man- mine whether they are adequate-an emphasis on adequate and not luxurious.
agement? How much flexibility is embodied in the policy to account for different
situations? What is the policy and practice from time of order entry to time of Financial. The financial requirements vary considerably among organizations.
delivery and customer satisfaction? Are customer's needs taken seriously and Some operate with significant debt, and others operate from a strong cash position.
expedited, or does the bureaucracy prevail? The financial resources must be available in one form or another. It is important that
organizations provide the financial resources.
Suppliers
1. What is the policy regarding suppliers? Are suppliers respected as participants?

Are estimates requested without consideration of cost of preparation? Do you
accept estimates from vendors who are not financially responsible? Or is the The business infrastructure determines the effective and efficient use of resources. Its
financial determination made after estimates are received? importance cannot be overemphasized. Infrastructure begins with clearly delineated
2. Do you qualify suppliers? How is that qualification performed? Does it include purposes (mission), objectives, and strategy followed by organizational structure,
people competencies, facilities, processes, and other operational issues? Does this guiding principles, policies and practices, management attitudes, management exper-
qualification take place in the office or on the shop floor? Does it involve hands- tise, support for innovation, acceptance of risk, and communication.
on assessment?
3. Who makes the assessment? Is this a purchasing function? Is it a team effort by Purposes. The purpose of an organization cannot be limited to making money.
people with the required competencies? Does it follow a strict question-and- Money, as profit from operations, is a result from effective use of resources. But the
answer process, or is there freedom to adjust the process as required? purpose must be carefully defined. The purposes of business units, of project teams, of
functional groups, and any combination of people must operate within some defined
4. Can you describe the working relations with suppliers? What is the past history?
context. It is important that purposes from the top to the bottom of the organization
What has been done to improve those relations? Are the relations long-term? At build on one another. The question that must be answered: Why does the organization-
what levels does the interchange take place? Is there a mutual support structure?
al unit exist?
5. What does the organization do to transfer knowledge to the vendor's organization?
Objectives. Objectives are a self-evident fact of life-not just in business but in our essential. Information systems would provide greater benefit today if CEOs had some
personal lives as well. There is no use in attempting to justify the need for defined knowledge of the monsters that were being built. Management expertise is important.
objectives. But those objectives must focus on the purposes of the organization, and
they must be clearly and concisely defined. Does your organization establish objec- Support for Innovation. Innovation provides opportunities for growth. But innova-
tives at all levels beginning with the CEO and the board of directors? Those objectives tion must be supported by management and rewarded. That support implies allowing
must relate directly to the purposes of the organization. Where does your organization and capitalizing on mistakes-what (the "what") was learned from the failure.
rate on a scale of I to 10? Innovation does not come from people who work from 8:00 to 5:00. Innovation comes
from the 5 to 10 percent of people in the organization. These are dedicated people who
Strategies. Strategies are important in order to determine how objectives will be are driven to accomplishment usually by their own ideas. Innovation does not come
met. This does not mean strategic planning. Strategy points the direction as to how about through strategic plans. Innovation comes from individual competence that
(the "how") some objective will be accomplished. But recognize that there are differ- searches for new ways of doing things.
ent kinds of strategy that impact performance. There is a corporate strategy, a busi-
ness-unit strategy, a marketing strategy, a technology strategy, an innovation strategy, Acceptance of Risk. Innovation involves risk, and acceptance of calculated risk can
and so on. Corporate strategy, while important, may be the least important. It is macro be traced to successful organizations. Accepting risk does not mean rolling the dice. It
strategy, but business operates at the micro level. What is the business unit's strategy is common to talk about people who are risk takers. Fifty years of involvement in var-
in these multiple areas? Is technology part of each of these strategies? ious aspects of technology have convinced me that the competent risk takers usually
evaluate their probability of success. They probably are not serious risk takers. They
Organizational Structure. The importance of organizational structure is often over- know their business and did their homework. How much risk do your managers
stated. Personal experience has demonstrated that if you have the right people, organi- accept? How do they manage risk takers? Do they encourage risk taking?
zational structure is not that important; and if you do not have the right people, no
organizational structure will make a difference. What is your organizational structure? Communication. It seems almost trite to talk about communication as we approach
How many coordinators do you have? Why do you need coordinators? They are the end of the twentieth century. But communication is a very major issue. It involves
redundant. They give you an out to rationalize the malpractice in management. one-on-one, small groups, and larger groups. It is also important to understand that
different styles and types of communication are essential. Too often communication
Guiding Principles. Guiding principles impact performance. Guiding principles really is nothing but double-talk.
must be differentiated from policies and practices. Does the organization practice what
it preaches? This may appear as simplistic psychology, but guiding principles start
with the behavior patterns of top management. If integrity is a guiding principle, it 33.12.3 Activities
cannot be subordinated when the situation becomes critical. It cannot be rationalized
at the upper levels and then be expected to nourish at the operations levels. Activities are classified as business, product, process, information, integration, effec-
tiveness and efficiency, and support-staff projects. Projects provide the means for
Policies and Practices. Policies and practices can be a blessing or a curse-too defining objectives, assigning resources, and establishing the start and finish dates. If
often a curse. They can provide guidance and at the same time can destroy initiative. an organization would institute the project approach from the top, including the CEO,
Shelves of policies and practices remove all decision-making responsibility and dele- most of the non-value-adding activities would be eliminated.
gate it to a set of impersonal books. If you have a problem, go to section so and so and
look for the answer. Judgment has been eliminated. Business. Business projects relate to activities such as managing the business, iden-
tifying and communicating a business strategy, planning the future, making acquisi-
Management Attitudes. Attitude determines success. Attitude at the management tions, providing the resources and the business, managing the finances, integrating the
level permeates the whole organization. Managers who keep one foot in the office and activities of business subgroups, guiding the operating and staff groups toward com-
the other foot in a personal business, on multiple corporate boards, on presidential mon objectives, and the general issues involved in providing for stakeholder interests.
committees, or on the golf course or some unrelated activity send the wrong message
to the organization. After all, executives and managers are employees of the corpora- Product. Product projects are probably the best examples of the project process. The
tion. They are not the owners. Excessive participation in extracurricular activity also term is self-explanatory and encompasses the range of projects described previously.
sends the wrong message. Social responsibility is essential but in the proper context. The product project process is used primarily in its many forms by research, develop-
What is the value-added component of such activity? ment, design, and manufacturing. Functions such as marketing, sales, and the staff
functions such as patent and legal and purchasing must be included in this process.
Management Expertise. How do you evaluate your management's expertise? How
many of them have mentally retired? Management expertise is a serious issue. How Process. The designation process must go beyond the traditional use in manufactur-
many executives and managers are technologically literate? How can they make deci- ing. Process has often been denigrated because of the "by the numbers" approach gen-
sions regarding investments in technology without some minimal understanding? erally applied. This denigration began when strategic-planning gurus focused on the
Granted that they have faith in people and in their track record of past performance, process. But process-and more particularly, delineation of the process and managing
but as technology becomes more complex, some minimum level of understanding is that process with substance-cannot be ignored. Processes provide direction. Some
may be very rigid; others may provide various levels of flexibility. Delineation of
processes must be expanded throughout the organization. Consider for a moment the
benefits to be gained from defined processes in all the administrative and support
functions-not the bureaucratic approach but a continuous effort to minimize the
number of steps in the process. Process flow is important in every function. It must be
documented but cannot be at the same time a deterrent to meeting objectives. It takes
balance of flexibility and rigidity.
Information Systems. Information, while not necessarily a competitive weapon,

plays a major role in business performance. But much of the investment in informa-
tion systems resources does not provide any value added to the user. Management
information often operates in isolation and continues to provide more data rather than
information. How often have you heard "I can't depend on those computer printouts"?
The project approach focuses on specifying the benefits and justifying the investment
in information systems according to the same rules that govern investments in other
capital equipment-that means within specifications, on schedule, and at cost. When
was the last time you heard of a new management information system that met the
specifications, schedule, and cost estimates?
Integration. The integration of MOT does not come about by espousing the cause.
Integration requires disciplined decision making followed by providing the resources
and the infrastructure. There are no 10 easy lessons on the road to integration of any
type. Integration requires education, intelligence, understanding, tolerance, intellectual
integrity, observation, discrimination, creativity, dedication, and a "think and do"
approach. It needs management agreement and know-how.
Effectiveness and Efficiency. Many projects focus on effectiveness, efficiency, and

the economic use of resources. Projects of this type form the fundamentals of continu-
ous improvement and must be implemented throughout the organization. They are the
source for not only financial benefit to the organization but also keeping an organiza-
tion challenged and healthy for sustained business performance. Measuring the perfor- ed-it is self-evident and does not require research to demonstrate its practicality. If
mance of these projects can be easily quantified. you doubt this statement, observe how people interact and work as individuals and
teams. As stated earlier, my purpose was to raise some issues, not provide a definitive
Support Staff Support-staff projects provide the greatest challenge to management. solution. The process model with the three-dimensional model linking resources,
Organizations seldom require the same analysis and justification for these activities infrastructure, and activities may be a starting point.
that they require for the more tangible projects. Is there any reason why these activi-
ties should be treated differently? I propose that organizations apply the project
process to all these activities and eliminate the "responsible for" type of mentality.
33.14 REFERENCES
Think how differently the introduction of a new personal appraisal system, by human
resources, might be considered if the project would be bound by the same guidelines
as other investments. Think how differently financial data would be collected and l. Philip B. Crosby, Quality Is Free: The Art of Making Quality Certain. McGraw-Hill, New
communicated if such activities were developed into projects and treated accordingly. York, 1979.
Think how differently a purchasing department might function if activities were divid- 2. G. H. Gaynor, Achieving the Competitive Edge through Integrated Technology Management.
ed by projects. McGraw-Hill, New York, 1991.
33.13 SUMMARY
This chapter can best be summarized by Fig. 33.9, which links the "what," the "why,"
the "how," the "who," the "when," and the "where" of MOT. It is self-explanatory.
Managing MOT provides benefits even though no specific theoretical proof is provid-
34.1 COMPANY BACKGROUND
G. D. Searle and Company was started by Gideon Daniel Searle in 1888 when he
owned a single drugstore in Fortville, Indiana (Ref. 1, p. 20). The company invested in
new pharmaceutical drugs, and the research paid off with several significant new
drugs in the 1920s and 1930s. Searle continued to grow and prosper, and in 1950 the
company issued an initial public stock offering. In 1960 for the first time G. D. Searle
and Company made the Fortune 500 list. A transition in management occurred in 1966
when John Searle was replaced by his son Dan as president and John was appointed
CEO. During this time, a corporate mission was being solidified:2
Daily we must be patient with the demands of science and impatient in the struggle to
make the product of our technology available to mankind at the earliest possible moment.
After Dan assumed control of Searle, the company underwent a transition. In 1967,
the Searle company was reorganized into autonomous operating divisions. From 1967
to 1968 there were 46 major managerial changes in the United States alone.3 By 1969
the strategic focus of the company had changed, and was expanded to an organization
that "can pursue virtually any promising idea to a conclusion far beyond the scope of
yesteryear."4 Searle embarked on a diversification effort that included acquiring: an
optical business, Pearle Vision, a retail chain of eyeglass studios; Curtiss Breeding, a
company that was involved with artificial insemination of dairy and beef cows;
Medidata Sciences, a computer company that offered systems for use in multiphasic
clinics; Nuclear-Chicago, a firm that developed peaceful applications of nuclear radia-
tion; and several international businesses. Searle's sales reached $163.9 million in
1969-up from $36.5 million in 1958, and net earnings escalated to $28.5 million
from $7.4 million in the same period. See Table 34.1 for a detailed sales and net
income breakdown. Table 34.1 shows sales and net income from 1958 to 1969.
Searle's effort to diversify, coupled with a new-product pipeline that was drying
up, helped pave the way for the development of aspartame.
34.3
34.6 CASE HISTORIES AND STUDIES NUTRASWEET-EUREKA! 34.7
detection was not unfamiliar to substances found to be sweet. Most previous chemical During 1969 and 1970, several outside events occurred which changed Searle's
compounds that were found to have a sweet taste were accidentally discovered (Ref. perception of the aspartame opportunity from a scientific curiosity to a significant
12, p. 4). Aspartame, for a still unknown reason, binds to the sweetener receptors of business opportunity.
the tongue to produce a sweet sensation.
Ironically, aspartame was developed prior to Searle's discovery of its sweet taste
by Imperial Chemical, a British company, in the early 1960s. Imperial did not seek to 34.2.3 Safety Concerns-The FDA
patent the compound because they thought it did not have any significant commercial
or scientific merit. After the researchers at Searle discovered it was sweet and the The diet food industry-a $750 million/year market and growing at 10 percent annual-
results of their efforts were reported in the industry, the scientists at Imperial tasted ly-was stopped cold in October 1969 when Health, Education, and Welfare Secretary
the compound and were amazed that it, in fact, did taste sweet. 13 Robert Finch announced a ban on the sale of cyclamates.14 With cyclamates being
Searle began to explore aspartame purely because it was scientifically interesting removed from the market, saccharin was left as the only sugar substitute.
and not because it was perceived to have commercial potential.'3 Mazur secured fund- Unfortunately, saccharin was also suspected of causing health problems. As far back
ing for the project because he felt he should do so in the interest of science. As Mazur as 1957, scientists have shown that certain forms of saccharin could cause cancer in
explained,13 mice. Saccharin's dubious future combined with the cyclamate ban prompted signifi-
This was a novel discovery and this structure had not been known before to be sweet. cant questions regarding the future of all artificial sweeteners.
We were certain what we discovered was really new. And what you do in a situation like
that, if you have the time and people, is to synthesize compounds which are closely relat-
ed to the original substance and see what it does to the taste. We did this for about four 34.2.4 Life After FDA Cyclamate Ban
years. What we were exploring is called structure activity relationships which means if
you change the chemical structure what does it do to the activity-in this case "activity" Companies reacted quickly to the FDA ban. One week after the ban on cyclamates,
was taste.
Coke, Pepsi, Royal Crown, and Seven-Up announced reformulation of their diet
We were chemists and our interest was in research as opposed to development-defi- drinks; they indicated that new formulations would be on grocers' shelves in "1 to 8
nitely as opposed to production and marketing. I decided that this was really important;
weeks."14 Most of these new mixtures used saccharin with a "shot of sugar," to help
not commercially important-it was a really important scientific discovery, and I decided
mask saccharin's aftertaste.14 The tabletop artificial sweetener manufacturers were
that this is something we should work on. It was strictly science, strictly curiosity and
chemical research. I really and truly never ever had one thought about market size. Also also panicking. In October 1969, Alberto-Culver announced that it would reformulate
there was no history that would have encouraged us to look at the marketing aspect [of its SugarTwin to remove any trace of cyclamates. IS Most other tabletop sweetener
aspartame], because Searle was a pharmaceutical company. They'd never even seen a manufacturers announced similar intentions.
food additive; they didn't have the vaguest idea what to do with a food additive-they Kraft and General Foods had some foods containing cyclamates, but they were not
were not interested in food additives-they were interested in drugs. overly concerned. General Foods announced that it would reformulate its D-Zerta gel-
I felt we should stop what we were doing, which was looking for an ulcer drug, like atin dessert, and Kraft was not sure if it would reformulate or continue its diet line.
rCI [Imperial Chemical], and explore the sweet-taste aspect of this series [of compounds]. Diet products represented a small portion of each of the company's sales-except for
And that is what we did. I made that decision within a month of Jim's discovery, because
Kool Aid at General Foods, which represented one of its major products. 14
it was so obvious [that the discovery was novel].
Many companies and scientists were racing to find a new artificial sweetener to fill
Searle continued to investigate aspartame, and the company filed a patent on the the void left by the cyclamate ban and the opening that saccharin was likely to present
compound on April 18, 1966 (issued Jan. 27, 1970,-U.S. patent 3.492,131). The because of its aftertaste. Several compounds were rumored to hold promise; examples
patent reflected the company's emphasis on the research of the product and not on the were neohesperidin dihydrocha1cone (NHD), Monellin, and xylitol, but they either had
development or market applications. The patent covered different compounds and for- an unpleasant aftertaste, did not reduce the caloric content, or else were prohibitively
mulations that could produce results similar to those of aspartame. costly.'6-l8
Searle spent a considerable sum of money in the early research of aspartame. From
1966 to 1968, there were approximately two researchers working on the project, and
in 1969 there were four people. This translated to a cost, in labor and laboratory over- 34.2.5 Searle Decides to Enter the Sweetener Market
head, of approximately one million dollars spent on aspartame research before any
commercial interest was established.13 The aspartame research was conducted as a The flurry of activity, after cyclamate was banned and saccharin rumored to be
course of normal business and not on a "bootleg" basis-Mazur was adamant about removed from the market, caused Searle to view the aspartame opportunity in a new
this pointY lightY
There was no bootlegging. The company was structured in such a way that there was
room for this kind of research. We had approval for everything we did from the director of In 1969 the management of the company got seriously interested in this [aspartame]
chemical research. He said that this discovery r the sweet taste of aspartame] was the best because cyclamate was taken off the market-out of processed foods. There was a big
Christmas present he ever had. hole [market opening], and saccharin tasted so bad that it couldn't truly be used alone, so
The research department was organized in such a way that it was possible for people the market really disappeared. This [the opportunity] was so obvious, and Searle had
like me to make fairly autonomous decisions. You had to get approval from the depart- something that tasted very good. There was no argument about this-anybody who tasted
ment head, but if you had some rationale it wasn't too difficult. Absolutely this wasn't this [aspartame] would say, "It tastes great." It began to view this as an opportunity. Even
bootlegging! the management of a pharmaceutical company couldn't fail to recognize the opportunity.
34.8 CASE HISTORIES AND STUDIES NUTRASWEET-EUREKA' 34.9
Although the cyclamate ban was a major motivator for Searle's commercial interest that was beyond anything that Searle had tackled before and there was real concern by the
in aspartame, it was not the sole reason for the company's excitement about the artifi- Searle family whether they should proceed with this.
cial-sweetener business. As Joseph McCann, the author of Sweet Success, noted19
John Searle, who was the chairman of Searle at the time, was not convinced that
They [Searle] were compelled to [enter the market]. They had an empty product the business potential was worth the cost. He wanted to sell the aspartame project
pipeline and this [aspartame] was one of the more promising, although scary products. It totally-to license it and use the royalties to fund drug-related research and develop-
was scary because there seemed that there was some potential even though it was in an ment projects (Ref. I, p. 33).
area that was pretty strange for them to be moving into. They didn't know how to market However, after senior management talked to the core group of people involved in
a consumer product.
the project, who had been investigating the potential of aspartame with some prospec-
tive customers, Searle decided to continue developing aspartame and preparing it for
During 1968-1970, Searle had a narrow product line and relatively few products commercial launch. Several of these food companies were trying and testing sample
accounted for a disproportionate share of sales. The company had not introduced a batches of aspartame in their labs and were becoming increasingly more enthusiastic
significant new product for the past 5 to 6 years. Eleven of Searle's products account- about the product.20.21 These companies helped give Searle a better understanding of
ed for 92 percent of 1968 sales volume.4 These products are listed in Table 34.3. the market. The feedback from the food companies reassured Searle that there was
some potential for aspartame. As Worley explained, "The reason to go ahead with this
was the enthusiasm of the food and soft drink companies."20
TABLE 34.3 Searle's Product Profile Although the feedback was not quantitative, the information was instrumental in
shaping Searle's view of the market. The input from the food companies helped allevi-
Product Year of introduction Use ate some of Searle's apprehension, because Searle itself was having great difficulty
Metamucil 1934 Treatment of constipation estimating the market potential of this innovation. As Barry HomIer, manager of tech-
Dramamine 1949 Relief of motion sickness nical services for Searle, said, "We tried to look at it [the potential of aspartame]
Banthine 1950 Treatment of ulcers and gastritis because nobody could-it was like we had a dart board and a single dart to figure out
Pro-Banthine 1953 Treatment of ulcers and gastritis what was actually going to happen."22
Enovid 1957 Oral contraception Robert Mazur, the head of research for aspartame, voiced similar concerns. "There
Ovulen 1963 Oral contraception was a realization that there was a commercial value to the product. There were ques-
Aldactone 1959 Treatment of edema and ascites in heart failure tions being raised in terms of how large the opportunity was, and also the cost and risk
Aldactazide 1961 Treatment of edema and ascites in heart failure of getting into it.""
Lomotil 1960 Treatment of diarrhea
Serenace 1961 Treatment of psychotic illness
FlagyI 1963 Treatment of vaginitis
34.2.6 Searle Aggressively Pursues Aspartame
Source: G. D. SearleAnnual Report. 1968.3
Searle decided to actively pursue aspartame in 1970 and appointed Dr. Robert Chin as
head of the aspartame project. Dr. Chin had previously directed the development and
commercialization of the oral contraceptive project (the "Pill") for Searle, which was
Because of the dearth of new products, Searle began an aggressive new-ventures tremendously successful for the company, and he had the support and trust of Searle's
effort to diversify its business. Tom Carney was appointed the head of the new-ven- management. His job was to "do it again.""' However, exactly just what the "it" was
tures group, and he had six ventures that he was evaluating-aspartame was one of for aspartame was an unknown.
these. When cyclamate was banned, aspartame became the top priority of all the ven- In an attempt to define the opportunity and create a more coherent marketing strate-
tures. The combination of the cyclamate ban and Searle's need to find a new business gy, Searle hired Phil Worley, who had worked in marketing in the 1960s for Abbott on
opportunity caused the company to move into an area in which they had no prior expe- Sucaryl, a cyclamate sweetener. When Worley joined Searle, its management still had
rience-the food additive business.2o doubts about aspartame's potential. To quantify demand, Worley began calling on pre-
Although aspartame seemed to suggest an opportunity, the question became, how ferred customers (General Foods, Lipton, etc.) to see if these companies would be will-
much of an opportunity? Searle did not seem to know what they had-they had no ing to place initial orders for the product, pending FDA approval. The results of his
point of reference, nor could they see clearly the complexities needed to bring a food efforts were encouraging; these early customers were excited about aspartame and were
additive from concept to market. The aspartame project represented a sizable risk in willing to place advanced orders for the product. One interesting and unexpected obser-
terms of development, marketing, and manufacturing. Major capital investments in vation was that in some cases it was the number 2 brand in the category rather than the
new plant and equipment would be necessary. Phil Worley, who became head of mar- number I brand that was more receptive to trying aspartame. Worley explained:20
keting for aspartame, explained20
In some cases we found that the top guy [company] was conservative, and in some
Searle's management had some questions as to the potential for the product. One of cases it was the second or third position that was more aggressive in looking for growth
the requirements for the project was to build a very large and costly plant-something or market share increase who was willing to go along with it [aspartame].
The results of Worley's preselling effort were semina] for Searle, and the company rights to the Japanese market, and Searle had exclusive rights in the United States and
became more convinced of the innovation's potentia] and decided it must turn its Canada. The remaining markets would be free for each to pursue individually (Ref. ],
attention to producing aspartame in larger quantities. p.35).
34.2.7 Aspartame Manufacturing 34.2.8 General Foods Joint Commercialization
Until this time (early] 970s), the company was producing aspartame in sample batch A critical juncture in the commercia] development and marketing of aspartame came
quantities. However, as the project progressed, the company decided to build its own in 1974 when Genera] Foods decided to become more actively involved with Searle in
production facility and planned to spend $]5 million on manufacturing. Progress was the commercialization of aspartame. Searle needed assistance developing an under-
halted in January] 974 because the plant would have to be approximately two times standing of the food market since its expertise was limited to drugs. For example, it
larger than any plant that Searle had previously built, and the company was unsure of needed to address questions such as23
the demand and was not able to firmly establish the optimum manufacturing procedure
for producing aspartame.20.24.25 Adding to the uncertainties of the manufacturabi]ity of What should the pricing structure be?
aspartame was the oil embargo that was making manufacturing more and more expen- What other uses can aspartame be used for?
sive. The cost to build the plant kept increasing. In ]969 the plant was estimated to
What should we call the product?
cost $5 million; the cost then escalated to $10, then to $25, to $50, and by ]976 the
cost estimate had reached close to $100 million. The company was reluctant to spend How good is the product, and how does it compare with competing products?
such a significant amount of money on an unproven and highly uncertain process. The How big is the market?
manufacturing process in the early 1970s required 100 ]b of raw materia] to produce Who is the target market?
approximately 3 ]b of aspartame. The company did not know what it was going to do
with the 97 ]b of waste for every 3 ]b of aspartame produced except to dump it in the Searle concluded that it needed to form an alliance with a company that had experi-
ocean, and Searle was concerned about the environmental impact of dumping 97 per- ence in bringing new food products to the market and that knew how to run focus
cent of the materia] used in its aspartame process.21.23 groups, taste tests, concept tests, preference analysis, and brand-loyalty assessments.
As a result of all the manufacturing unknowns, Searle entered into a joint-venture Genera] Foods seemed a like]y candidate because of its presence in the dry-packaged-
agreement with a Japanese company, Ajinomoto, a worldwide leader in amino acid food market such as Jello, Koo] Aid, and cereal. Searle believed these foods would
research, as its manufacturing partner. Ajinomoto had a long history in the foods and offer a stable environment for aspartame.
chemica] manufacturing arena. In the early ] 900s Ajinomoto was the largest supplier The relationship between Searle and Genera] Foods solidified, and in ]975 Searle
of MSG (monosodium glutamate) in the world. In fact, ajinomoto means MSG in and Genera] Foods formally formed a joint venture (or as they called it a "joint com-
Japanese.26 Ajinomoto learned about aspartame at a scientific conference where Searle mercialization assessment team") to analyze aspartame's potential.23
presented a paper on the sweetener. Searle barely beat Ajinomoto to the patent office Genera] Foods was interested in aspartame because of its experience in the ] 960s
with its patent application. Ajinomoto subsequently contacted Searle to see if the two with Sugar Free Koo] Aid, an exceptionally successful product that represented
companies could work together, and a relationship was established. Ajinomoto agreed approximately 20 percent of the Koo] Aid business. When cyclamates were banned,
to provide the first complete manufacturing process for aspartame in return for Genera] Foods was forced to remove Sugar Free Koo] Aid from the market. The only
Searle's technology to produce the compound. cost-effective alternative at the time was saccharin, and children did not like the taste.
Ajinomoto's original plant had the capability to produce 20,000 Ib of aspartame per As a result of Genera] Foods' experience with sugar-free products such as Kool Aid
month, but the manufacturing process was quite crude because the company was using and D-Zerta (a diet gelatin dessert), the company knew how to proceed to assess the
a plant that was designed to produce another drug-L-dopa (levo-dihydroxyphenylala- market for aspartame. Genera] Foods began conducting tests, even before the FDA
nine), a pharmaceutical drug for treating certain types of neurological and mental ill- approved aspartame. These tests were one of two kinds: the first was actual taste tests
ness.27 In the early 1970s, Ajinomoto had a monopoly on L-dopa until Monsanto with their own employees (who had to sign taste-testing agreements) designed to veri-
became a competitor and cut the manufacturing cost of L-dopa to 10 percent of fy that aspartame, indeed, tasted like sugar. The second type was concept tests: cus-
Ajinomoto's cost. Ajinomoto, in the typical Japanese fashion at that time, would not tomers would read advertisements describing the benefits of aspertame, and then taste
fire any workers, which left them with a large investment and little return-a fully Kool Aid or cereal sweetened with sugar, although the participants were told that the
equipped but idle L-dopa plant. When Searle discussed the aspartame process with food or beverage was sweetened with aspartame. The concept tests indicated that con-
Ajinomoto, the Japanese firm was receptive and enthusiastic. Ajinomoto produced ini- sumers loved the product. In fact, the result "was off the chart it was so good."23
tial runs of aspartame using the currently available equipment in their L-dopa plant. Genera] Foods conducted thousands of taste and concept tests during these early years
The early manufacturing plant was extremely unrefined using "pots and kettles."23 to learn what customers wanted.
Aspartame was important to Ajinomoto because it represented an opportunity for them Unfortunately, giving customers what they wanted proved difficult, and in some
to use a plant that was being underutilized. cases impossible, from a manufacturing perspective. In the manufacturing of Koo]
Ajinomoto was to be paid royalties on sales of aspartame, and each company Aid, there was a dust problem-aspartame was difficult to keep contained in the dry
would share in the other's research. The two companies agreed to jointly market pouring operation. Because of the high cost of aspartame (approximately $55.00/lb),
aspartame in Europe and some North African countries; Ajinomoto had exclusive the dust which was lost or wasted was expensive. This problem was remedied, but the
problems associated with delivering an aspartame-sweetened cereal were not. What I set all this criteria up on what the tablet should do. It should be the right color, the right
General Foods found in the tests was that customers loved the concept of aspartame- sweetness and so on. And he would bring these tablets over (to test) and the first ones I
sweetened cereal. But a cereal sweetened with aspartame would have had to sell for put in my cup of coffee-they'd sit there and they'd never dissolve. He'd look at the
approximately $5.00 per box, compared to sugar-sweetened cereals selling for $1.50 checklist, and say, "Well there is nothing on here about dissolving. Ok back to the lab."
to $1.70. So neither General Foods nor Quaker, which had also completed concept Then I got a call from this individual and he said, "Boy I've got it. This thing dissolves in
under ten seconds. The taste was right." He was real excited. He brought the tablet over,
tests with cereal, were able to deliver an aspartame-sweetened cereal to the market,
lined up some cups of coffee, dropped it in, sure enough, it dissolved, but on the top of
despite the promising test results. the coffee cup after it dissolved there was this sort of green scum. I said, "What is this
While the concept and taste tests were being conducted in the United States, green scum?" And he said, "You didn't say anything about green scum specifications."
General Foods and several other food and beverage companies performed actual com-
mercial taste testing of aspartame outside the United States to learn the intensity of
consumer interest in the product. These tests demonstrated that there was a market for
34.2.10 FDA Approval
the product. Worley described the international tests:20
Searle began human testing in February 1972, and on March I, 1973, the company
We started working outside the U.S. where some taste testing was permissible and we filed a petition with the FDA (FR DOC 73-4260, petition FAP 3A-2885) seeking
started getting experience with the product, and other companies experience also. As part approval for aspartame for use in foods and selected beverages. The FDA approved
of the agreements we had at that time was that they [aspartame customers] would provide aspartame on July 26, 1974 for several categories:28
us with information they learned from a commercial aspect, technical aspect as well as
from a consumer response. Free-flowing sugar substitute (in packets equivalent to less than two teaspoons of
sugar)
Tablets for hot beverages such as coffee and tea
34.2.9 Aspartame Applications
Cold breakfast cereals
As a result of the domestic and international tests, Searle forecasted the target market Chewing gum
for aspartame to be weight watchers and diabetics. This market represented $10 to $20
Dry bases for beverages such as coffee, tea, gelatins puddings, and dairy product
million.21 Searle, with the input from General Foods, determined that a spoon-for-
substitutes (ice cream and imitation whipped toppings)
spoon product (one teaspoon of sugar would equal one teaspoon of aspartame) would
represent 60 percent of aspartame's volume, a packet (two teaspoons of sugar equiva-
There were two stipulations in the approval: (1) aspartame must not be used in
lency) would be 30 percent, and a tablet would be 10 percent. 23 These sales were to
cooking (it breaks down and loses its sweetness) and (2) a warning must appear in
come from various markets:20
capital letters: "PHENYLKETONURICS: CONTAINS PHENYLALANINE"
Carbonated soft drinks 60 percent (phenylketonuria is a rare disease that reacts adversely with aspartame). The warning
label required and the limitation for nonbaking applications were foreseen. However,
Powdered drink mixes 25 percent what was unforeseen was that Searle's spoon-for-spoon equivalent product, which was
Chewing gum and candy 10 percent the company's number I priority, was not approved. This posed a significant problem
Tabletop sweetener 5-10 percent to the company because the spoon-for-spoon product was the preferred embodiment
for aspartame. Also the number I use, carbonated soft drinks, was not approved.
Dairy products (ice cream) 5 percent
Another problem occurred shortly before Searle launched aspartame. Several exter-
The spoon-for-spoon product was the number I priority for Searle, because the nal studies were performed by outside scientists that raised questions about the safety
company believed that it offered the greatest market potential because of its ease of of aspartame. John Olney, a psychiatry professor at Washington University Medical
customer use; the packet was second; and the tablet was third. School, and a consumer group, Consumer Action for Improved Food and Drug, found
The tablet probably would not have been introduced at all had Searle not been a that aspartame, when used in conjunction with MSG, could cause brain damage in
pharmaceutical company who had a preference for pills and tablets.20 The spoon-for- children.29 Following Olney's study, the FDA on December 5, 1975 issued a stay (a
spoon product and the tablet required separate development work and had to be manu- restraining order) on the sale of aspartame.30 Further complicating matters, in 1975 the
factured at three different locations. Each was viewed as a separate opportunity.20 FDA called into question Searle's testing and data-reporting procedure on several of
As the market tests continued, Searle's executives developed more experience the company's products, one of which was aspartame.24
with marketing aspartame and their requirements became more exact. Trying to make As a result of the stay and the FDA investigation, the aspartame project all but
a product that marketing wanted to sell continued to pose problems from a develop- died. Prior to FDA approval there were 100 people working on the project at Searle;
ment and manufacturing perspective. Worley explained about trying to perfect the after the stay, there were only 10 (Ref. I, p. 54). The few employees who were left
tablet:20 focused their attention on aspartame's international market applications. Aspartame
floundered for the next several years until Searle changed its top management; with
this change a more focused strategic direction emerged.
One of the forms of Equal was a tablet. The fellow that was in charge of developing Don Rumsfeld, the former Secretary of Defense and Ambassador to NATO,
the tablet had worked on developing pills and pharmaceutical tablets for close to 20 years.
became CEO of Searle in 1977. He changed the company's mission to stay closer to find no buyers-not a single one.34 Rumsfeld had to make a decision-either commit
its core business and led the divestiture of over 20 of Searle's businesses. to commercializing aspartame or drop it. Many of the largest food and beverage com-
During the late 1970s, the company's new product pipeline was drying up and panies were constantly inquiring about aspartame, asking for samples and testing the
Searle remained dependent on a small number of pharmaceutical products for the product in their labs. The total investment in the aspartame project up to the early
majority of its revenue. Sales of 15 products accounted for 89 percent of sales in 1977, 1980s totaled close to $100 million (Ref. I, p. 52), and since Searle did not have
and of the 15 products only four were new since 1968. Two of the company's prod- another new product that offered more potential, the company decided in 1981 to
ucts, Aldactone and Aldactazide represented 21 percent of sales, and these were intro- make a commitment to aggressively pursue commercializing aspartame. Searle then
duced in 1959 and 1961, respectively.31 From a new-product standpoint, the early sued the FDA for excessive delay in approving aspartame.
1980s were no kinder to Searle than were the late 1970s. The same two products, On July 15, 1981 the FDA's Commissioner, Arthur Hull, issued final FDA approval
Aldactone and Aldactazide, represented 48.2 percent of the company's sales in 1980, for aspartame (Ref. 1, p. 45). Aspartame was legalized for the following applica-
and no significant new products were in sight. tions:3o
Tabletop sweetener-40 mg (packets of two teaspoons equivalent of sugar)

34.2.11 The Changing Sweetener Market Tablets-20 mg per tablet
While Searle was grappling with its future corporate innovation strategy, the sugar Dry beverage mixes-120 mg in an 8-oz glass
market was rapidly changing. Because of an increased demand and a decreased supply Gelatins or puddings-32 mg per serving e;2 cup)
of available alternatives, sugar prices had risen to their highest level in 5 years-30 to Whipped toppings-lO mg per serving (2 heaping teaspoons)
36/Ib in 1980 up from 21/Ib in 1979. And prices were expected to increase to over
45/Ib in the near future.32 Because of sugar's high prices, soft-drink bottlers were Cold breakfast cereals-90 mg per serving
experimenting with new alternative sweeteners, primarily high-fructose corn syrup, Chewing gum-8 mg per stick
which cost one-third less than sugar.32 A cost comparison of the various sweeteners is
shown in Table 34.4. Similar to the 1974 decision, aspartame was forbidden to be used in cooking or
Searle decided to launch aspartame for several reasons: the high cost of sugar, the baking and the warning label about PHENYLKETONURICS would also be required.
limited availability of high-quality safe alternatives, a lack of other new products, and After FDA approved aspartame, Rumsfeld became a supporter of the project. In late
a readily obtainable sugar substitute in the company's own labs. Because aspartame 1981 he said, "We're going to sell this (aspartame), but we don't know what 'it' is."5
had not yet been FDA approved, management was skeptical about its potential. Sales The applications approved by the FDA were classified into two broad categories:
of aspartame through 1981 had totaled only $13 million and were primarily in Canada, using aspartame as an ingredient (dry mixes, puddings, whipped toppings, cereals, and
where aspartame had been approved as an ingredient for carbonated soft-drink use chewing gum), and using it as an end product (as a tabletop sweetener in packets and
(Ref. 1, p. 47). tablets). Because of the different applications, two strategies emerged for marketing
Because of aspartame uncertainties with FDA approval, manufacturing, and mar- aspartame: selling the product as a tabletop sweetener under the name Equal (and
keting, and because the product did not fit the strategic mission of the company, Canderel in some countries) and offering it as an ingredient under the name
Rumsfeld charged Marcel Durot, the head of the Consumer Products Division, with NutraSweet. Searle would sell Equal via the typical methods-in grocery and drug
the duty to sell the aspartame business entirely and take the proceeds to fund activities stores. NutraSweet would be sold directly to firms such as General Foods, Pillsbury,
more closely aligned with Searle's core business. Unfortunately, the company could Pepsi, and Coca-Cola (when approved for carbonated soft drinks) for use in their
products.
As part of the company's commercialization plan for aspartame, management
TABLE 34.4 Sweetening Equivalence planned to use a "branded ingredient strategy" (similar to selling yellow dye no. 6 and
calling it molar). The origin of the branded ingredient strategy is not clear. Some cred-
Sweetness Cost I Ib of sugar it Robert Shapiro (who eventually became president of the NutraSweet group) with
(compared per sweetening the idea, and others credit John Mullendore, who was head of the aspartame project in
Sweetener Calories to sugar) pound equivalence Description the late 1970s. Whoever's idea it was, the branded ingredient strategy was pivotal in
NutraSweet's positioning. Consumers did not have to read a label and see
Aspartame O.4-tablet 200 $90.00 45 No baking
2-powder times "aspartylphenylalanine methyl ester"; they only saw "aspartame" and "sweetened with
NutraSweet." In addition to greater perceived safety by consumers, simply seeing
Sugar 16 I 29 29 All uses "aspartame" and that "little red swirl" secured for NutraSweet high brand-name recog-
Saccharin I.36-powder 300 $4.00 0.013 All uses nition and customer loyalty.
O-tablet times Searle's pricing strategy for NutraSweet developed and became more sophisticated
Cyclamates 2-powder 300 $1.93 0.064 Banned over time. In the early 1980s the price per pound of NutraSweet was based on a slid-
O-tablet times ing scale depending on how much aspartame decreased the caloric content of the prod-
HFCS 15 I 18 0.018 Baking and beverages uct in which it was used. However, the original $90.00 price point was determined
without any formal market analysis; it was decided by Don Phillips in the late 1970s.
Source: Bylinsky." Phillips was in charge of Searle's optical division. Rumsfeld felt that because Phillips
34.16 CASE HISTORIES AND STUDIES
NUTRASWEET-EUREKA! 34.17
had retail experience, he would be capable of devising a retail strategy for

34.2.13 The NutraSweet Group
NutraSweet. Phillips was placed in charge of the NutraSweet project. When Phillips
took control, NutraSweet was selling for $601lb and was being rationed to customers As the project began to gain momentum, aspartame needed additional company
who wanted to test it. Demand far exceeded supply. Phillips approached Annette resources, and in December 1982, Rumsfeld formed the NutraSweet group to coordi-
Ripper (now Mullendore), who was in charge of marketing aspartame at the time, and nate and run the aspartame operations. He appointed Robert Shapiro as its new man-
after talking to Ripper about customer's wanting far more aspartame than the company ager. Shapiro had been Searle's corporate counsel and was one of the key executives
could supply, told her, from then on the price would be increased from $60.00 to responsible for selling many of Searle's businesses in the rash of divestitures in the
$90.00. The new price of $90.00 per pound was established. 21 late 1970s.3s
Once Shapiro took control, he began a build-up of manufacturing and marketing.
Searle was now firmly behind the project. Gone were the days of staging dog and pony
34.2.12 Market Launch shows to get people to give their approval of the program. The NutraSweet group was
staffed with young and very aggressive people. By late 1982, the company's strategy
The strategy for the marketing mix of aspartame seemed solidified. As a check, prior was firmly established: Searle would market NutraSweet (now the generic name for
to launch of aspartame, many marketing techniques were used in an attempt to quanti- aspartame) as an ingredient and not as a finished product. The only exception would be
fy the market potential. Market research for Equal, based on the opinion of experts the Equal-brand tabletop sweetener packets to be sold directly to end consumers.s
inside and outside the company, and taste and concept tests conducted in the early NutraSweet sales increased to $74 million in 1982, and estimates indicated that
1980s, indicated that aspartame could achieve 60 percent customer awareness of the sales volumes would increase.s Shapiro arranged for $25 million to expand Ajinomoto
product in 90 days, a 10 percent trial, with a 50 percent repeat purchase rate. Searle facilities, and $30 million to expand Searle's own plant in Michigan that was produc-
set its goals on these numbers.34 ing aspartame and their pilot manufacturing plant in Illinois. The cost to produce
In October 1981, Searle introduced Equal in the United States,3S and by the end of NutraSweet in the early years was approximately $55 to $60 per pound, and the com-
1981, Equal had been approved in 13 countries. Also in 1981, John Robson, a senior pany was selling the product for $90 per pound.21
executive with the company, succeeded in getting the patent life of aspartame extend- With the success of NutraSweet imminent, a new company strategy began to
1
ed for an additional 5 1;; years, which allowed Searle to retain its monopoly on aspar- emerge: expand capacity and reduce costs. Customers were being rationed NutraSweet
tame (Ref. I, pp. 52-53). and Searle was trying to decide how to increase capacity. One alternative was to build
In late 1981 and early 1982, Equal was released in selected test markets. What was a dedicated state-of-the-art NutraSweet manufacturing plant to meet demand and
surprising was that the trial rate was double what was expected (close to 21 percent) reduce costs. In March 1983, the board approved $100 million to build a manufactur-
with the same awareness (60 percent) and repeat purchase (50 percent) levels as had ing facility, but concerns remained. As Shapiro said, "We didn't know if we could
been predicted in the early 1980s. This meant that the market for NutraSweet would manufacture it [NutraSweet] ourselves on a large scale."36 In 1984 the cost to build
be twice the original estimates.34 The target market for Equal as late as 1981 was still the facility that was to be located in Augusta, Georgia, had risen to $130 million, and
saccharin users. Executives forecasted that the market for Equal would reach a 50 to was scheduled to be completed in 1985.31
60 percent share for a spoon-for-spoon product or a 40 percent share for the packet
product and the market for the ingredient NutraSweet could reach 15 percent of the
sugar market with FDA approval of its use in carbonated soft drinks, or 7 to 8 percent
34.2.14 Indications of Success
without carbonated soft drinks.20 The actual results showed that the ingredient esti-
mates came pretty close to hitting the mark, but Equal actually achieved a 25 percent Sales of aspartame in 1982 totaled $74 million, but it was not until 1983 that Searle
market share instead of the 40 percent that was forecasted.
began to get an indication of the true demand. Two events occurred that changed the
One reason for the varying levels of accuracy in the forecasts was that companies way Searle viewed NutraSweet: FDA approved aspartame for use in carbonated bever-
such as General Foods, and other food and beverage companies, were helping Searle ages, and a new advertising and promotion campaign was implemented-the famous
calculate the market size for the ingredient business. These food and beverage compa- gumball program. The results of these two events transformed NutraSweet from being
nies based their estimates on two factors: thousands of concept and taste tests with the perceived as an innovative product to a significant business opportunity for Searle.
product and past experience with their own artificially sweetened products. On the To educate consumers about the availability of NutraSweet in soft drinks and other
other hand, the Equal forecasts were based on Searle's own internal marketing products, the NutraSweet group invested heavily in advertising. In the first 3 years
research, and Searle did not have a solid foundation of experience on which to base after product introduction (1982), the company spent close to $120 million in advertis-
the forecasts. Interestingly, it was not until the product was actually launched in ing promoting the NutraSweet name.3S This was in contrast to other artificial-sweeten-
regional test markets in 1981 and 1982 that the true picture came into focus. Until er companies who were spending approximately $3 to $4 million on advertising.
1982, the company still thought the market for Equal would be saccharin users, but Ogilvy & Mather was hired to direct the NutraSweet campaign. Ogilvy launched a
follow-up studies in shopping malls during the test market indicated that the market gumball promotion program that had a profound impact on the estimate of the magni-
was not saccharin users at all, but rather dissatisfied sugar users. Although saccharin tude of NutraSweet's potential. In March 1983, print advertisements appeared in bold-
had a bitter aftertaste, it was discovered that saccharin users had become used to and, face explaining NutraSweet as a breakthrough sweetening agent. A coupon campaign
in fact, preferred the aftertaste of saccharin. Searle had to change its marketing and was initiated. Anyone returning a coupon would receive a free NutraSweet gumball.
positioning of the product to reach this new target segment.
Over 3,000,000 coupons were returned.s The advertising strategy worked. Within only
i.
I
a few years of introduction, 98 percent of all American adults could identify Several other companies were reported to be positioning themselves to enter the I
I
NutraSweet from a list of sweeteners, and 70 percent could name NutraSweet as a market once the NutraSweet patent expired on December 14, 1992; these included
sweetener unprompted.5 Beatrice, General Foods, Johnson & Johnson, Procter & Gamble, Schering AG, Adeda
The second and more significant event for Searle was FDA approval for use of Chemical, Tanabe Seiyaku, Tate & Lyle, and Unilever.41,43
NutraSweet in carbonated beverages. Searle submitted an FDA petition in 1982 for
carbonated beverages and was granted approval on August I, 1983. The carbonated
beverage market was the true gem of the entire sweetener market, and the company
34.3 SEARLE'S NEW STRATEGIC FOCUS
had been trying to access this market since the mid-1970s, when there were estimates
indicating that this segment could represent 70 to 80 percent of the total artificial-
sweetener market. Also, control of this market was dominated by only a few players: In light of the imminent influx of competitors, Searle and NutraSweet needed to for-
Coke and Pepsi's combined market share was 64 percent, making this a potentially mulate a new plan to remain competitive. Searle's management was faced with three
attractive market. Furthermore, consumption of carbonated beverages was increasing options:
and the per capita growth of this segment had increased over 70-fold from the time
they were first introduced. Recent growth of the soft-drink segment was impressive. In Maintain their present situation.
1969 per capita consumption of soft drinks totaled 23.4 gal, and in 1985, consumption Merge with or acquire another company to give them greater critical mass.
had grown to over 40 gal (Ref 1, p. 80; Ref. 35). The diet soda market enjoyed similar

success. In 1980 diet soft drinks penetrated 12.9 percent of the entire soft-drink indus- Sell the firm.
try, and by 1984 the figure reached 21.3 percent. 35
Searle decided to sell the entire company to a larger corporation that had the
In 1983, both Coke and Pepsi finally became NutraSweet customers, and the
resources to enable both Searle and NutraSweet to remain competitive in the turbulent
impact on the sales of NutraSweet was substantial. NutraSweet's sales went from $74
times ahead. Monsanto decided it was interested in purchasing Searle's pharmaceuti-
million in 1982, to $336 million in 1983, to $585 million in 1984.11.38NutraSweet had
cal business, but Monsanto was not interested in the NutraSweet business. Monsanto
captured 86 percent of the total U.S. sugar-substitute market.38 In Canada, NutraSweet
was apprehensive about aspartame soon coming off patent and was uncertain what its
had achieved 40 to 45 percent of the entire tabletop sweetener market. The
future potential would be. The Searle family rejected Monsanto's offer to buy part of
NutraSweet Group was "relishing its success."5 After NutraSweet was approved for
the company-the family insisted on an all-or-nothing deal.
carbonated beverages, Shapiro was quoted as saying, "About all we have to do is hang
Searle's own executives who expressed an interest in buying the NutraSweet busi-
our shingle and say, 'we're open for business. "'39
ness were unable to come up with a plausible selling price. These executives used
This story was well on its way to a happy ending. By the end of 1984, NutraSweet
standard ROI (return on investment)-type calculations but could not justify the $300
had been approved in 40 countries and over 100 million consumers had tried foods
million the company was asking for only the Equal tabletop sweetener business; the
sweetened with NutraSweet.37 During this same period, the FDA had received fewer
executives felt $150 million was closer to the correct evaluation which left a safety
than 600 complaints on aspartame out of 70 million Americans who used it.40 The
margin for error.34 However, Monsanto changed its mind because of active interest
question became: What was the company going to do for an encore?
from several food companies in buying the line, and decided to purchase the entire
Although NutraSweet's future seemed bright, there were many competitors trying
company. In August 1985 Monsanto bought Searle and NutraSweet for $2.754
to get a piece of the artificial sweetener market. Some companies readying products to
compete with NutraSweet are listed in Table 34.5. billion.44
TABLE 34.5 Potential NutraSweet CompetitorsI.35.41.42 34.4 LIFE AFTER MONSANTO

Company Product Description
After Monsanto purchased Searle, NutraSweet's strategic focus changed to a four-
Biospherics Lev-O-Cal Same taste as sugar without the calories, and can pronged action plan (Ref 1, pp. 101-102; Ref. 35):
be used in baking, browning, and for bulk: it also
does not promote tooth decay Increase the use of NutraSweet in existing markets.
Hoechst AG Acesulfame-K Slight aftertaste and must be blended with

(Germany) (Sullette brand name) other sweeteners; directly competing with Develop new applications for NutraSweet.
aspartame-no baked applications Create new food products by using advanced technology to solve customers' prob-
Pfizer Alitame Stable in baked goods. 2000 times sweeter than lems.
sugar; shelf life 2-4 times that of aspartame Lower costs.
Coca-Cola Family of sweeteners High-performance sweeteners that are 1900 times
sweeter than sugar The company realized that it had to change. As George Logan, the Managing
Director for Middle East and Africa Business, said in an interview: "This company
Ajinomoto ? Rumored to be thinking about entering the
was built upon 90 yard passes in the Superbowl-really big plays. We're now having
market once NutraSweet's patent expires
to learn 'first-down football' and the running game" (Ref. I, p. 94).
To meet these goals, N utraS weet spent $31 million on R&D in 1987. This represent- 34.5.1 Breakthrough Mentality
ed 4.2 percent of sales, compared to the I percent that traditional food companies were
spending. The strategic mission of NutraSweet evolved into one of not simply lowering Searle was a drug company in which long lead times for new products were common.
cost, but of achieving the low-cost position. Also, the company began to place more A new pharmaceutical agent can easily require 10 to 15 years to be commercialized.
emphasis on customer service. And finally, the third area of direction was to be the This type of business recognizes the need for prolonged research, patience, and persis-
dominant international supplier of aspartame. In 1989, the company doubled manufac- tence in pursuing many avenues on the path to a new medical treatment. Drug research
turing capacity-investing cJose to $100 million (Ref. 1, p. 96). NutraSweet enlarged in many aspects is similar to a river flowing and branching into different tributaries. It
its applications support department, calling it the Technology and Development Group. would be difficult to predict ahead of time where the river would finally end.
The charge of this group was to work with customers on possible applications for Pharmaceutical researchers must be given a relatively free hand to pursue the tribu-
NutraSweet. By the late 1980s, this group had grown to over 200 people-190 profes- taries of their work, because it is difficult to know, a priori, what effort will yield a
sionals, 65 percent with Ph.D.s. Approximately one-third of all Searle's R&D scientists desired result.
were in support roles for aspartame (Ref. I, pp. 102-103; Ref. 35). During the initial stages of the development of aspartame this discovery was pur-
The company became the world's lowest-cost producer of aspartame and the com- sued because it was "scientifically interesting." Neither Mazur nor Schlatter48 knew or
ponents of aspartame. Even Ajinomoto, the original supplier, began buying product cared about the market size or commercial potential of aspartame. These compounds
from NutraSweet because of the lower cost. NutraSweet built manufacturing plants in should not have tasted sweet, but they did, and this observation was scientifically sig-
foreign markets where sugar was imported in an attempt to compete locally with nificant. Because of Searle's organizational structure, research managers were autho-
sugar. Manufacturing costs were cut by a factor of 5 from 1983 to 1989, which rized to pursue these types of opportunities without much trouble. Mazur funded the
allowed the company to post a 33 percent gross margin from 1985 to 1986, even aspartame project not covertly or on a shoestring basis, but rather as part of the normal
though the market price had decreased by 10 percent. Unit volume had increased by course of business.
50 percent.45 By 1988, the price of aspartame had fallen to $27/lb in Europe because Aspartame fit nicely into the ilk of Searle, an organization that believed "Daily we
of increased competition, but NutraSweet still claimed that they were able to make a must be patient with the demands of science and impatient in the struggle to make the
profit at that price. In the United States, NutraSweet was selling for $65/lb, and the product of our technology available to mankind at the earliest possible moment."z
company's profit margin on J987 sales before depreciation and R&D expense was 53 Searle seemed to be the ideal type of company to pursue the early development of
percent.35
aspartame because this company was conditioned in the pharmaceutical mentality that
If NutraSweet had been an independent company during the 1980s, it would have breakthroughs take time and patience. So a question arises: How can a nonpharmaceu-
been number 392 in sales revenue of all U.S. companies, number 152 in net income, tical company develop a breakthrough mentality? Perhaps the following phases will
number 22 in sales per employee, and number 4 in net income per empJoyee.45 In help illuminate this idea.
1986, the picture looked better than ever, as one observer noted: "The hill had been
taken by the troops and now it was time to secure and defend their gains" (Ref. 1, p.
90). The company had reduced manufacturing costs, and it dominated the artificial-
34.5.2 Call to Action
sweetener market. In 1988, NutraSweet accounted for 90 percent of the U.S. sugar-
substitute market and 80 percent of entire worldwide sales of artificial sweeteners.41
Breakthrough mentality allows the research of an idea to continue, but what causes a
By 1989, NutraSweet was in over 2700 products, and by 1991 it was in over 4000 company to act on a radical innovation that is outside the company's normal scope of
4
products. " The company had become an international manufacturer and marketer. As business in a concerted and aggressive fashion? Several events occurred simultaneous-
of 1989, 22 percent of the company's sales were outside the United States, and by ly to cause Searle to view the aspartame opportunity seriously. These events consisted
1990, NutraSweet was approved in 79 countries (Ref. I, p. III). NutraSweet's sales
of the cyclamate ban in I 969-"If cyclamate had not been banned I do not think
increased from $722 million in 1987, to $736 million in 1988, to $869 million in Searle would have pursued the commercial aspects of aspartame"2-and the drying
1989, to $933 million in 1990 (Ref. I, p. 2; Ref. 47).
up of the company's new-product pipeline. Without both of these, Searle may not have
The cost to manufacture NutraSweet was being reduced and the market for pursued the project as fervently as it had.
NutraSweet-sweetened products was becoming saturated. The company had squeezed A similar call to action inspired Ajinomoto to invest heavily in the manufacturing
almost all the costs and markets out of the product that it could and needed to find the of aspartame. Because of the disruption in its business caused by Monsanto's new L-
next big money maker.
dopa production process that dramatically reduced the cost of manufacturing the drug,
Ajinomoto found itself with a plant operating at far-from-full capacity. The combina-
tion of excess capacity and the Japanese no-firing ethic led to Ajinomoto's call to
34.5 DISCUSSION action. The company had a plant, and it needed to find something to produce; aspar-
--.--- ... ------. --
- ------ ----- ..
tame seemed to offer potential at the time, and the uncertain potential of aspartame
was far better than their other alternatives.
This case illustrates six implicit, and at times explicit, phases through which Searle Would each company have gambled as they had without their own respective call
passed when it marketed its breakthrough: breakthrough mentality, call to action, to action? Perhaps, but the probability favors a languishing product development
learning from experience, experimental marketing, fine tuning, and opportunity effort because aspartame was seven times more expensive than cyclamate, its nearest
exploitation.
competitor.
NUTRASWEE'f'ID-EUREKA! 34.23
34.5.3 Learning from Experience ties that were expected. During taste tests it was found that NutraSweet tablets, for use
in coffee, did not offer better taste than Sweet 'n Low, and aspartame would have to
One observation that became clear with the development and commercialization of be sold at a substantial premium price. It was also determined that even though some
aspartame was the reliance on experience. Phil Worley, the head of marketing on concepts offered potential, such as aspartame-sweetened cereal, it could not be pro-
aspartame, drew on his experiences from working on Sucaryl at Abbott. Ajinomoto duced cost-effectively. As a result of the uncertain product and uncertain manufactur-
benefited from its extensive knowledge of amino acid production, which was similar ing technology, Searle tried several avenues with the hope that one or more would
to the process needed for aspartame production. General Foods provided critical direc- prove possible and profitable.
tion and guidance to Searle because General Foods recognized the opportunity aspar-
tame represented. General Food's cyclamate-sweetened Kool Aid drink was a big hit
prior to its removal because of the cyclamate ban in 1969. General Foods knew that if 34.5.5 Fine Tuning
aspartame could pass FDA scrutiny, its company could once again introduce a sugar-
free Kool Aid. General Foods as well as many other food companies conducted thou- Aspartame changed drastically over time. The initial concept-the spoon-for-spoon
sands of taste and concept tests, many before FDA approval, in an attempt at defining product-was not introduced in the United States, and what was ultimately offered for
the opportunity. These tests reinforced the notion that NutraSweet had potential. sale were packets and tablets. The market changed from its originally envisioned tar-
However, even the food companies, with substantial experience in the food area, get-saccharin and cyclamate users-to dissatisfied sugar users. The manufacturing
encountered several critical problems, many of which were unable to be successfully changed radically from Ajinomoto's first production process with "pots and kettles" to
resolved. One good example was aspartame-sweetened cereal. Neither General Foods a state-of-the-art facility.23 The product, market, and manufacturing changed drastical-
nor Quaker Oats could deliver what people wanted-a low-cost, reduced-calorie, ly over the course of aspartame's development. Because Searle desperately needed a
good-tasting, and sugar-free cereal. new business, the company stuck with the aspartame opportunity and remained flexi-
The importance of building on experience surfaced again when Searle introduced ble, enabling Searle to change and adapt to new twists and turns as they arose. Searle
Simplesse. One year after Kraft signed an exclusive agreement with Searle for the use changed the product and marketed its second choice-aspartame in packet form. The
of Simplesse in its line of mayonnaise, Kraft merged with General Foods. General company learned that the market was, in fact, dissatisfied sugar users and not the sac-
Foods learned of the Kraft-Searle joint commercialization arrangement, and General charin market, and consequently changed its advertising and focused and fine-tuned
Foods explained to Kraft the dilemma it faced when one ingredient is withdrawn from its message to this new market. Searle continued to refine and improve the manufac-
a food product (sugar from cereal) and another more expensive ingredient must be turing of the product until it was even better than Ajinomoto. Over time the picture of
added (NutraSweet) to add bulk or texture; the result is a far more costly end product. the opportunity became clearer and the company realized where it needed to direct its
Kraft, building on General Foods' experience, decided to cancel its contract with efforts.
Searle, but Searle went ahead on its own and introduced a line of ice creams with
Simplesse (Simple Pleasures). Searle, however, did not have much experience with
this line of business-and Simple Pleasures flopped. 34.5.6 Opportunity Exploitation
This final stage, opportunity exploitation, was characterized by expanding the base of
34.5.4 Experimental Marketing products that could use NutraSweet, concentrating on lowering manufacturing costs,
and growing internationally in terms of both marketing and manufacturing. In this
Searle tried several different approaches in its search to exploit the aspartame opportu- phase, Searle tried to squeeze all the potential it could from NutraSweet; this included
nity. These tactics were the result of working with people and companies with experi- product acceptance in over 4000 products and 79 countries by 1991, and leadership as
ence, and these experiences allowed Searle to narrow the scope of product, offering the worldwide low-cost producer of aspartame.
choices to a manageable number, but market experimentation of the product was need-
ed. It was as though the company were approaching the different products and markets
in a venture capital-like fashion-try many investments with the hope the few that
succeed will be large enough to more than compensate for the others that fail. 34.6 LESSONS LEARNED
In the early years, Searle thought it would market several different embodiments of
aspartame: spoon-for-spoon, packets, and tablets. However the FDA did not approve We can glean several lessons from this case:
the company's number I priority product-the spoon-for-spoon product, and the com-
pany had to introduce its number 2 and number 3 products: packets and tablets. 1. Because commercializing a radically new product can take 20 years or longer,
Similarly, original applications included carbonated soft drinks, powdered drink companies wishing to develop and market these types of products must have a break-
mixes, chewing gum, tabletop sweeteners, dairy products, and tablets for use in cof- through mentality-a patience with the belief that there is a light at the end of the tun-
fee, but the number I application, carbonated soft drinks, which was estimated to be nel.
60 percent of the potential, was not allowed by the FDA. The company tried many 2. Companies may wish to impose an urgency to the project-a call to action-
product combinations: Equal; packaged drink mixes, such as Kool Aid; food mixes, that will cause them to stop talking and act. It can be easy to rest on past laurels, but if
like lello and D-Zerta; packaged cereals; as well as a host of other products. The con- companies want to develop and commercialize truly innovative innovations, a proac-
cept tests and taste tests showed that several applications offered potential; however,
tive-versus-reactive strategy should be cultivated.
the in-depth market tests indicated that a few applications did not offer the possibili-
3. Companies need to build on their experience because many problems will arise
ing misses the "target," we feel that, as marketing professionals, we have failed. To
when developing and commercializing these types of products and a company's past
spend thousands or millions of dollars on a pricing strategy or on an advertising cam-
experience can help guide it around some of the obstacles. This third lesson does limit
paign only to find that the pricing was too high or that the advertising was directed at
companies to markets they are already competing in. How, then, can companies suc-
the wrong segment, can send the best marketer looking for future employment.
cessfully diversify into new, uncharted areas? For companies that desire to compete in
However, when dealing with radical innovation, several questions and unforeseen
areas outside their "comfort zone," one technique may assist: Live with your cus-
problems surface. Discontinuous innovation is a process that requires a long lead time
tomer. This concept goes beyond adages of "knowing your market," or "getting close
and is highly dynamic and uncertain. It is difficult to predict the exact product that
to your customer." Living with your customer means just that. For a period of several will be offered for sale. As an example, if manufacturing can figure out an easy, cost-
weeks, live at your customer's facility. Tag along when their salespeople make sales
effective way to produce the innovation, the price could be $1.00; however, if manu-
calls, attend their staff meetings, in short, for that several week period, be a part of
facturing is unable to devise an efficient process, the cost could reach $5.00, as was
their organization. The intimate knowledge you will gain should give you a spring-
the case with aspartame-sweetened cereal. This scenario would change even the best-
board of knowledge to help understand customers' needs and wants, and the dynamics planned marketing strategy. Furthermore, because radical innovation can require 10
of the market. You will have developed a storehouse of information upon which to
build the new venture. years or longer to develop and commercialize, the market may look entirely different
than it did when the market was first examined. Consequently, the product is chang-
4. Companies must experimentally market the radical innovation-testing differing, the market is changing, and the manufacturing is highly uncertain.
ent products and markets-because as Sophocles said in 400 B.C.: "One must learn by So what is the message of this case? I think that the message of this case is one of
doing the thing, for though you think you know it-you have no certainty until you experimental marketing, or management by muddling around. It is almost as though
try." you are trying to navigate through a heavily misty and foggy swamp, where you can
Experimental marketing allows companies to remain flexible while trying various see only 5 ft in front of you. To map out a specific and exact navigational course when
products and markets. This technique may seem disconcerting to young (and some you are on one shore trying to get to the other would be foolish. However, a global
old) marketers who have been schooled using quantitative tools and computer soft- goal is needed: "Get to the other side." The specifics will be worked out during the
ware products (like Lotus and Excel) to analyze various market scenarios and then Journey.
select the course of action that offers the greatest discounted cash flow. This case The strategy that is being presented from this case is similar to the story that was
demonstrates that when developing breakthroughs, performing these standard-types of rumored when Seymour Cray was trying to develop the world's fastest computer. He
analyses can be fraught with problems. First, when dealing with a breakthrough, cus- hired a newly minted M.B.A. to develop a business and marketing plan, which the
tomers may know, themselves, if they need the item. For example, if, in 1975, I would M.B.A. completed. The plan was inordinately long with a quantitative analysis on var-
have asked you if you would be interested in having a "personal" computer on your ious scenarios. When Cray saw the plan, he elected to write one himself to present to
desk, you most likely would have said, "No!" Frequently, with discontinuous innova- prospective investors-it was a one-page plan that included both a 5-year and a I-year
tion, customers cannot verbalize needs and wants that they may not yet know that they plan. It read similar to the following:
have. Also, even if customers express a desire for a product, the company may not be
able to produce it-as was the case with NutraSweetened ice cream and cereal. As a Five-year plan: Build the world's fastest computer.
result, companies wanting to commercialize breakthroughs must be more flexible in One-year plan: Be one-fifth of the way there.
trying different product ideas on various market segments and to determining the opti-
mal product/market combination.
Perhaps this story is an oversimplification of the complexities when trying to
5. Once companies have identified a product and a market, they will need to fine- understand the market and manufacturing difficulties for commercializing radical
tune and adjust their product offering and innovation strategy as well as the imple- innovation. However, it does capture the essence of the inherently dynamic and com-
mentation of the strategy as new developments arise. Also, companies must then plicated environment that exists with discontinuous new products. Management must
exploit the opportunity, to squeeze all it can from the new product, by improving the try to refrain from its need to precisely quantify opportunities that may not be able to
manufacturing process, reducing manufacturing costs, and expanding into niche as be bounded so tightly in the early stages. To pursue this type of precision may be com-
well as international markets. These factors enabled Searle to define more clearly the forting to management, but may unduly restrict and possibly impede the development
opportunity over time and to plan better for the successful commercialization of aspar- and successful commercialization of radical innovation.
tame, and these steps should assist your company when trying to grapple with the
uncertainties of developing and commercializing these types of complex, time-con-
suming, and resource-driven innovations.
34.8 SUMMARY
34.7 CONCLUSION This chapter explores the development and marketing of aspartame, also known as
NutraSweet. Specifically, the case described in this chapter details how Searle, the
innovators of NutraSweet, went about trying to understand the market dynamics when
Marketers like to think of aiming at a specific, predefined target, called the target developing and commercializing a radical innovation. The case depicts a company that
market, with a well-defined marketing strategy, known as the marketing mix (pricing, was originally looking for one product-an ulcer treatment, and found another-a rev-
product offering, channel of distribution, and promotional campaign). When market- olutionary artificial low-calorie sweetener. It is a story about how a company missed
what it was shooting for (in terms of the originally envisioned product and market) but 28. FDA Ruling, Federal Register, 39(145): 27317, Washington, D.C., July 26, 1974.
still managed to hit a target. The case also depicts how a company gradually devel- 29. "Team-up on Sweetener," Chemical Week, p. 16, April 16, 1975.
oped an understanding of the potential for its innovation, as well as an understanding
30. "Aspartame," Federal Register, 46(141), Washington, D.C., July 24,1981.
of the market and how this definition changed over time.
How can a company manage an uncertain product in an uncertain market with an 31. G. D. Searle Annual Report, 1977.
unproven manufacturing process? This is the story of NutraSweet. 32. "High Prices May Sap Sugar's Market Share," Business Week, p. 70, June 16, 1980.
In developing this case, 16 personal interviews were conducted with executives 33. Gene Bylinsky, "The Battle for Amer.ica's Sweet Tooth," Fortune, (July 26) p. 28 + 3.
who represented a wide range of responsibilities within Searle (now Monsanto) and 34. Marcel Durot, former head of the Consumer Products Group, Searle, Inc., interview, July 24,
outside the company. The executives interviewed ranged from Dan Searle, who was 1992.
the CEO, to James Schlatter, the scientist who originally discovered the sweet taste of 35. "The NutraSweet Company: Technology to Tailor-Made Foods," Harvard Business School,
NutraSweet.
case 9-589-050, 1988.
36. Robert Shapiro, former president of Searle NutraSweet group, interview, April 14, 1992.
37. G. D. Searle Annual Report, 1984.
34.9 REFERENCES 38. Julie Franz, "NutraSweet Ads Ready to Swirl in Three Countries," Advertising Age, Feb. II,
1985.
I. Joseph McCann, Sweet Success: How NutraSweet Created a Billion Dollar Business, 39. "Aspartame," Business Week, p. 62, July 18, 1983.
Business One Irwin, Homewood, Ill., 1990. 40. 1986 Medical and Health Annual, Encyclopedia Britannica, Chicago, 1986.
2. G. D. Searle Annual Report, 1967. 41. Susan J. Ainsworth, "New Sweeteners Crowd Sugar out of the Bowl," Chemical Week, pp. ;
3. G. D. Searle Annual Report, 1968. c6-8, Aug. 1988.
4. G. D. Searle Annual Report, 1969. 42. Susan Irving-Monshaw, "Sugar Substitutes Are Poised to Hit the Table," Chemical
Engineering, pp. 47-49, July 1989.
5. "NutraSweet," Harvard Business School, case 9-389-142, 1989.
43. Monsanto Annual Report, 1990.
6. "Diet Drinks Take a Lump," Business Week, p. 69, April 12, 1969.
44. Monsanto Company, Moody's Industrial Manual, 1988, pp. 4105-4106.
7. "Calorie Cutters Weigh in Light," Chemical Week, pp. 125-127, April 22, 1967.
45. Robert Shapiro, presentation to securities analysts in New York, Sept. 20, 1989.
8. "Sucaryl," Modern Packaging, pp. 118-119, July 1963.
46. Joseph McCann, "Design Principles for an Innovating Company," Acad. Management
9. "April New Products Star Is Low-Cal Sugar," Chemical Week, p. 108, April 1968.
Executive, 5(2): 76-93, 1991.
10. "Ban on Sweetener Sours Flavor Outlook Too," Chemical Week, pp. 16-17, Nov. 5, 1969.
47. Louis Therrien, "NutraSweet Tries Being More of a Sweetie," Business Week, p. 88, April 8,
II. Robert Teitelman, "Bittersweet," Forbes, pp. 36-37, Aug. 27, 1984. 1991.
12. Lewis Stegink and L. J. Filer, Jr., eds., Aspartame, Marcel Dekker, New York, 1984. 48. James Schlatter, Scientist, Searle, Inc., interview, July 28,1992.
13. Robert Mazur, Research Fellow, Searle, Inc., interview, July 23, 1992.
14. "Diet Industry Has a Hungry Look," Business Week, pp. 41-42, Oct. 25,1969.
15. "Cyclamates: How Sweet It Isn't," Chemical Week, pp. 30-31, Oct. 29,1969.
16. "Can Citric Chemicals Fill the Sugar Bowls?" Chemical Week, pp. 21 -24, July 21, 1971.
17. "Turning Sour on a Sweet Berry," Business Week, pp. 30 ff., March 25, 1972.
18. "Marketers Are Sweet on Birch Sugar," Chemical Week, p. 37, July 14, 1976.
19. Joseph McCann, author of Sweet Success (see Ref. I), interview, July 21, 1992.
20. Phil Worley, interview, July 25, 27, 28, 1992.
21. Annette Mullendore, former director of marketing on the aspartame project, interview, July
27,1992.
22. Barry Homier, Manager of Technical Services, Searle, Inc., interview, July 23, 1992.
23. Bob Ganger, Director of Development at General Foods, interview, July 27, 29, 1992.
24. "The FDA Gives Searle a Series of Shocks," Business Week, p. 20, Dec. 22, 1975.
25. G. D. Searle Annual Report, 1975.
26. Kelichi Koseki, "Marketing Strategies as Adopted by Ajinomoto in Southeast Asia," J.
Advertising Research, pp. 31-34, April-May 1990.
27. "Searle Sweetener, Cleared by FDA Is Expected to Hit US Market Shortly," Chemical
Marketing Reporter, p. 4, Aug. 5, 1974.
35.1 INTRODUCTION
A model gives us a special way of thinking about things. By definition in the model,
we make fixed assumptions and focus on the interplay of input, process, and output
variables. This special way of thinking leads to more effective thinking. Think about
your written and spoken communication, across different departments in your compa-
ny, different regions of your country, different countries that still speak the same lan-
guage, and finally, different countries with different languages. In a competitive world
it is absolutely essential to remove the blinders and think about our communication
models.
Reducing project cycle time when managing across borders is the case in point.
Clarity in communication is where the rubber meets the road. The knowledge, the
skills, and the technology as well as all other related elements must be in place.
Projects are doomed to failure without interactive and understandable communication.
Time after time, projects fail to meet the projections related to performance, cost, and
schedule because of language differences, lack of translation competency and integri-
ty, and the biases inherent in different cultures.
The following case history regarding a multinational project on a short time sched-
ule sheds some light on these interactions and demonstrates the issues involved and
approaches used to assist the communication process. This case history, while anecdo-
tal, presents the communication issues in a multinational project through a discussion
of the
Sources of information
International dimensions
35.1
35.2 CASE HISTORIES AND STUDIES COMMUNICATION IN AN INTERNATIONAL ENVIRONMENT 35.3
Brief history of the organization motor controls. The resulting stream of new products and new production technologies
Communication process variables created phenomenal opportunities. Each plant expanded production lines and capacity
Guidelines of implementation with remarkable improvements in quality using their own Telemecanique product and
Telemecanique production technologies.
The company developed elaborate photoelectric devices and proximity detectors.
35.1.1 Factory Automation Most of you who enter stores with automatic doors know intuitively what a photoelec-
tric device is. It projects a beam of light toward a photoelectric cell. When the beam is
A tour of manufacturers reveals a wide variety of physical environments and cultural broken, a switch is tripped, opening a door or sounding a buzzer. A proximity detector
attitudes. My trips through factories in the United States and Canada have been varied, uses a different technology to trip a switch given the presence of a material under
and subject to extremes. Perhaps the worst were in the industrial Northeast, where the wide-ranging conditions, magnetic, plastic, hot, or cold. For example, the motor con-
strong and sweaty wielded giant wrenches, positioned a replacement fitting, and trols were soon interfaced with photoelectric cells and proximity detectors on the
pushed levers with all their might, in a dangerous and smoking industrial hell just this assembly line eliminating elaborate manual efforts to synchronize work up and down
side of Dante. Framed by the faint illumination of control panel lights, a welder issued the assembly line. Work throughout increased dramatically. The company's motto was
Fourth of July sparks to seal the final connection. In a garish choreograph, machinists "Innovative solutions to control problems," and no one knew it more thoroughly than
nurtured balking and recalcitrant machinery back up to the rhythmic clatter of produc- their engineers, as the product that was sold, made the product. The proof was in the
tion with tense urgency to defray the cost of lost production time at a rate of $100,000 pudding.
an hour. This is not unique to Telemecanique. Actually, many manufacturers make products
Other factories I saw in the Southeast were cleaner and more organized, but still a that are used in their own factories. The differences in degree are startling, however.
lot of waste could be seen in materials handling and plant layout. Some Japanese firms have duplicated their existing factories in the United States right
Yet, my tour of the production locations in France showed spotlessly clean plants, down to the wallpaper. U.S. manufacturers field-test emerging technologies on pro-
with most of the parts production automated, attended by women fashionably attired duction lines in their own factories before marketing. The feedback from production
and in heels to boot. Telemecanique led industry with a special program attracting personnel is important. The vendor factory sells to the customer factory at an inter-
women with reduced hours so that they could work a little and be home for the chil- company transfer price. As intercompany politics are involved in the bargaining
dren after school. From about 9:00 until 3:00, with time for lunch and coffee breaks, a process, the price may be unreasonably high, creating financial distortions and vocif-
largely female workforce manufactured products exported all over the world and then erous objections. Yet the deal is done "for the good of the team." This is not always
went home in time to check the children's homework. It does not get any better than the case; it is a matter of company culture. Another Japanese concern in the same
this. Or does it? industry departs from this approach. If the internal transfer price is excessive, plant
managers are encouraged to use other sources, even their competitors, as long as they
get the best price adjusted for quality and productivity.
35.1.2 Parent-Company History
In 1924 Telemecanique Electrique was founded in France by four engineers who 35.1.4 Subsidiary History
developed a technology and manufactured the resultant components to start and stop
large motors over long distances. In essence, they began as a system control business. In 1962 the computer numerical control (hereafter CNC) group was formed as a
By centralizing controls, they felt that people would be safer working on large department within Telemecanique. A CNC coordinates the motors in a machine to
machines, and could control more of them from one central location. Over the years, accomplish work in a highly precise and repeatable manner. The computer itself is
the company thrived, expanding into all types of electrical and electronic controls. useful in computing mathematical equations that transcribe arcs and motions from
The company had some interesting credos. No plant should have more than 200 drawings to three dimensions. Stated simply, a CNC is to parts manufacture as a word
people at work. No plant should have a clock to punch. Limiting the plant size devel- processor is to documents. Both have the abilities to catalog, produce, and "print out"
oped specialization, expertise, and individual recognition. Without the tyranny of the tangible results.
punch (time) clock, the production worker's self-esteem grew to the exacting stan-
dards of professional commitment. By building factories across France (and later the
world) in small and large towns, the company took advantage of regional variations in 35.1.5 The Market
location costs and selling prices, and reduced the susceptibility to business risks that
plagued the centralized firm. A CNC is better appreciated in terms of the products it produces. One area of specialty
is the lowly and often unseen gear, quietly and surely moving civilization about its
business. There are gears for watches, drills, eggbeaters, and cement mixers, automo-
35.1.3 Unique Strengths tive transmissions, locomotives, and even turbine blades for jet engines and hydro-
electric power generators. A gear is an interesting study in circles, arcs, and tangents.
Dedicated workers continued to modify existing products, miniaturize, and combine Calculating the motions is trigonometrically and numerically intensive. For example,
functions. They also carried these efforts upstream to how they made the product. to cut the circle for the gear, grind the teeth along the radial, allowing for the continu-
Advancements were made in factory automation, assembly lines, transfer lines, and ous rate of change needed along the teeth and make its smoothly fitting mate requires
COMMUNICATION IN AN INTERNATIONALENVIRONMENT 35.5
mathematical and dimensional precision. The CNC is wired to the motors that operate TABLE 35.1 Products by Company and Language
the machine in the same way the brain operates the muscles to move the skeleton.
Country Product Language
The market for machine tools is a lively and diverse one. Machine tools and their
manufacturers are from Germany, Japan, Switzerland, and the United States. Some France CNC French
machine tools fetch a price of $].5 million, run for 30 years, and produce $1.5 million Germany LCD German
in annual revenues. This is certainly not the domain of a thinly capitalized player, nor Italian
Italy Servo motors and drives
one faint of heart. A malfunction from bad design can kill, but smooth operation can
USA Machine English
print money faster than a banana republic. The machines are often unique, one-of-a-
kind, highly engineered products. The producers of machine tools are a maverick USA Software English
bunch, faced with the task of unusual nonrepetitive problems to solve, and a high
degree of experience required. A small miscalculation can set a project back months; a
middle-sized mistake can be fatal.
The translator
Clarity in communication
35.2 INTERNATIONAL DIMENSIONS OF Cultural issues
MANAGING TECHNOLOGY AND PROJECTS
Documentation
The following experiences on a recent project framed my thinking on the subject. We

Technica]
had a virtual monopoly on severa] emerging technologies developed by our interna- Financia]
tiona] subsidiaries. This would be demonstrated at the International Machine Tool Transfers between countries
Show, which was widely attended by affluent buyers. From the back of an envelope in
May to assembly in August and a live functioning exhibition starting September 5th,
life could have been a risky battle of minutes. Schedules were set tightly. One slipup 35.2.2 Languages: Reducing Uncertainty
could jeopardize millions of dollars in ruined machinery, lost customers, and future
business. Sometimes I think that the whole purpose of human existence is to reduce uncertainty.
We wonder and question perhaps without even knowing that these musings follow
very predictable patterns. When we question, we anticipate a menu of simple answers.
35.2.1. Project Scope On the basis of that, we may ask more questions about the consequences of each of
those answers. And finally, we need to know the costs or performance characteristics
The exhibit was a remanufactured Cincinnati lathe, with a twist. A]ong conventional of those choices, in order to rank the answers and pass judgment. Our ability to com-
designs, a machinist manually turned the handwheels along horizontal and lateral axes municate quickly and accurately without distortion helps reduce uncertainties.
to shape the parts. Outfitted with a flat-panel LCD, servo motors, and a CNC, the Regard]ess of nationality, people differ markedly in communication skills within
operator could twist the handwheels, and even feel the tension while cutting into the their own native language. Many do not possess a sophisticated ability to make a
part. The Hat-panel LCD display ergonomically gave operators feedback on the parts request; make that request understood; in turn, understand the reply, modify their
they macbined. Where an operator's skills fell short, the CNC could be used to design request; and then, on the basis of what was heard, congenially formulate an action
the advanced geometries, and then produce quantities using fully optimized high- plan. Subject to the foregoing, they therefore do not differ in their ability to reduce
speed machining techniques. uncertainty. Many such efforts end not in productive inquiry, but in frustration.
The motors and servo drives came from our Italian subsidiary. Powerful like a Advanced education does not seem to help. None of you would be surprised to be told
Ferrari, delivery would take in excess of 8 weeks. The computer numeric control came that our colleges and universities do not turn out very good writers, skilled readers, or
from France. The flat-panel LCD display, the most visible and central ergonomic fea- attentive listeners. Even armed with omnipotent computers and bowed before the
ture of the product, came from Germany. Software development that was assigned to church of latter-day spelling and grammar checkers, the results are pretty scary. While
the United States posed a specific problem. The hardware was not available during the humorous stories and anecdotes about miscommunication abound, comedy is not
software development, test, and debug phases. Additional up-front effort was required financially tolerable in business. A typographic a] error on a work order can mean
to precisely define the variables and control system configuration. This intercountry product built to the wrong specification, time delays, and money wasted. Sloppy writ-
interaction involved close scrutiny of the system's operational parameters. Table 35.1 ing can open vistas of litigation on obligations and performance. Understanding prob-
shows the origin of parts, assemblies, and products. lems, even those without ready answers, is vital. Understanding-who does what to
Against these pressing and immediate requirements, and in direct opposition to any whom, and when-is critical.
apparent progress, stood formidable barriers. The barriers related to
The Second Language. Communication skills in a second language are usually
Language-reducing uncertainty worse. The language skills taught even at the college level are enough to get one
The second language through customs, restaurants, restrooms, and some classic eighteenth-century litera-
35.6 CASE HISTORIES AND STUDIES COMMUNICATION IN AN INTERNATIONAL ENVIRONMENT 35.7
ture but not through street slang and complex negotiations. Unless the person thor- important deadline without so much as an apology. If it is an accepted company norm,
oughly knows basic grammatical rules, it is doubtful that grammatical rules will be there may be little you can do, except schedule your way around it. But a multination-
mastered in another language to truly perceive every nuance, especially in a highly al project needs an agreement on the ground rules. These rules should take into
technical and pressing environment. account the diverse ways of working. In essence, the rules accommodate the idiosyn-
At this point we meet the double standard. People can be highly literate in another crasies of the culture without necessarily submitting to those idiosyncrasies. So, get
language but have such poor pronunciation, or a native accent, that they are reluctant your schedule declared and get it countersigned. Production planning is a poor place
to speak, although they comprehend every word spoken. At the same time, those par- for a hidden agenda.
ticipating in the latest" I 0 easy lessons approach" to a foreign language often exagger- Technical skills, organizational skills, and swift follow-up are vital in dealing with
ate their level of understanding. cultures for whom time is not a series of consecutive moments, but perhaps a spaced-
out trail to another dimension. You also need a sixth sense that detects when some-
The Translator. Ah! you might say, I have the answer, use a translator! They do not thing is amiss. It could be a meeting that went too well, or a memo that is cheerfully
work out well as company slang and tech 'cal jargon are not taught, and again, the acknowledged, or promises made, or amazing product specifications. Often questions
commercial worlds in revolutionary turmc spin around urgent missives and arcane and answers need to be repeated so that every person understands the impact of the
kant. If a translator is not highly technical, the results can be disastrous. Instead of a decision, the price of success, and the penalty for failure.
meeting of the minds, you have the befuddled brainless, one who knows what one
wants to show and tell, and the other knowing full well all the possibilities of what
could be said, but without any technical understanding, what probably should be said. 35.2.5 Documentation
Translators vary in the level of their skills and most certainly their endurance. At a
recent European sales meeting the translator arrived 2 hours late, because of heavy Technical people understand the physics of the project and the quantification of the
traffic. Traffic is horrendous in Paris. In the meantime, one of the European financial specifications, and grasp the nuts and bolts of how things go together. Fortunately,
executives tried to translate, but did not know the product line. When the discussions mathematical disciplines and the related symbologies are taught congruently in
covered company finances, the translation was superb, but as every chart looked the European and American schools. Yet there are very troublesome fixed assumptions
same, nobody paid any attention. Financial details bore engineers, and you, or anyone that people take for granted and part of our communic jons model that are missing or
else, could not make them pay attention. The room was hot, and the speakers, lacking poorly positioned. These differences make the differer ;e between success and failure.
really dynamic presentation skills, took their toll on even the most curious, reducing Chief differences appear in documentation. Europeans like their tables of contents at
the audience to a confused slumber. My favorite moment was when one of the speak- the end. Americans may find this charming, or so objectionable as to be out of the
ers was giving his speech in English and the translator had lost her bearings and was question. Europeans use paper of a different size. Size A4 paper, for instance, will not
rephrasing ever so slightly what he said, in English! I let it go on for a while and then fit in standard filing cabinets-another objection. Finally, the American market has
gave her a coffee break. I could not blame her. been much closer to the significant advances in technical writing pulled along by
Management meetings which on the surface seem straightforward can be highly superb software development. Poorly illustrated technical manuals developed on anti-
cloaked negotiations, employing all sorts of duplicitous strategies to close a deal. The quated publishing systems that are long on hyperbole and short on savoir-faire are just
question arises as to whether the translator functions as a translator or an interpreter. not going to cut it.
Research shows that translators who interpret often inject their own biases. These
occur in technical translation as well as in management communications.
35.2.6 Technicallssues
35.2.3 Clarity in Communications Technical issues to resolve are myriad. Foreign companies may be viewed as having
only a fleeting presence, spotty local distribution, and limited, if any, on-site service.
If you think people's communication skills vary, just test their filing skills. We needed Backup hardware may have to come from thousands of miles away with long delays.
a method that got our message across, was countersigned by someone responsible, and From there, we may encounter inch/metric measurement differences, different volt-
was scheduled for delivery. Put only one subject in a memo, never two or three, as ages, and different current requirements. The software menus and data-collection
people need to be able to integrate your action plans with their ticklers. schemes may not be modified in mission critical applications to the customer's satis-
faction. The software may not be capable of being networked.
35.2.4 Cultural Variables

35.2.7 Financiallssues
Regrettably, if superb communication skills are not enough, the international environ-
ment introduces cultural variables that are difficult to control. The term world class The devil is often in the financial details. Since the bulk of the financial details are
implies universal standards, but few understand them or even know about them. often developed in negotiations, there are very few immutable facts. Payment terms
Things you take for granted and count on are nonexistent or worse. An American may be negotiated backward from a standard American net 30 all the way to 120 days
might say "do or die," start early, work through lunch, stay late, and even reschedule or more as there is no European standard, and they are used to tolerating longer col-
vacation without complaint. A European may start late, take a long lunch, and miss an lection times. A progress payment schedule is advisable with dates, performance crite-
COMMUNICATION IN AN INTERNATIONAL ENVIRONMENT 35.9
concept is clear. You can cross-reference your communiques to your project manage-
ment software, or your Gantt chart, whatever the case may be. In practice we use
Italian and German as well.
Observe the following pointers. Write simply to your international colleagues,
telling them exactly what they must do and by when to meet the project commitments.
It takes a great deal of effort to simplify, but that is the only way. Avoid using cliches,
colloquialisms, humor, vernacular, idioms, professional mumbo jumbo, or anything
vague. Whatever they do not understand, they will try to look up in a dictionary, and
the predictable result is confusion and lost time.
35.3.1 Business Meetings in Virtual Reality
Much has been written about proper conduct in international business meetings. But
what if you do not have to meet? How do you structure protocol? We did not want to
travel anywhere for the project. All we needed was the fax machine; it was preferable
to talking, and certainly to travel. All we needed was a method for getting people to
buy into the project, and an effective method of reminding them that their promises
were tightly scheduled and part of a highly visible project.
35.3.2 The Bulletin Board as the Lingua Franca
While passing bilingual faxes resolves simple problems, we needed to send larger
reports, program listings, graphic files, and so on. Here, we found bulletin-board
software that met our requirements: simplicity, file security, and-best of all-the
ability to use different languages. One unintended but beneficial result was that other
members of the corporation not involved with running the project made helpful sug-
gestions.
35.3.3 Virtual Logistics
Do you think that the best way to win in foreign markets is to source and manufacture
as closely as possible to the customer? We think not. By standardizing communica-
tions, from the global strategic level to the individual, across companies, and through
governmental regulations, a reduction of communication problems can reengineer the
manufacturing process and save time. Communiques from faraway places look imme-
diately familiar. Since the ambiguities have been hashed out, they can be immediately
acted on. By closely managing each link of this supply chain, you could produce the
same tangible results as if all the related elements were right next door.
35.3.4 The Shrinking World
As the world shrinks, work that was previously done at the manufacturing plant can be
now be done more economically en route, subject to successfully resolving the lan-
guage barriers above. It is a pivotal transformation in manufacturing technology.
For example, a manufacturer in Germany can ship a machine carcass by boat to
New York; ship by rail to Rockford, Ill.; add controls, engineering, and software; con-
tinue on by rail to Seattle; and then ship the machine by boat again to Japan. This is
called a sea land-sea bridge. Sea land-sea bridges combined with vastly rapidly
improving airports are rapidly shrinking transit times. Travel times from the Far East
through Seattle, across the states by rail, and overseas to Europe are routinely done at
a price that is a bargain.
Air freight terminals have been renovated to handle large loads expeditiously; 8000
mi and 4000 lb can be routed into a domestic plant on a 48-hour basis as if it were a
simple domestic shipment. There is no reason why you cannot apply just-in-time (JIT)
shipment across borders if you standardize the process of communication.
You should be able to procure parts from Europe and Asia, and assemble the fin-
ished goods here in the United States as efficiently as if the whole operation from fab-
rication to final assembly were taking place in the United States. If you think that the
idea is novel, get familiar with it. Global competition is heating up, and those who fail
to master strong communication skills will soon be left behind. Superb communica-
tion skills will have you adeptly manufacturing en route and navigating the wayward
flows of product to customers taking every advantage of fluctuating currencies and
production efficiencies in the same way that Magellan used the stars.
35.4 SUMMARY
If you think about the way we communicate, much of what we can say and need to
hear benefits from a formalized structure and reciprocal commitment. We have ex-
plored several ways at getting acknowledgments and commitments from our interna-
tional colleagues. By standardizing on communication and commitment, we can
"shrink the world" and shrink cycle time. It is important to observe these ideas as they
are rapidly becoming a competitive standard.
would buy it because there was no reasonable alternative. As technology-based prod-

ucts became more abundant in the 1980s and 1990s, customers became more savvy
and products had to solve more of their needs to gain market acceptance. In parallel,
competitors became more ubiquitous so designs had to really meet the customers'
needs for a sale to be secured. Consequently, in the late 1980s, successful companies
quickly developed techniques to define not only how they would develop and launch
products but also how they would define what customers truly need from products.
Mastering the product definition phase of product development is an emerging
capability. A number of authors have explored the subject of needing to do product
definition well,1.2 but none have outlined the steps necessary to define and screen a
successful product. Here, 14 key steps of product definition will be outlined. These
steps are based on action research conducted at Hewlett-Packard,3-5 General Motors,
General Electric, Motorola, Xerox, and IBM6 in which the product definitions of prod-
ucts that were successful in the marketplace were compared with those of products
that were unsuccessful in the marketplace. Follow-up research conducted by the
Product Development Consulting Firm in Cambridge, Mass. at 43 companies verified
the efficacy of the model. 7
The 14 steps of product definition are
1. Strategic alignment
2. Understanding user and customer needs
3. Competitive analysis
4. Compliance issues
S. Localization
6. Product positioning and value proposition
7. Decision priority list
8. Risk analysis
9. Core competencies
10. Marketing channel and support
11. Strategic dependencies
12. Leadership
13. Resources
14. Project and business plan
From the author's action research and subsequent consulting work with product devel-
opment teams at Hewlett-Packard, successful projects were found to have adequately
researched all 14 of these steps and to have based their subsequent decisions on fact,
not hunches or intuition. This critical differentiation of the methods employed by the
successful versus the unsuccessful teams led to the development of a product defini-
tion model which illustrates the logical cause and effect relationships between each of
the 14 steps (Fig. 36.2). Notably, both successful and unsuccessful teams use a similar
product definition process; the difference between the teams continues to be the con-
sistently higher level of knowledge the successful teams have about each factor prior
to making key project decisions. This points to teams not needing more process train-
ing, but rather more coaching and guidance on adequately completing each of the
product definition factors. This preparation for the product specification, plan, and
financial analysis culminates in the product definition.
The product definition step which most unsuccessful projects have problems with
is understanding user and customer needs. This was noted in three retrospective stud-
PRODUCT DEFINITION 36.5
topic. Once the strategic stage has been set, the team is ready to move to the next set
of "what" factors: "user and customer needs," "competitive analysis," "compliance,"
and "localization." These four factors need to be concurrently researched since infor-
mation from each one will affect the other three. You can think of this as trying to
cooptimize your understanding of this group of steps.
36.1.2 User and Customer Needs
In the author's work, understanding user and customer needs is the most elusive and
most expensive part of the product definition process effort. In the United States
alone, billions of dollars are spent conducting both quantitative and qualitative
research to identify the needs of the marketplace each year, yet as many as half of the
projects initiated either never make it to market or result in a product that is unsuc-
cessful in the market as measured by revenues, profit, net present value, return on
investment, and return on assets. Robert Cooper, in Winning at New Products, 11.12
states that less than 40 percent of North America's investment in new-product devel-
opment yields successful products. What goes wrong? The question that is not
answered is, "What is the fundamental problem that this product needs to solve for
this set of people?" While this question sounds trite, it is truly difficult for many teams
to arrive at a succinct answer. Why do so many teams have difficulty answering this
question? First, there are many places that they can go wrong. A number of the pitfalls
are explored and a number of methods are presented that can be used to answer this
question. In Fig. 36.4, the process of identifying user and customer needs is dia-
grammed.
To begin answering the question, the team must understand which segment of the
marketplace they are targeting their product for. Oftentimes, teams confound segments
and homogenize the needs of many segments. This results in a product definition that
does something for everyone and either does too much for one segment at too high a
price or does not meet the needs of any segment at any price. Just think, if you were
designing laser printers and thought that the corporate user and the sole-proprietor
user were in the same market segment. You then might conclude that having a printer
that could operate on a network and print extremely fast were needs of the whole seg-
ment. Well, we know that the sole proprietor would love the faster speed but is unlike-
ly to need network printing capability. However, we also know that there is less price
sensitivity in the corporate user segment than in the solo user segment. By separating
the segments, we are better able to first understand and identify the specific needs of
the segment and then clarify our understanding of those needs. Another reason for
identifying the segments of the market are that you need to quantify the size and
growth rate of each market segment and the share of that market that both you and
your competitors have.
So, how does one understand the needs of the users and the customers? The
author's favorite starting point is visiting customers. Caution is needed in making cus-
tomer visits; do not just go with a laundry list of questions because the customers will
just answer the questions you ask. The worst question you can ever ask is, "What
would you like for our new product to do?" Customers invariably will tell you about
their most recent problem and suggest a solution that is probably one that a competitor
has already proposed to them. If you base your design on this information, it is fre-
quently outdated prior to market release by a competitor's release of a similarly
designed product.
The best customer visit is one in which a cross-functional team visits the customer
site and moves the meeting out of the conference room and spends time observing or,
even better, performing the customer's work. It is important to understand the whole
meet the users' and customers' needs. However, teams need to be prepared to accept
that the best that one can really hope to get out of a series of customer visits are a
number of ideas of what the product ought to embody to meet the needs of the users
and customers in this segment.
Customer visits are an example of qualitative methods to identify users' and cus-
tomers' needs. This is not statistically valid, but Griffin found that teams need to visit
at least 20 different customers to be able to statistically project their observations. 13 A
couple of caveats are in order: (I) visit customers who both are and are not currently
buying your product and (2) include customers in your sample who are purchasing the
competitors' product or not buying at all. If you choose just one of these four subcate-
gories, you will probably distort the data and will not be able to project your observa-
tions on the other subcategories.
Other methods of qualitative research are available. Among the most popular are
focus groups,14-18 in which a sample population (usually less than 12 people) are
brought together to discuss their needs. The benefits of this method are that the identi-
ty of your company can be left unknown to the interviewees and that you eliminate
bias by having an outside facilitator guiding the discussion. The team is usually able
to observe the focus group from behind a one-way mirror, and the discussion can be
videotaped.
The next step is to develop and validate a hypothetical product definition. To
develop the product definition, the team will usually meet and brainstorm about what
to embody in the new product. This is often difficult because each functional area will
have a different opinion about what they heard from the customers in the qualitative
interviews, and these differences need to be rectified. In this rectification, perfection
should not be strived for because the next step of understanding user and customer
needs is to go out and test the hypotheses that have been developed using quantitative
methods. This is the step in which data is collected about what customers truly prefer
and need as opposed to what they do not prefer or need. There are a variety of ways to
do this, including surveysl9-24 and conjoint analysis.25-29 A favorite is to use a $100
test in which a number of product attributes are listed and the customer is then asked
to assign portions of a $100 budget to each attribute on the list in order of importance
to them. Caution always needs to be taken to ensure that the data is from only one seg-
ment of the marketplace, which can be determined by looking at the standard devia-
tions of the data; a large deviation would provide a hint that there were subtleties in
marketplace preferences that the segmentation did not capture. If this method is used
on a sufficiently large sample size, the preferences and needs of the segment will be
determined. These methods will not be described in detail here as they are covered in
the many references devoted to the subject and by consulting firms that specialize in
select methods. The purpose of this quantitative revisiting of user and customer needs
is to validate the hypothesis that you have developed. Through working with numer-
ous organizations, validation of this sort has been found to shorten the development
cycle because clarity about user and customer priorities exists. To get more informa-
tion on needs, organizations such as the International Society of Business Marketing
are useful to direct you to appropriate sources for methods.
36.1.3 Competitive Analysis
This is the next step of the "whats," and it is important to analyze each of the top three
companies in your product area. The way to select which products and companies are
on this short list is to identify which three companies have the most market share in
your product area; these companies will be called the "giants." One caveat is to also
36.8 CASE HISTORIES AND STUDIES PRODUCT DEFINITION 36.9
look for companies that have significantly higher growth in market share than do any pre loaded software and printer drivers and all one had to do was plug the computer in
of the main competitors and to include them on your list as a "sprite" that may soon be and begin using it. Compared with spending hours installing various software applica-
a market share leader (Fig. 36.4). In the recent past, many people have thought of tions and installing an appropriate printer driver for a personal computer, Apple won
competitive analysis as the process of doing only a product component and manufac- the approval of many customers for the ease with which setup could be done. Once
turing process breakdown. Unfortunately, this is insufficient, and much more needs to again, the project team's goal is to understand what method would be the most satis-
be understood if we are to be able to understand why competition has made the moves factory from the users' and customers' perspectives.
they have and to forecast what moves they will make with future products. The goal of Next, do the users and customers of your product need any special training to use
competitive analysis is to understand the whole set of interactions a customer will that product? Does the customer need to attend classes, is there on-line self-help, or
have with a competitive firm and its product vs. your own firm and your product. This are there manuals which customers need to read themselves? How do customers learn
is a necessary prerequisite to enable your project team to identify each competitor's to use the product?
strategy and what areas your product needs to be strong in and where it can be weak. Once the customers have been trained in the use of the product, next is the step of
Researching this will provide the basis on which to identify what it will take to beat actually using the product. Two aspects of use need to be determined: (I) how easy the
the competition in meeting the needs of the users and the customers. A useful method product is to use and (2) whether the product really meets the customers' and users'
for cataloging this information is a QFD (quality function deployment) chart using the needs and solves their problems and objectives while facilitating productivity or
methods outlined by Hauser in the Harvard Business Review30 and Clausing in his whether the product is difficult to use although it provides useful information.
treatise on total quality development.31 Thoroughly understanding deficiencies in this area is difficult because customers may
Completing competitive analysis thoroughly entails understanding how a customer not be able to articulate their frustrations, but, when they use something that is better,
is initially exposed to a company and its products. Exploring whether the company is they can immediately identify the earlier problems. Using the product includes not
using word of mouth, advertising in journals, magazines, and newspapers, has a toll- only day-to-day use but also the support the customers will need for the product.
free 800 customer service phone number, or is relying on presenting its products Support may include telephone hotlines or on-line help, as well as how customers can
attractively in retail distributors is the initial goal. The critical issue then is how the get repairs done and purchase refills and secure upgrades for the product.
users and the customers like the experience they have with the competitor and to com- Ultimately, how the product will be discarded at the end of its life needs to be
pare the competitor's market share and growth rates with your own to fully determine addressed. In many European countries, obsolescence is now the responsibility of the
whether your marketing communications are effective. Above all, you need to under- original manufacturer, so design for reuse, teardown, and recycling needs to be con-
stand whether the competitor or you offers the best information and experience. If sidered during the product definition. Now that there are an increasing number of
there is room to improve this experience, is there something unique that your project environmental issues which prevent disposal of many subcomponents and hazardous
team can do to improve the experience your firm provides the customer? substances, how the product is discarded is a major concern. This is to assure that the
Second, it is important to understand what is entailed in purchasing the product and end-of-product-life experience is a smooth one for the customer.
how the customer goes about doing this. Does the product have to be ordered through In summary, taking the whole-life approach of looking at the entire set of interac-
a third party, or is there a mode of distribution different from the method your compa- tions that a customer must have with a company to buy, use, and dispose of the prod-
ny is using? An example is how more and more sophisticated products such as com- uct offers the product development team a variety of opportunities to identify the com-
puters, printers, and facsimile (fax) machines are being purchased at warehouse stores petitors' strengths and weaknesses and, thus, opportunities for your project team to
rather than from computer-specialty stores or through company-specific salespeople. differentiate your product. Asking "Do we need to be better, the same, or worse than
If changes such as this affect how customers wish to purchase products similar to the each of the competitor's attributes?" is critical if you are to gain market share and
ones you will be manufacturing, it is critical for you to identify this trend so that your accurately position your product to win market share. It is important to remember that
firm can change their distribution process time for the release of the product. the competition you should measure yourselves against includes not only the direct
One of the most critical areas to investigate about the competitive products is its competitors but also the "sprites," which are often the companies that use alternative
set of attributes and the pricing of their products. The major attributes of your product techniques to solve the customers' problems. An example is in the test and measure-
and of each of the top three competitors' products need to be listed. Next, compare ment industry, in which the giant companies were also building expensive test equip-
these attributes to the customers and users needs and rate them as equal ( = ), plus ment which was used at the end of the manufacturing line to test the quality of the
(+), or minus (-) in their ability to meet these needs. The third step is to assign a product. The project teams repeatedly did not consider companies that were designing
weight to each of these attributes using the customer's and user's perspective as to software simulation tools as competitors until too late, when simulation had displaced
whether these are important (+), neutral (=), or unimportant (-). By comparing the much of the need for testing on the manufacturing line.
scores of the competitors, the users, the customers, and your project, areas of opportu- Additionally, if you look at the "spritely" and "giant" competitors over time, you
nity for your project will emerge. See Fig. 36.4 for an example. can begin to determine what their strategies are. Some major strategy themes include
Next, your team will learn what is it like for the customer to receive and install the the price/performance leader, the budget product, the service provider, and the perfor-
product. For many products, this is a trivial part of the interchange between the cus- mance/quality leader. It is important to identify what all competitors offer that satis-
tomer and the company; however, for others, this can be horrible. The first considera- fies their customers. By tracking the competitive information over several years and
tion is whether or not all the necessary components are delivered concurrently and in a several product generations, you will observe trends of how competitors invest, and, if
timely manner. Next, understanding what is entailed to install the equipment is stud- you augment this with your current intelligence, you will be able to project what
ied. For the late 1980s and early 1990s, Apple Computer Company had a distinct moves the competitors might make in the future.
advantage over the personal computers because their equipment was supplied with It is critical to look for novel methods to secure information about the competitors
36.10 CASE HISTORIES AND STUDIES PRODUCT DEFINITION 36.11
and their products. There is a great deal of information about the competition in prod- tees. This is important to influence the development of the standards to make use of
uct data sheets and brochures, but there are other ways to gain access to how the com- the skills and competencies of your firm rather than those of the competitors' firms.
petition might be moving from other sources. These include securing a clipping ser-
vice that will make copies of all articles that occur in a selection of newspapers,
journals, and magazines. Additionally, having the service keep track of the classified 36.1.5 Localization
("want") ads in the major newspapers and in local newspapers serving the region
where your competitor is located can provide extremely useful information such as Localization not only involves making your product usable by customers in many for-
hiring emphases. Other sources can be attending tradeshows, interviewing past eign countries but also means assuring that your product meets the standards and gov-
employees of the companies, and talking to common customers and vendors. Gaining ernment regulations of the different countries in which you wish to sell. Localizing to
access to using the competitor's equipment can be difficult at times, but leasing the the regional language in both your written and on-line support materials and having
equipment from leasing companies, using the equipment at customer sites, and work- local language selling and support processes is just the beginning of the process.
ing with a friendly distributor can be very helpful in providing access to the products. Additionally, meeting the local compliances and intellectual property practices will be
If worse comes to worse, or the product is inexpensive, or if the information is critical necessary. These protocols can be quite expensive, and you need to ascertain whether
to your success and the product is relatively inexpensive, just purchase the product. the size of a given local market warrants the investment to localize the product or
The final question you need to ask is, "If we want more market share, what do we whether there is a way to design the product so that it meets the needs of multiple
need to do?" Using the methods described above will help you identify your competi- markets with the same design and configuration. Understanding these differences
tor's strategies and what moves you expect them to make in their product offerings. should drive the design process. In one firm that sells laser printers, all written materi-
This is critical if you are to design your product to gain market share. als have no words in them; the communication is done solely with pictures. This strat-
egy eliminated the need for translating the materials into different languages and
resulted in significant savings for the company.
. 36.1.4 Compliance Analysis One simple difference throughout the world is voltage supplies. They vary from
100 to 240 V and from 50 to 60 Hz. Additionally, they require a variety of different
One should think of compliances as unspoken user and customer needs which can plugs to power the product. Just this simple difference can lead to dozens of variations
exclude you from the market if they are not met. The critical issue about compliances in a product configuration or just a few depending on the choices that are made in the
is to understand which compliances govern the sale and use of your product type and design. If you choose to use a universal power supply that self-adjusts to the local
whether they vary from country to country. The international component of compli- power configuration, you will need only four different plug versions. However, if you
ances will be discussed under the section on localization. The basic set of compliances do not choose the universal power supply, you may need dozens of configurations.
that each project group should investigate include the question of intellectual property Additional localization challenges include the management of inventory. As the
and what patents you might need to secure for your product or to secure a license from demand for products varies over both time and region, early considerations of how
another company. Next, you must determine what standards govern the design and use you might design your product architecture so that you can localize the configuration
of the product. For example, are there IEEE standards or governmental standards of the product as late as possible will result in large savings for your organization by
which need to be adhered to? If you are designing disk drives, a common interface is not necessitating inventories tailored for specific regions. In the example of printers,
an SCSI (small-computer-system interface) which is defined by an IEEE standard. In this was achieved by varying only the power cord of the device for any particular
another example of designing an electrocardiograph, passing the Food, Drug and country as there were no written materials in the packaging and the rest of the product
Alcohol Bureau's testing for medical product safety is a precursor to being able to sell design was suitable for use in any part of the world.
that product.
Each of these standards must be identified prior to the design of the product
because usually something needs to be designed into the product to ensure that the 36.1.6 Product Positioning
product meets these standards. Often, customers will not be specifying what standards
they need a product to meet but will be very vocal with their dissatisfaction if the After completion of the first five product definition steps-strategic alignment, user
product does not meet one or more standards. For example, all personal computers are and customer needs, competitive analysis, compliances, and localization-the product
now expected to have both a parallel port and a serial port, that they will use the IEEE positioning of the product needs to be developed. This step marks the completion of
protocol for modems, and that the emissions requirements will meet the minimums set the "what" steps and outlines the point in the product development effort at which the
by over 50 nations. team has identified what their company and the marketplace need from the product to
At a more complex level, there may be some industry-specific testing procedures satisfactorily solve their problems by some. Product positioning is sometimes called a
that your product needs to go through. These might include a self-inflicted standard value chain,32 which is another way of stating how the product solves the target mar-
such as assuring that toys manufactured by your company contain no toxic substances ket segment's problems as well as how the product causes the customer to get more
and cannot be broken into small pieces that might cause choking. Standards of this use out of the product than what the product initially costs. To develop a product posi-
sort are often made to protect a company against liability suits. tioning that will result in a product that is successful in the marketplace, the team
One method to assure that standards work goes smoothly for a company is to invest needs to base this part of the product definition on a thorough understanding of the
some of your company's people time into the participation on these standards commit- answers to the first five steps.
36.2.3 Core Competencies
The next step is to look at the work breakdown and the risks and to identify which risk
areas require the organization to have new core competencies to complete the project.
The competencies can be for any functional area and are not limited to the technology
area as described by Prahalad and Hamel in the Harvard Business Review.44 The rea-
son for listing these at this time is that the project team needs to decide how they will
acquire the competencies. The available techniques are to develop the competency,
buy it from a vendor, or ally with another company or institution who can provide the
competency. If the competency is not currently available, the team needs to decide
whether they should proceed with the whole project or delay the project while they
resolve the issues of acquiring the necessary core competencies and explore alterna-
tive solutions. It is critical to note that misjudging the difficulty of acquiring the nec-
essary core competencies in sufficient time is second only to not understanding the
users' and customers' needs in leading to marketplace failure of products.
36.2.4 Strategic Dependencies
In the strategic dependency step, each project partner is identified. These are the other
divisions in the organization and outside companies, consultants, and organizations
that are supplying something to the project. It is key to think of every portion of the
project effort in identifying the strategic dependencies so that you do not overlook
some critical aspect of the effort. Some of the common dependencies are integrated
circuit and other component suppliers, the distribution companies handling the over-
seas distribution of your product, independent software suppliers that you need to
influence to assure compatibility of your product with theirs, standards committees
which will set guidelines to which your project must adhere, and governmental agen-
cies, to name only a few.
36.2.5 Project Leadership
The leadership of the project needs to be excellent and stable for a project to be suc-
cessful. Most evident is that the people guiding the project must be capable of moti-
vating the rest of the team so that they will enthusiastically work hard during the diffi-
cult periods and will seek the guidance of the leader to address any difficulties that
might be stymieing the progress of the project at all times. In high-technology projects
there are a few traps that management often falls into when choosing a project leader.
The first is to select a person who is technically superior to the rest of the project team
members. This choice is often burdened with difficulties because, often, technically
superior people lack people skills and are not adept at facilitating tradeoffs between
different departments' needs or managing the softer people issues encountered in most
projects. Additional difficulties with using extremely technically talented people are
that they sometimes micromanage the technical details at the expense of the other
function and the business goals of the project. The author's guidance is to choose the
project leader for the ability to listen and to facilitate problem solving. Additional
skills the project leadership will need to have are the abilities to communicate the pro-
ject's problems and successes with their management in written and verbal forms, to
be capable of managing the project schedule and budget, and to be cognizant of when
fining the boundaries and the interaction of the boundaries of the different subcompo-
nents will make the design and the integration processes much simpler.
The staffing levels are next calculated and are based on what you are going to do.
If there are shortages or excesses of people, the scope of the project needs to be com-
mensurately adjusted. Then the financial side of the expenditures is investigated; fund-
ing for the people, staff overhead, and manufacture and sales of the product is calcu-
lated.
Next, the market projections of sales volumes and sales price vs. feature are inte-
grated, and the team calculates a number of financial variables to determine whether
the project is a good investment. Included are net present value (NPV), internal rate of
return (IRR), return on investment (ROI), cash flow (CF), and return on assets (ROA),
to name only a few. Each of these tells you something a little different about how well
or poorly you might do with the investment. The caution that is offered here is that
you should not rely on anyone of these metrics but look at the whole picture and ask
if the investment makes sense for your organization given the objectives you need to
meet.
The final effort in this step is to analyze which, if any, of the possible scenarios
would be best for your organization to invest in. The primary criterion for selection
will be some measure of profitability, as that is the primary objective of most publicly
traded companies. Sometimes, there will be other reasons for pursuing a project even
if it is not profitable. Some commonly cited reasons include making a competitive
move and augmenting an existing product line to have a fuller range of products.
36.3.1 The Product Definition
The "why" step marked the last of the 14 product definition steps, and the product def-
inition phase of the project is best concluded with a review meeting of these 14 steps,
a sharing of the uncertainties and risks the team believes the project will encounter, a
review of the financial forecasts for revenues and expenditures, and a recommendation
on the best path forward. Additionally, it can be very helpful for the team to test their
product definition using the methods outlined in Refs. 50-56. This method was devel-
oped by the author to identify any project weaknesses which could cause delays in the
project or a marketplace failure of the project. By querying every person associated
with the project, from general management to individual contributors from each func-
tional area, on each factor, any weakness that might exist on the project, and any dif-
ferences in opinion about the status of the project will be highlighted. The test mecha-
nism to discover this information is a multiple-choice question on each of the 14 steps.
A score of I means there is a problem; a score of 5 means that the step has been excel-
lently researched and no problems have been encountered. After having each member
of the extended management and team complete the test separately, means and stan-
dard deviations are calculated. Any means less than 3.0 or standard deviation greater
than 1.0 is noted as being indicative of project weaknesses and discrepancies in per-
ception on those individual steps. This has proved to be a satisfactory method to note
product definition problems at several companies.7 The likelihood of the project meet-
ing the business goals is correlated to the scores: a mean of I indicates a low likeli-
hood; a mean of 5, a very high likelihood. For example, for the Hewlett-Packard
Laserjet 2P and 3 Series products, the assessment test score means were all between 4
and 5 and the standard deviations were below I. These products marked the beginning
of Hewlett-Packard's dominance in the laser printer market. Teams need to remember
that the purpose of doing this exercise at the end of the product definition phase is to
highlight where they need to focus to quickly address any project problems, success- 16. Bobby J. Calder, "Focus Groups and the Nature of Qualitative Marketing Research," J.
fully reduce the likelihood of project failure, and maximize the likelihood of market Marketing Research, 14: 353-364, Aug. 1977.
success. If a project has the majority of the mean scores at less than 3, management
17. Abbie Griffin and John R. Hauser, "The Voice of the Customer," Marketing Science, pp.
and the team should hold critical discussions on how to redeploy the project. If there 1-27, Winter, 1993.
are one or two low means, action plans to improve the score are in order, and if all
18. Glen L. Urban, John R. Hauser, and Nikhilesh Dholakia, Essentials of New Product
means are very high, it is unlikely that the project will encounter weaknesses in the
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future. In interpreting the standard deviations, scores greater than 1 require attention.
19. Jerome Kirk, Reliability and Validity in Qualitative Research, Sage, Beverly Hills, Calif.,
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1984.
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Methods, Graduate School of Business, Research Paper 1071, Stanford University, Stanford,
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30. J. R. Hauser and D. Clausing, "The House of Quality," Harvard Business Review, 88(3):
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Management doctoral thesis, Cambridge, Mass., 1989. Imaginative Understanding of User Needs," paper presented at the Sloan Foundation
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15. Richard A. Krueger, Focus Groups: A Practical Guide for Applied Research, Sage, Newbury
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39. Karen Holtzblatt and Hugh Beyer, "Making Customer-Centered Design Work for Teams,"
Communications of the ACM, pp. 93-103, Oct. 1993.
40. Paul Eisenstein, "Your True Color," Family Circle, p. 40, Nov. I, 1994.
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42. Yoji Akao (author and editor in chief), Hinshitsu Tenkai Katsuyo No Jissai (English transla-
tion: QFD: Integrating Customer Requirements into Product Design), translated by Glenn H.
Mazor, Productivity Press, Cambridge, Mass., 1990.
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Problems and Satisfying Customers through QFD, Amacom, New York, 1993.
44. C. K. Prahalad and G. Hamel, "Core Competence of the Corporation," Harvard Business
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New York, 1992.
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47. Michael F. Wolff, "Building Teams-What Works (Sometimes)," Research Technology
Management, Nov.-Dec. 1989, pp. 9-10.
48. Therese R. Welter, "How to Build and Operate a Product Design Team," Industry Week, pp.
35-50, April 16, 1990.
49. Japan Human Relations Association, eds., Kaizen Teian I: Developing Systems for
Continuous Improvement through Employee Suggestions, Productivity Press, Cambridge,
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51. M. J. Rokeach, Beliefs, Attitudes, and Values, Free Press, New York, 1973.
52. Glen Urban, "Preliminary New Product Forecasting," in Marketing Science Institute
Conference Summary: Roles for Research and Models in Improving New Product 37.1 INTRODUCTION
Development, Report 90-120, Dec., 1990, pp. 8-9.
53. Jonathan Gutman, "A Means-End Chain Model Based on Customer Categorization Manufacturers frequently want to know the extent of manufacturing technology use by
Processes," J. Marketing, 46: 60-72, Spring 1982.
competitors or by plants in industries similar to their own. Further, manufacturers
54. Paul Eisenstein, "Your True Color," Family Circle, p. 40, Nov. I, 1994. would like to know the benefits, if any, associated with manufacturing technology use.
55. Gary Levin, "Anthropologists in Adland," Advertising Age, pp. 3, 49, Feb. 2, 1992. For example, manufacturers are keen to know whether productivity and quality are
56. Allan D. Shocker and William G. Hall, "Pretest Market Models: A Critical Evaluation," enhanced by investments in manufacturing technologies. What are the most common
Marketing Science Institute Research Program Special Report, Report 86- I07, Sept. 1986, benefits attributable to manufacturing technology? Unfortunately, the information on
pp.86-107. the subject is very limited. To acquire such information we must develop industry
norms or benchmarks on manufacturing technology use. The process of developing
such norms and benchmarks can be very tedious and expensive.
This study benchmarks the use of 15 more frequently used technologies and bene-
fits associated with them. This large study was made possible by the valuable support
of the National Association of Manufacturers and the National Science Foundation.
The 15 technologies bench marked here are identified in Table 37.1, and each tech-
nology is described in detail in the glossary in Sec. 37.9 (App. 2). Further, Sec. 37.8
(App. I) explains the data collection procedures and validation.
37.1.1 Soft and Hard Technologies
This study has categorized technology on the factory floor into two kinds: hard tech-
nology and soft technology. Hard technologies are hardware- (and associated soft-
ware-) based technologies such as FMS, CAD, and CAM. Soft technologies, on the
37.1
TABLE 37.1 List of Technologies Covered by the Study
Hard technologies investigated

1.* AGVs Automated guided vehicles
2. * Automated inspection
3. CAD Computer-aided design
4. CAM Computer-aided manufacturing, including programmable
automation of single- or multimachine systems
5. CIM Computer-integrated manufacturing; extensive use of computer
hardware and software to link all aspects of a manufacturing
plant from order entry to shipping for real-time planning, sched-
uling, and control; CIM may integrate across plants, states, and
countries
6. * CNC Machines with computerized numerical control
7.* LANs Local area networks
8. FMS Flexible manufacturing systems; automated multimachine sys-
tems linked by an automated materials-handling system
9. Robots All kinds
Soft technologies investigated

10. JIT Just-in-time manufacturing
II. Manufacturing cells See glossary in App. B
12. MRPI Material requirements planning
13. MRP II Manufacturing resource planning
14. SQC Statistical quality control
15.* TQM Total quality management
*Technologies not included in the last study.
other hand, are techniques such as statistical quality control (SQC/SPC), just-in-time
production (JIT), and manufacturing resources planning (MRP II).
37.1.2 Technology Use in Small versus Larger Plants
There is an across-the-board difference in technology usage between small (less than

100 employees) and large plants (] 00 or more employees). It is notable, however, that
small manufacturers use all the technologies investigated in this study. See Table 37.2
for the contrasting characteristics of small and large plants in the sample. Throughout
the report, we provide selected information by plant size.
37.2 MANUFACTURING TECHNOLOGY USE
Figure 37.1 assesses the penetration of manufacturing technologies in all plants sur-
veyed, but does not distinguish between extremely skilled users and others. According
to Fig. 37.1, CAD (84 percent), TQM (72 percent), JIT (71 percent), and CNC (7 I
percent) have the most widespread use in U.S. manufacturing. We did not investigate
TQM and CNC in an earlier study, but on the basis of the widespread use of the tech-
nologies reported in Fig. 37.], their inclusion in this study has been beneficial. CAD is
the most widely used technology (84percent) according to Fig. 37.1, as it was in the
taken by the Foundation for Industrial Modernization (a research arm of the National
Coalition for Advanced Manufacturing) is very timely.
There is a synergistic match between CAD and CNC technologies as the output of
CAD can be used as inputs to CNC and CAM, thereby reducing the setup time to
almost zero. We conclude the following: The use of CAM and CNC is tied to the use of
CAD. The three form a core of hard technologies at the heart of automation on the
factory floor.
Table 37.4 shows that the three soft technologies, JIT, TQM, and SQC, appear
jointly in manufacturing plants. According to the table:
1. More than 80 percent of TQM, SQC, and cell users use JIT (column I).
2. More than 80 percent of JIT, SQC and cell users use TQM (column 2).
Thus, the three soft technologies are frequently used in conjunction. It appears that
cells and SQC are used to implement JIT and TQM. We conclude that the use of soft
technologies (TQM, lIT, cells, and SQC) occurs in a cluster, which is at the heart of
effective and efficient factory operation today.
Other technologies occurring jointly are MRP I and MRP II (65 percent of MRP I
users use MRP II). Thus, MRP II coexists with MRP I in most plants.
37.2.4 Technology Use Since the Last Study
A similar study was conducted by the author in 1990. Out of the 1042 respondents
participating in the current iteration of the study, 216 indicated that they participated
in the first study also. In Fig. 37.10, we see the number of plants reporting the most
significant improvements since the first study. CAD (47 percent) and TQM (36 per-
cent) are the two technologies in which plants report most significant improvements
since the last study. Figure 37.10 is helpful in identifying the technologies in which
plants have experienced the most and the least improvements over the last few years.
We see that a negligible percentage of manufacturers are investing in automated
inspection and AGY.
37.3 BENEFITS OF INVESTMENT IN

TECHNOLOGY
Manufacturing technologies, when selected wisely and used, enable manufacturing

firms to compete better through reduced cost, increased quality, reduced manufactur-
ing lead time, reduced time to market, and increased product variety. In spite of the
many benefits of manufacturing technology use, however, the adoption of manufactur-
ing technologies is often slow for reasons such as poor and confusing equipment justi-
fication methods, poor understanding of the benefits of modern technologies, and/or
lack of capital. This study strives to correct the lack of information about the benefits
attributable to manufacturing technology.
Figure 37.11 reports the claims of respondents concerning benefits attained from
the use of advanced manufacturing technologies. Two out of three respondents report
that reduced cycle time was a direct benefit of their investment in advanced manufac-
turing technologies-far and away the most frequently cited benefit. The overwhelm-
ing frequency with which this benefit is mentioned (66 percent) was unexpected. From
Fig. 37.11, one could conclude that the reduction of cycle time is perhaps one of the
most significant reasons for investing in new technologies. Prior to this study there
was no definite link between technology usage and cycle time reduction. In Fig. 37.11,
BENCHMARKING MANUFACTURING TECHNOLOGY 37.15
investigation is needed to understand this more fully. The average rate for all plants is
4.0 percent; small plants average 3.47 percent, and larger plants average 4.54 percent.
Sales per Employee. According to Fig. 37.15, hard technologies such as AGV, CIM,
robots, and FMS are associated with higher sales per employee, which usually
improves with automation.
Return on Investment. According to Fig. 37.16, extremely skilled use of JIT, MRP
II, and AGV is associated with superior return on investment. The appearance of JIT at
the top of the list should not surprise anyone. It is significant that, while the average
ROI for all plants is 12.99 percent (11.5 percent for small plants and 14.7 percent for
large plants), extremely skilled users of all technologies report much better than aver-
age ROI in every case except automated inspection (12.7%). The evidence here is very
strong that extremely skilled users of all technologies considered here enjoy superior
return on investment.
Figure 37.16 shows how powerful JIT can be; it leads all other technologies on
ROI (17.6 percent). The emergence of JIT as an effective and efficient technology is
notable. Extremely skilled use of JIT is associated with the best performance or close
to the best performance in each of the five performance measures in Figs. 37.12 to
37.16, i.e., JIT is associated with the best performance regardless of the performance
measure used. Therefore, we conclude that JIT use is found in the best performing
firms, or the best performing firms use JIT. Either way, for the practitioner, the con-
clusion is easy to see, use JIT!
37.3.3 Characteristics of Extremely Skilled Users
Direct-Labor Costs. We studied how direct-labor costs as a percent of sales were

affected by the extremely skilled use of various technologies. In soft technology envi-
ronments such as MRP I and II, direct-labor costs are the lowest, at 12.3 percent of
sales (see Fig. 37.17). CAM, automated inspection, robots, and CIM are associated
with very high labor costs as a percent of sales. The high labor costs in these plants
appear to justify the investment in these hard technologies. Alternatively, plants with
higher labor costs may be attracted to these technologies.
Number of Product Lines. According to Fig. 37.18, JIT environments are associated
with the maximum number of product lines (43.8), while automated inspection and
AGV exist in environments with the least number of product lines at 13.4 (about a
third of what JIT environments handle). Given that JIT environments are associated
with high profitability, the large number of product lines seem to be beneficial to JIT
manufacturers; JIT perhaps helps manufacturers to broaden their market base and fur-
ther helps them enter new markets quickly. Alternatively, plants with wider product
lines may be attracted to JIT. The finding concerning AGV and AI is consistent with
what we would expect; that is, they are suitable for high-volume, low-variety manu-
facturing environments.
Making to Stock. We studied how the skilled use of various technologies varied
with make-to-stock production, which is typified by repetitive, large-volume produc-
tion. Figure 37.19 shows that, where SQC is used with extreme skill, average make-to-
stock production as a percentage of total production is the lowest. The opposite is true
where robots are used with extreme skill. This means that extremely skilled use of
robots is found more often in make-to-stock environments (high-volume production)
and extremely skilled use of SQC is more prevalent in make-to-order environments
(low-volume production); this is consistent with expectations because SQC can be
labor-intensive and works well in low-volume environments. In high-volume environ-
ments, some form of automation of the inspection process is called for. Further, manu-
facturers are reporting that extremely skilled use of robots, LAN, and MRP I and II are
more prevalent in make-to-stock environments.
37.4 INVESTMENT DECISIONS
37.4.1 Reasons for Not Investing in Technologies
Manufacturers expressed three reasons for not investing in advanced manufacturing

technologies: (I) irrelevance of the technology; (2) lack of know-how; and (3) lack of
capital. The results are presented in Figs. 37.20 to 37.22.
Not Relevant. According to the Fig. 37.20, specialized hard technologies such as
AGV, FMS, and robots are not relevant to about half the manufacturers; this is under-
standable given factory size, batch size, manufacturing processes used, etc. The find-
ings are consistent with common wisdom.
years for capital recovery, with about 40 percent allowing between 1 and 2 years for
capital recovery. This may be too short a time for recovering investments in manufac-
turing technologies. Only about 18 percent allow more than 3 years for capital recov-
ery. Plants that are entirely U.S.-owned reported a recovery time of 30 months as
opposed to 26.6 months reported by foreign plants (foreign ownership in excess of 50
percent).
It is notable that while 50 percent of small plants allow less than 2 years for recov-
ery, nearly 60 percent of larger plants do so. Further, while 22 percent of small plants
allow 3 to 5 years for capital recovery, only 11 percent of the larger plants do so. This
indicates that smaller plants are unable to recover investments in technology as fast as
larger plants. This may partially explain the less frequent use of manufacturing tech-
nologies in small plants when compared to larger plants.
37.4.3 Sources of Assistance
More than 70 percent of respondents credit their technology vendors and customers
for providing the assistance needed to invest in advanced technologies (Fig. 37.24). At
nearly 43 percent, customers' role in providing assistance to manufacturers in technol-
ogy investment decisions is by far the single most commonly reported source. The rise
of TQM and JlT, which include a heavy dose of supplier development, may explain
part of the finding. This finding also reveals a healthy cooperation among industrial
suppliers and customers.
37.6.2 Respondents
The questionnaires were completed by top management in the manufacturing facilities

participating in this study. As Fig. 37.30 shows, 86 percent of respondents were vice
presidents or higher.
37.6.3 Employees
Figure 37.31 shows the distribution of plants participating in this study by size of
employment. The average plant has 228 employees. Plant employment was used as the
metric for classifying plants as "small" (less than 100 employees) or "large" (100 or
more employees). And, because differences between responses from the two groups
were significant enough, some findings in this report are differentiated by plant size.
37.6.4 Annual Sales
The average annual sales for a plant is $47.2 million. The combined total sales for all
the plants in this study is in excess of $49 billion. The distribution of participants by
annual plant sales is presented in Fig. 37.32. According to the figure, 71 percent of the
respondents have annual sales of less than $20 million, and 91.7 percent have annual
37.6.7 ISO 9000 Certification
The ISO 9000 series is an internationally accepted quality management standard

developed by the International Organization for Standardization (ISO). Figure 37.35
shows that only 4 percent of manufacturers in the industries covered by this study are
already certified in ISO 9000 series. However, a healthy 23 percent (about one-fourth)
are in the process of certification. Only 13 percent are not interested in ISO 9000 cer-
tification. Among small plants, 1 percent are certified, whereas 7.8 percent of larger
plants are certified. While 15.6 percent of the small plants are in the process of certifi-
cation, 33.2 percent of larger plants are in the process of doing so.
37.6.8 Dominant Manufacturing Processes
Figure 37.36 shows that job shops are the most common in the survey sample. This is
explained by the fact that 54 percent of manufacturers employ fewer than 100 employ-
ees (see Fig. 37.3). One-fifth (20.7 percent) of all plants predominantly use manufac-
turing cells. While 13.8 percent of small manufacturers use cells predominantly,
notably 28.2 percent of larger manufacturers do so; that is, larger plants use cells
twice as often as smaller plants. Manufacturing cells provide an important avenue for
capturing cost efficiencies as well as flexibility. [See the glossary in App. 2 (Sec. 37.9)
for a definition of manufacturing cells.]
37.32 CASE HISTORIES AND STUDIES BENCHMARKING MANUFACTURING TECHNOLOGY 37.33
37.7.1 Nature of Plants Studied associated with superior performance, regardless of the performance metric used.
Specifically, extremely skilled users of JIT reported a superior inventory turn at 10
This study benchmarks manufacturing plants, not entire manufacturing firms with (average = 8.04), the second lowest manufacturing lead time at 7.2 weeks, the lowest
multiple plants. We studied plants as opposed to entire companies because technology rejection and rework rate at 2.9 percent (average = 4.00 percent), superior sales per
use practices vary significantly among the various plants of a given company. The employee at $178,000 (average = $133,000), and the best ROl at 17.6 percent (aver-
average characteristics of benchmarked plants are: age 12.99 percent). With these rewards associated with JIT, it is no wonder JIT is used
by nearly 90 percent of those who consider it relevant to their operations.
Total employment is 228 workers.
Plant sales is $47.2 million. Number of Benefits Reported. The average plant reported 3.7 benefits directly
attributable to the use of one or more technologies. More than 85 percent of the plants
Sales per employee is $133,000.
reported one or more benefits attributable to technology use, which also means that 15
Pretax return on investment (ROI) for 3 years is 12.99 percent. percent reported no benefits. About 25 percent of the facilities reported six or more
Average plant has 24 product lines. benefits attributable to technology use. About 3 percent (37 plants) reported 10 or
Inventory turns is 8.04. more benefits attributable to technology use.
The lead time from order to shipping is 7.19 weeks.

Rejection and rework rate is 4.00 percent.
37.7.3 Future Plans to Become Extremely Skilled Users
More than 84 percent of the plants participating in the study have export sales.
TQM, CAD, and JIT, in that order, are the most frequently cited technologies in which
Forty-five percent have some sales to the U.S. Department of Defense.
U.S. manufacturers plan to become extremely skilled users in the next 2 years.
About 30 percent of the respondents use line or flow production.
Nearly 45 percent use job shops.
About 20 percent use manufacturing cells predominantly for production.
37.8 APPENDIX 1: DATA COLLECTION
Over 55 percent of the respondents use small batch production.
The percentage of foreign-owned plants is 3.4. 37.8.1 The Sample
Number of Technologies Used. The average plant uses 7 different technologies; This is a study of individual manufacturing plants, not a study of manufacturing firms.
only 30 plants (about 3 percent) use none of the 15 technologies investigated. A questionnaire was sent to 4453 member firms of the National Association of
Eighteen percent of the plants use 10 or more technologies; the maximum number in Manufacturers (NAM) in the SIC industrial classifications 3400 through 3899 (fol-
use is 14 different technologies. The correlation between the number of technologies lowed by one reminder 3 weeks later, in July 1993).
used and the number of benefits claimed is .49. The moderate correlation means that
the indiscriminate use of several technologies does not translate into benefits. Split Sample. To examine the validity of the study, we developed a split sample.
The average plant is an extremely skilled user of 1.8 technologies, with 63.3 per- After mailing the questionnaire and one reminder, we received 556 usable responses;
cent reporting extreme skill in the use of at least one technology. About 20 percent of this formed the first "half' of the split sample. To increase the responses and to
the plants are extremely skilled in the use of four or more technologies. On the nega- acquire the second "half' of the sample, instead of sending a mere reminder in the
tive side, 37.3 percent of the plants are not extremely skilled in any of the technolo- form of a card, we again sent the entire questionnaire to those firms that did not
gies surveyed. respond to the first mailing. We also followed this with a reminder card. The second
"half' of the sample yielded 565 usable responses. Thus, the total usable response was
556 + 565 = 1121; 25 responses were unusable and 3 responses came after February
37.7.2 Benefits of Technology Use 15, 1994, the cutoff date; the resulting response rate was 25.8 percent. Our estimate
shows that the response from larger plants was much higher.
Most Frequently Cited Benefits. Reduced cycle time, market share growth, progress In Table 37.5, we present the averages for nine major variables from the two sam-
toward zero defects, and ROI are the top four direct benefits of technology use report- ples for comparison. The similarity of the averages is an indication of the lack of sig-
ed by our respondents. The most frequently mentioned direct benefit of technology use nificant bias in the total sample. All subsequent analyses were performed by pooling
was reduced cycle time, cited by 66 percent of respondents. One can infer from the the two split samples into one pooled sample of 1121.
finding that manufacturers are most often investing in manufacturing technologies to
reduce the cycle-time from order to shipping. Distribution by Plant Size (Employment). Table 37.6 compares the distribution of
plants by size in the split samples. The two samples are very similar on the basis of
Benefits of Extremely Skilled Technology Use. Just-in-time manufacturing (JIT) this comparison; no particular bias is evident.
took the top honors as the one technology whose extremely skilled use was unfailingly
TABLE 37.5 Statistics for Split Samples TABLE 37.7 Comparison of the Distribution of Plants by
Employment Size
Sample I Sample 2 Total
Employment, n BOC estimate, % NAM sample, %
Sample size (n) 556 565 1121
Sales, $000,000* 38.4 (n = 487)t 56.4 (n = 465) 47.2 (n = 952) 0-99 71 53.2
Employment* 251.4 (n = 513) 203.5 (n = 502) 227.7 (n = 1015) 100-499 24.1 35.6
Sales per employee, $000 130.5 (n = 484) 136 (n = 460) 133 (n = 944) 500+ 4.9 11.3
Rejection, % 3.92 4.07 4.00
Inventory turns 7.61 8.16 7.89
Cost of goods sold, % of sales 0.609 0.605 0.606 Industry. In Table 37.8 below, we compare the distribution of plants by SIC classifi-
Product lines 22 25 24 cation with the BOC study serving as the reference. Table 37.8 shows that the distribu-
Average lead time, weeks 7.2 7.2 7.2 tion of manufacturing establishments in the United States is roughly comparable to the
Direct labor, hours * 18.31 18.27 18.3 distribution of the respondents to this study with a slight bias toward SIC 34 (metal
*Averages exclude outliers.
fabrication industry) in the NAM sample. This slight skewing toward one industry
tAverages based on the number of firms (n) reporting.
may be due to the slight bias toward larger plants in the NAM sample.
TABLE 37.8 Distribution by Industry

TABLE 37.6 Distribution of Respondents by Size in the Split Samples (Including Outliers and
Miscellaneous Manufacturing) BOC estimate for the USA 1994 NAM
(firms with 20 + employees), % respondents, %
Sample I Sample 2 Total
SIC 34 31.6 42.5
Employment Respondents % Respondents % Respondents % SIC 35 33.2 28.1
SIC 36 16.6 15.7
<49 159 29.18 178 32.60 337 30.89
SIC 37 9.5 8.8
50-99 121 22.20 122 22.34 243 22.27
SIC 38 9.1 4.9
100-499 196 35.96 192 35.16 388 35.56 --
~500 69 12.66 54 9.89 123 11.27 100.1 100
-- -- -- -~ --
Total providing 545 100.0 546 99.99 1091 99.99
employment data
Total responding 556 565 1121
37.8.3 Differences in Response Rates for Small and Large Plants
The last study was directed entirely at larger firms that paid $300 or more in dues to
37.8.2 Data Validation NAM. This time, we contacted all firms in the appropriate SIC classifications without
regard for size or dues. In the last study, we contacted 2015 firms, whereas in this
Size. The industries covered by this study are identical to those covered by a Bureau study, we contacted 4453 firms. That is, 2438 more firms were contacted this time. In
of Census (HOC) study (U.S. Hureau of Census, Manufacturing Technology: Factors columns 3 and 4 of Table 37.9, we show our estimate of small and larger firms con-
Affecting Adoption 1991, AMT/91-2, Current Industrial Reports, Government Printing tacted in the first study and the additional mailing in the second study to small and
Office, Washington, D.C., 1993). The BOC study estimated the total number of plants larger firms. In the table, for the sake of making an estimate of response rates by plant
in the United States with 20 or more employees in 1991 in each industrial classifica- size, we are making an assumption (see note below) that larger plants among the
tion covered by the study. The HOC estimate predates this study by at least 2 years, respondents belong to larger firms contacted by us, and small plants among the
but the changes in the distribution in the national population during the 2 years may respondents belong to small firms contacted by us. Using this assumption, we find in
not be substantial. the last column of Table 37.9 that the response rate for larger plants is nearly 43 per-
Table 37.7 compares the distribution of plants in this study with the distribution of cent and the response rate for smaller plants is nearly 20 percent.
plants in the HOC study on the basis of size (employment). The NAM study is slightly (Note: There is a small chance that some of the small plants participating in the
biased toward larger plants. Yet, the two samples are similar in that plants with 0 to 99 study belong to larger firms. Therefore, the response rate for larger plants in Table
employees are the largest subgroup in both samples, and plants with 550 or more 37.9 may be a slight underestimate. Overall, larger plants are better represented in
employees form the smallest subgroup in both samples. The slight bias toward larger our sample. The chance of larger plants from small firms participating in this study is
plants in the NAM sample is because the HOC sample covered all plants with 20 or either negligible or nil; if a small firm had larger plants, the firm would have been
more employees. Fewer firms with 20 to 50 employees tend to be members of NAM. classified as a larger firm. Throughout this report we mention separate figures for
Yet, the sample is reasonably comparable to the HOC estimate. small and larger plants for the benefit (~f' readers from both groups. Small plants use
technologies less often than do larger plants but small plants do use most technolo-
gies, and therefore it is worth studying technology use and trends in small plants.)
37.9 APPENDIX 2: GLOSSARY OF

MANUFACTURING TECHNOLOGY TERMS*
37.9.1 Automated Guided Vehicles (AGVs)
Automated guided vehicles (AGVs) are unmanned carriers or platforms that are con-
trolled by a central computer that dispatches, tracks, and governs their movements on
guided loops. AGV systems utilize infrared, optical, inertial, embedded wire, or ultra-
sonic methods for guidance. AGVs are useful primarily for materials handling, in
which they deliver inventory from holding to production areas, or between worksta-
tions as a replacement for conventional forklifts and rigid transfer lines. Some AGVs
are used in assembly systems, while others provide production platforms that support
products such as automobiles and engines while work is performed.
37.9.2 Automated Inspection (AI)
Automated inspection (AI) is defined as the automation of one or more steps involved
in the inspection procedure. Automated inspection (AI) takes advantage of highly
advanced sensor technologies to perform inspection functions once performed by
humans (or not performed at all). It can reduce manufacturing lead times and product
cost associated with manual inspection. Further, automated inspection allows for 100
percent inspection to be integrated into the manufacturing process.
37.9.3 Computer-Aided Design (CAD)
Computer-aided design (CAD) is a computer software-hardware combination used in

conjunction with computer graphics to allow engineers and designers to create, draft,
manipulate, and change designs on a computer without the use of conventional draft-
ing. CAD systems allow for tremendous speed, precision, and flexibility over tradi-
tional drafting systems.
37.9.4 Computer-Aided Manufacturing (CAM)
Computer-aided manufacturing (CAM) incorporates the use of computers to control

and monitor several manufacturing elements such as robots, CNC machines, storage
and retrieval systems, and AGVs. CAM implementation is often classified into several
levels. At the lowest level, it includes programmable machines controlled by a central-
ized computer. At the highest level, large-scale systems integration includes control
and supervisory systems.
*These definitions were compiled by Michael Hickman. Graduate Research Assistant at the Thomas Walter
Center under the guidance of the author.
37.9.5 Computer-Integrated Manufacturing (CIM) one another for exchange of information and control. The types of devices that can be
attached to the network include computers, programmable controllers, CNC machines,
Computer-integrated manufacturing (CIM) involves the total integration of all com- robots, data-collection devices, bar-code readers, vision systems, and automated
puter systems in a manufacturing facility; the integration may extend beyond one fac- inspection systems.
tory into multiple manufacturing facilities in one or more countries and into the facili-
ties of vendors and customers. CIM integrates all computer systems that handle
everything from order to shipment of final product. The integration involves account- 37.9.10 Manufacturing Cell (MC)
ing, finance, management, engineering, design, production, manufacturing, and equip-
ment. The idea is to form one large system that connects all activities so that common A manufacturing cell (MC) is composed of a small group of workers and machines in
information is shared on a real-time basis. While the scope of CAM is generally limit- a production flow layout, frequently a V-shaped configuration, to produce a group of
ed to the factory floor, the scope of CIM can extend far beyond the factory floor. similar items called part families in dedicated production areas. Proponents of cellular
manufacturing have claimed several benefits for this type of production system,
including less inventory, less materials handling, improved productivity and quality,
37.9.6 Computer Numerical Control (CNC) Machines improved worker job satisfaction, smoother flow, and improved scheduling and con-
trol. Cells can be used for machining, fabrication, and assembly, as well as combina-
Computer numerical control (CNC) machines are locally programmable machines tions of the three. Cells permit a degree of automation, improved flow, and reduction
with dedicated micro- or minicomputers. CNC provides great flexibility by allowing of direct labor, and provide the vehicle for implementing manufacturing innovations
the machine to be controlled and programmed on the floor by the machine operator. such as FMS and JIT. Flow patterns in cells vary considerably. Some resemble flow
Further, CNC allows machines to be integrated with other complementary technolo- shops, while others are more like job shops. Because manufacturing cells are so adapt-
gies such as CAD, CIM, and CAM. CNC also serves as the building block for flexible able, almost any manufacturer could gainfully use cellular manufacturing.
manufacturing systems.
37.9.11 Materials Requirements Planning (MRP or MRP I)

37.9.7 Flexible Manufacturing System (FMS)
Materials requirements planning (MRP 1) is primarily a scheduling technique, a
Aflexible manufacturing system (FMS) is a group of reprogrammable machines linked method for establishing and maintaining valid due dates or priorities for orders using
by an automated materials-handling system and a central computer. The intent of such bills of material, inventory and order data, and master production schedule informa-
a system is to produce a variety of parts that have similar processing requirements tion as inputs. MRP I has been around since the mid-1960s.
with low setup costs. The typical FMS system is designed around and dedicated to the
manufacture of a family of parts. The FMS is typically designed to run for long peri-
od, with little or no operator attention and fills the need for machining in a batch envi- 37.9.12 Manufacturing Resource Planning (MRP II)
ronment. FMS, unlike the old dedicated production lines, can react quickly to product
and design changes. Manufacturing resource planning (MRP II) is a direct outgrowth and extension of
closed-loop materials requirements planning (MRP I) through the integration of busi-
ness plan, purchase commitment reports, sales objectives, manufacturing capabilities,
37.9.8 Just-in-lime (JIT) Manufacturing and cash-flow constraints. MRP II reports may include dollar value of shipments,
product cost, overhead allocations, inventories, backlogs, cash-flow projection, and
The concept of just-in-time (JIT) manufacturing is a philosophy that requires materials profits.
and goods to arrive "just in time" to be used in production or by the customer.
Embedded in the philosophy of JIT is a "continuous habit of improving" and the
"elimination of wasteful practices." The latter means not only to looking for ways to 37.9.13 Robots
cut cost but also to continually eliminate everything that does not directly contribute
to the company's objectives or add value to the product. One of the most recognizable The Robotics Institute of America defines the industrial robot as "a programmable,
aspects of JIT is the low levels of inventory with which it is associated. In the JIT sys- multifunctional manipulator designed to move material, parts, tools, or specialized
tem, inventory is seen as a necessary evil. devices through various programmed motions for the performance of a variety of
tasks." The basic purpose of the industrial robot is to replace human labor under cer-
tain conditions. The programmable nature of robots provides the flexibility to manu-
37.9.9 Local Area Network (LAN) facture a variety of products. The industrial robot was developed to generate higher
output at a lower cost in situations that require high-repetition, high-precision, large-
Local area networks (LANs) are the backbone of communication systems that connect capacity workloads, and working in hazardous environments (e.g., paint booths, chem-
various devices in a factory to a central control center. The LAN, through the control ical processing, and welding).
center, allows for the various devices connected to the network to communicate with
37.9.14 Statistical Quality/Process Control (SQC/SPC)
Statistical quality or process control (SQC/SPC) applies the laws of probability and
statistical techniques for monitoring and controlling the quality of a process and its
output. SQC/SPC can be used to reduce variability in the process and output quality. It
contributes to the implementation of JlT and TQM.
37.9.15 Total Quality Management (TQM)
Total quality management (TQM) is built on the principle of continuous quality

improvement in manufacturing, as well as in the entire organization. It works well
with frequent feedback of performance measures to various system elements empow-
ered to make changes in their operation such that the system moves closer and closer
to its stated goals, which keep up with customer needs.
38.1 INTRODUCTION
Globalization and technological advancement are transforming the fundamental nature

of competition. Today manufacturers are struggling to define what it means to be
"globaL" Each plant, division, and line of business must understand how it fits into
the whole; each must understand its contribution to competitive advantage. As the var-
ious entities place their pieces within the strategic jigsaw puzzle of global competi-
tion, entirely new forms of manufacturing systems are emerging. Away from stand-
alone electronic technologies, integrated advanced technologies are transforming
centuries-old industrial organizations. Especially within the industrialized nations, the
picture many see is termed "agile manufacturing" (Burgess, 1994; Goldman et aI.,
1995; Goldman and Nagel, 1993; Maskell, 1994; Roth, 1996). Roth and Giffi (1995)
push this vision more broadly toward capabilities-based competition on strategic agili-
ty. Strategic agility is "the ability to produce the right products at the right time at the
right place at the right cost" (Giffi, 1994, p. 6). Accordingly, strategic agility is opera-
tionalized by the set of combinative competitive capabilities-on quality, delivery,
flexibility, and price leadership.
This research shows that world-class manufacturers exhibit more strategic agility
than do their non-world-class counterparts. From a theoretical perspective, the simul-
taneous acquisition of multiple competitive capabilities adds to the firm's "absorptive
capacity" to deploy its operations resources as a source of formidable enterprisewide
advantage. [See Cohen and Levinthal (1990) for a discussion of absorptive capacity
theory in R&D management; also see Kogut and Zander (1992) for a discussion of
combinative capabilities and knowledge.] Roth and Jackson (1995) apply the theory to
capabilities-based competition in service operations. Absorptive capacity represents a
'"The author is most greatful to each of the executives who shared their valuable experiences in the conduct
of the field research, and especially to Mr. Robert Badelt for Norte!'s support of the theory development phase
of this research in 1992-1993, and the Craig Giffi of Oeloitte & Touche Consulting Group for his valuable
insights. An earlier version of theoretical framework was presented at the Executive Forum on Global Business
Rcengineering. CATO Center for Applied Business Research. University of North Carolina at Chapel Hill.
38.1
synthesis of accumulated organizational know-how, technological prowess, and social

values that enables an entity to identify, assimilate, and exploit new knowledge;
hence, there are path dependencies in knowledge accumulation. Simply put, the level
and types of prior knowledge largely determine the rate of new-knowledge assimila-
tion. Thus, it is not coincidental that the world-class group takes a holistic approach to
their operations strategy. The empirical evidence presented here supports the hypothe-
ses that strategic agility is correlated with technological leadership and best manufac-
turing practices.
Absorptive capacity theory requires a fundamentally new and expanded view of
operations-a neo-operations strategy. Neo-operations strategy is defined as a path-
dependent pattern of integration, infrastructural, and structural choices that create
dynamic value-chain processes critical to order winning, qualifying, and keeping.
These processes build combinative capabilities, accelerate the rate of organizational
learning, and leverage knowledge-based competencies for competitive advantage in
the global marketplace. Neo-operations strategy requires an ongoing assessment of
strategic alignment of operations with activities within the firm and along the value
chain. Without question, the conceptualization of neo-operations strategy requires a
revolutionary-not evolutionary-change in executive mindsets and practice. "Under
the mantra of neo-operations strategy, manufacturing (firms) must exploit informa-
tion-intensive, knowledge-based competencies to create a seamless value chain and
competitive capabilities" (Roth and Giffi, 1995, p. 3).
Thus, to complete the strategic jigsaw puzzle, world-class manufacturing firms
have redefined operations strategy because traditional definitions of manufacturing
strategy are woefully incomplete. Neo-operations strategy replaces the logic behind
traditional manufacturing strategy that is oriented toward the shop floor. The tradition-
al logic is functionally defined as the adoption of a portfolio of manufacturing
improvement programs, tools, and activities that coincide with a specific manufactur-
ing task (Adam and Swamidass, 1989; Hayes et a!., 1988; Krajewski and Ritzman,
1993; Skinner, 1978; Schonberger, 1986). Hill (1989) classifies manufacturing tasks
as "order winners" and "order qualifiers." Neo-operations strategy differs from con-
ventional wisdom in seven important ways, as delineated in Table 38.1.
The extant manufacturing strategy literature says nothing about information age
logic; it is rooted in industrial-age wisdom. It says little about boundary-spanning,
such as cross-functional integration. The few exceptions are directed at bifunctional
interfaces such as Hill (1989); Fitzsimmons et al. (1991); Wheelwright and Clark
(1992); Kim et al. (1992); Vickery et al. (1993); and Berry et a!. (1991). Yet, Roth and
Giffi (1994, 1995) have empirically shown that world-class manufacturers have a
broader, dynamic view of manufacturing-one that emphasizes the criticality of
boundary spanning to increase strategic agility. The world-class group consistently
differentiates itself by integrating production processes with other parts of the compa-
ny, with parts of different companies through alliances and partnerships, and with cus-
tomers and suppliers along the value chain. Such boundary spanning provides unique
opportunities for customer value integration (Roth et aI., 1995). For some manufactur-
ers, like Hewlett-Packard, Xerox, GE, or Nortel, the deployment of neo-operations
strategies literally means turning their organizations topsy-turvy along business
process lines that span the global supply chains. One executive interviewed in this
research said, "Manufacturers must now be ready to 'turn on a dime.''' Moreover,
Corbett and Van Wassenhove (1993) question the trade-off logic of traditional manu-
facturing strategy.
In the following pages, a backdrop for neo-operations strategy with an overview of
the macro forces that are intluencing manufacturing firms' strategies and behavior is
given; next, an overview of the evolution of management perspectives establishes the
38.4 CASE HISTORIES AND STUDIES NEO-OPERATIONS STRATEGY 38.5
trajectory of capabilities-based competition. Under the assumptions of absorptive the plethora of emergent technologies and customer information bases also provide
capacity theory, a series of hypotheses are generated around the technological prowess infinite ways of carving up markets.
of world-class manufacturing. Third, this chapter seeks to advance both theory and
practice with a theory of how combinative competitive capabilities are acquired in the
first place (Ferdows and DeMeyer, 1990; Noble, 1995; Noble and Schmenner, 1994; 38.2.2 Age of Customer Choice
Miller and Roth, 1994). Competitive progression theory casts doubts on the tradeoff
model of capability development. The Global Manufacturing Technology and Vision Today's customers want it all! Savvy global customers have high expectation levels-
Project database was used to develop operational indexes as proxies for the constructs and they, too, have better access to product information and databases on which to make
presented here and to test five hypotheses generated from this research (Roth et a!., more informed choices. Consequently, global customers are demanding more uniformity
1993). The chapter concludes with a discussion of the results and future directions. in product quality and service standards around the world. Global service firms can pro-
vide some insights for manufacturers. Take McDonald's, for example. McDonald's glob-
al success is based on its operational ability to simultaneously add "local" content to its
product line, and at the same time, deliver services consistently around the globe.
38.2 DRIVERS OF CHANGE Ironically, however, in the age of customer choice, there are fewer prospects for sus-
tained loyalty. As current and emerging rivals fight fiercely for the same customers, the
customers become more fickle. Consider the continuous jousts among long-distance car-
Why the hubbub about neo-operations strategy? Quite simply: The rapidity of change riers AT&T, MCI, and Sprint and the cola battle raging anew around the world between
has outstripped traditional methods and approaches to manufacturing. Increasingly, Pepsi and Coke with niche players like Snapple nipping at their share.
the world-class pacesetters are "out of the box" thinkers who have succeeded by cat-
alyzing their combinative competitive capabilities to tie production to customer
orders, scrap forecasts, and use production to squeeze out working-capital inventories.
38.2.3 Speed to Market
Globally competitive manufacturers attract, maintain, and grow market share by thor-
oughly "unlearning" old production rules and contextualizing their technological Speed to market is the rallying cry of global manufacturers seeking to reduce their
know-how for competitive advantage. Coming to grips with how their business new-product development cycles (Merrills, 1989; Stalk and Rout, 1974; Giffi et a!.,
processes and product lines synergistically fit together often calls for satisfying global 1990). Estimates ranging from one-third to two-thirds of a firm's annual sales rev-
customers with galloping speed-without packing warehouses. This is the essence of enues are derived from new products developed within the past 2 years. Put another
strategic agility. Obviously, manufacturers cannot negate the key macro forces which way, speed, or lack of it, may account for up to two-thirds of a company's profits or
are fundamentally driving change and altering the basis of global competition: virtual losses. On the darker side, processes that enable rapid new product introduction also
markets, savvy customers, speed to market, technological choice, and global informa- increase product proliferation and process complexity. Research and development,
tion availability. product design, manufacture, distribution, and servicing must be managed using glob-
ally distributed assets and resources-whether owned or outsourced. No part of a
global business remains unscathed with heightened speed-to-market goals.
38.2.1 "Virtual" Markets
Global markets are seemingly "virtual." Globalization is causing markets to continual- 38.2.4 Myriad Technological Choices
ly change and swap boundaries, niches, and individual customers. Virtual markets and
customers are significantly impacting operations strategies. On a regional basis, The array of technological choices available today is exploding exponentially. New
emerging markets in Eastern Europe, China, South America, and Southeast Asia are manufacturing technologies such as CAD/CAM, FMS, and CIM are changing the
stressing localized capacity development to meet needs. In other global regions, coun- rules of production and extending the bounds of operations capacity (Goldhar and
tervailing forces seek to "lock" out competition. Consider trade barriers posed by Jelinek, 1985; Goldhar et a!., 1991; Maskell, 1994). The richness of the options in an
Japan's policies, NAFTA, and the European Common Market. Taking an industry integrated resource planning hierarchy influences how goods are being designed and
slice, the retail giants like Wal-Mart and K-Mart, the increasing number of consumers produced (Gray et a!., 1993). Moreover, technological advancement is reshaping prod-
who are entering purchasing cooperatives, and those who are buying from mail order uct definitions. The so-called strategic bill of products now includes both physical
and electronic catalogs are fundamentally altering the suppliers' order fulfillment goods and intangibles, such as value-added services and information (Giffi et a!.,
processes from purchasing to manufacturing to distribution to after-sales services. 1990). Estimates suggest that as much as 80 percent of the U.S. $6 trillion GNP (gross
Even industrial markets are in constant flux. For example, hospitals are forming huge national product) is information-based. While the array of technological choices are
purchasing blocks; global firms are consolidating purchases worldwide under blanket expanding at lightning speed, the ability of individuals, organizations, and even soci-
orders; and more firms, like Baxter and Johnson and Johnson or IBM and Apple, are ety at large to exploit those options cannot keep pace with the rate of technological
simultaneously suppliers and competitors-depending on products, global region, and development. As technological advancement encroaches on every aspect of daily
customers. Like amoebas engulfing floating prey in water droplets, markets will work, the technical skills and creativity of people and their leaders are the limiting
change forms and shapes as long as it is opportunistic to do so. From the supplier side, resources-not capital and equipment (Roth and Marucheck, 1994).
38.2.5 Information as a Global Commodity
Advancements in electronics and telecommunications make information a global com-

modity. Global access to the information superhighway, Internet, is a prime example.
Access to the Internet and other on-line services (e.g., America On-line, Prodigy,
Netscape, Compuserve, and Gopher) provides new sources of value-added. Computer-
based commerce speeds the order fulfillment process to gather orders electronically
and simultaneously drive EDI purchase orders and enterprise scheduling of resources
to fulfill them, anywhere in the world, 24 hours per day. Even more importantly, it
provides the firm with unprecedented market and process information. Those firms
that can assimilate, translate, and organize bits of information into products and ser-
vices faster and better than the competition will have a distinct advantage.
In summary, each of the aforementioned drivers of change is creating heightened
enterprisewide process complexity and confusion. Coping mechanisms for managing
parts of the value-chain network must extend beyond the realm of the traditional man-
ufacturing function-and even beyond the firm in some cases. Prevailing macro forces
are causing leading manufacturers to innovate and reinvent themselves. Anecdotal evi-
dence suggests successful coping mechanisms are melting away icy bureaucracies.
Product simplification and process reengineering are two widely touted approaches.
By breaking down the walls between product design and manufacturing, for example,
leading firms are "designing simpler products, making them in fewer permutations,
and with fewer parts, and getting them to market with fewer delays" (Henkoff, 1995,
p. 136). In other cases, competitors, like the U.S. "big three" automakers, are cooper-
ating by sharing designs for electrical connectors for efficiency. Automotive engineers
at the big three have concluded that design complexities on electrical gadgets make
little sense, cost too much, and create too many opportunities for things to go wrong.
As leading manufacturers struggle to make sense out of the new competitive
dynamics, adding to their turmoil is the conclusion that both the magnitude and the
rate of change in the macro forces have hastened the pace at which competitive capa-
FIGURE 38.1 Evolving management perspectives: neo-operations view of capabilities-based competition.
bilities must be improved. Even though a vast number of organizational experiments
are under way, it is inefficient and even risky for executives to misunderstand what
lies ahead. Operations decisions made today impact tomorrow's competitive capabili- you must see things differently." To see operations differently, I propose a juxtaposi-
ties (Hirasawa et aI., 1995). A macro view of the neo-operations strategy provides a tioning of the macro economic view of the industrial divides into a meta view of capa-
trajectory of capabilities-based competitiveness. bilities-based competition. Coincident with each industrial divide are strategic manu-
facturing epochs-those strategic moments in time where top management
perspectives of what competitive capabilities are required to compete dramatically
shift. Given that the manufacturing pacesetters are the arbiters of the near future, Fig.
38.3 STRATEGIC MANUFACTURING EPOCHS 38.1 represents a strategic map of their evolutionary trajectory. Notably, many of those
outstanding performers, dubbed as "world class," are approaching the twenty-first
A first-order questions is: What are the strategic directions of manufacturing paceset- century practices today. Each strategic epoch requires manufacturing executives to see
trs? Second, what are the best paths for getting there? In this section, based on 10 and do things differently from the past to achieve stellar performance; each dramati-
years of intensive field and systematic survey research on world-class organizations, I cally changes management perspectives along three important dimensions:
propose a "strategic map" that outlines the broad contours of the competitive terrain;
in the next section, a path is indicated. Business historians speak of the great industrial Competitive priorities capture how capabilities-based competition will evolve.
divides as punctuated periods where radical changes in technology occur within orga- Process performance criteria indicate how operations should be evaluated.
nizations. Without question, manufacturing firms are in the midst of the next major Sources of value-added signify where the greatest paybacks from investments
divide as society moves from the electromechanical industrial age to the digital infor- reside.
mation age. One only has to look back to the sweeping economic transformations at
the last turn of the century when society plowed out of the agrarian age to see the These dimensions are intimately bound up with the firm's operations strategies, of
impact of a major technological discontinuity. The past merely hints at the revolution- which people, R&D, markets, products, and process and information technologies are
ary upheavals. It says little about what challenges and opportunities the information critically linked. Herein lies the problem. To the extent to which it is possible to move
age brings. seamlessly between epochs, executives must orchestrate requisite investments in peo-
Paul Allaire, Chairman and CEO of Xerox, once said, "To do things differently, ple and technology today to prepare for tomorrow. The strategic map points to where
in the organization investments will typically garner the greatest strategic paybacks. by mass markets at affordable prices was the primary manufacturing objective. Fueled
For example, time-based competition generally requires process reengineering at the by the post-World War II economy, the power wielded by its military industrial com-
business-unit level, whereas for strategic agility, innovations are required at the enter- plex, and little global competition, the dominant U.S. manufacturing strategies typically
prise level. Each epoch calls for increasingly higher levels of process integration and followed product life-cycle theory which gave rise to the product-process matrix (Hayes
coordination. Forging ahead mandates fundamentally new competitive capabilities and Wheelwright, 1984). Problem solving was linear and mechanistic. Managers
that I argue in the next section are built cumulatively, and hence, are path-dependent believed they could derive significant operational efficiencies by increasing production
[see Hirasawa et al. (1995) for a detailed discussion of path dependencies in manufac- volumes. Consequently, by adopting dedicated technologies and realizing the learning
turing operations]. curve phenomena, they could dramatically lower unit costs. These manufacturing strate-
Unfortunately, the exact timing of the beginning of a new epoch for any particular gies myopically focused the first-order benefits of production: machine utilization, pro-
industry is unknown. In contrast, the end of an epoch is typically represented by a dis- ductivity of direct labor (the operators of electromechanical devices), and inventory
cernible convergence of underlying technological bases, know-how, and industry cul- savings. The mass-production theme reflects the Western industrial heritage.
tures-the bundle of values, assumptions, and beliefs that delimit the bounds of man-
agement practices. Smaller firms have been observed either to become entrenched in
an epoch or to seemingly leap-frog epochs (Fiegenbaum and Karnani 1994). As 38.3.2 Beyond Mass Production
expected from population ecology theory, small firms are at the greatest risk. Those
that grow typically fall back into the industry norms. Epochal change is marked by During the 1970s and 1980s, the Toyota Motor Company, now a business legend, pio-
confusion about how best to invest resources. Products and processes become quickly neered a new manufacturing perspective. Toyota's "lean production" system changed
obsolete, and niche competitors nip on the firm's heels. There are also discontinuities the strategic directions of manufacturing (Womack et aI., 1991). Using a highly
in practice as firms "experiment" with alternative modes of technology and organiza- skilled, flexible workforce, Toyota, and subsequently other leading practitioners,
tional structures. One only has to consider the pervasive renewed interest in integrat- changed production arithmetic and shattered the sacrosanct walls between manufactur-
ing new-product development and manufacturing process designs, redeploying and ing direct and indirect labor. Lean production capitalized on continuous flows of small
upgrading worker skills, reconfiguring distribution systems, adopting advanced lots by minimizing changeover costs and managing bottleneck operations, and em-
process and information technologies, and benchmarking best practices. ployed the principles of continuous improvement (kaizen) to reduce waste.
Each new epoch unglues the shared values and shatters the technological traditions Throughput improvement programs, such as just-in-time (JIT) production, simultane-
that preceded it, and, most importantly, each unravels the basis of industry competi- ously attacked manufacturing overhead, speeded up delivery processes, and offered
tion. There is frequently a false sense of comfort by taking shelter in the past-or even customers better value
denial. Dysfunctional management behavior abounds (Roth, 1996). Well-rehearsed Continuous improvement and quick response to customers became the criteria for
approaches that built executives in the past won't succeed in the future. Using the time-based competition in manufacturing. In North America, many companies like
metaphor, putting a dinosaur on a crash diet to reengineer it, won't save it! In Northern Telecom developed deliberate manufacturing strategies around the construct
Darwinian terms-it's the wrong species! No wonder that over 70 percent of reengi- of "time-based competition" (Merrills, 1989). While lean production was relegated
neering projects fail. Only taking costs out of a dying operation won't bring in new primarily to happenings on the factory floor, value-chain activities that impacted con-
customers, but it will make products a commodity faster. Killing off the organization's tinuous flows began to spill over into broader-based business unit practices. Moreover,
knowledge base with unscrupulous across-the-board downsizing is the equivalent of the role of direct workers expanded from carrying out time-consuming, routine tasks
an organizational lobotomy that will only hasten its demise. Shark competitors will to tackling the more challenging activities of redesigning work and work processes.
sweep good people up and use them to penetrate the most vulnerable spots. Worker goals now emulated those of traditional knowledge workers: eliminated quali-
Examination of the evolutionary trajectory of competitive priorities indicates how ty defects, improved delivery performance and customer service, and lowered costs.
operations strategies were reinvented during each epoch to meet the gaps. Best practices of high-performance, cross-functional work teams and total employee
involvement seized top executive attention, as shifts away from localized information
systems and toward more integrated systems. At the same time, employee empower-
38.3.1 The Industrial Age Heritage ment created knee-jerk reactions and generated significant tensions in traditional man-
ufacturing organizations.
Prior to the industrial revolution, production was based on individual skills-those of These strategic movements from craft production to mass production to lean pro-
artisans and domestics (Piore and Sabel, 1984). In the craft epoch (not shown on Fig. duction were accompanied by changing definitions of competitive priorities. With
38.1), physical product attributes were highly variable; no two products were exactly each epoch, the competitive ante was ratcheted up. Product quality, originally defined
alike, and many goods and services were in short supply. The modern factory system as "buyer beware" in the craft epoch, evolved total conformance to customer specifi-
was introduced by Adam Smith in The Wealth of Nations. Smith's conceptualization of cations. Xerox's quality leadership or Motorola's "six sigma" (6a) quality, Japanese
the division of labor seeded the mass-production epoch. The massive business trans- fJokeyokes (fail-safing processes), and robust product designs are examples.
formation to the industrial age was not fully realized, however, until the beginning of Manufacturers are recognizing that customers demand "best" value; however, the bar
the twentieth century in North America. Frederick Taylor formalized the principles of is continually raised for what is deemed "best." For example, value has evolved from
"scientific management," and Henry Ford and his engineers put the stake into the sheer "availability" in the craft epoch to combined conformance, reliability, perfor-
ground with the production of the Model- T. mance, features, and moderate price in the lean production epoch. In the 1980s,
Mass production symbolized the dominant management philosophy during the Toyota, for instance, introduced cars with more features than their U.S. counterparts
majority of the industrial age. Producing large volumes of standard products demanded offered in the same price brackets; the same was true for GE Motors' business.
Value-chain relationships have also evolved. Characteristic of the mass-production CIM, but few have been truly successful in their attempts to fully automate the shop
epoch are cut-throat purchasing tactics, large supplier bases, antagonistic relation- floor and link it to other functions in the organization (Giffi et aI., 1990; Roth, 1986;
ships, and rock-bottom pricing. GM's infamous Lopez legacy is an exemplar. Roth et aI., 1993). Under the assumption that outstanding business performance is
Axiomatic to lean production are cross-firm cooperation and strategic alliances with enhanced by economies of scope and integration, experience with multiple advanced
suppliers. Lean production brought fewer suppliers accompanied by more "hard technologies is a necessary, but not sufficient, condition of superior performance. This
wiring" in supplier-manufacturer relationships. Suppliers won orders by delivering the leads to the following hypothesis:
right quality, on time; cost became an "order qualifier" (Giffi et aI., 1990). Leanness
in manufacturing, too, has proved insufficient to keep pace with evolving global mar-
HI: World-class manufacturers have more experience with multiple advanced manu-
kets and technological forces (Stewart, 1992). facturing technologies, including integrating and information technologies, in
An industry-led group is advancing the next generation of manufacturing under the contrast to their non-world-class counterparts, ceteris paribus.
aegis of "agile manufacturing" (lacocca Institute, 1991; Goldman et aI., 1995). Agile
manufacturing is accompanied by new paradigms from scale to scope, from hardware
to integrating software, from stand-alone production to integrated manufacturing tech- The second assumption is that necessary prerequisites for technological advance-
nologies, from supply-chain information systems to virtual value-chain relationships ment toward strategic agility are combinative "hard," engineering-based sciences and
among customers and suppliers, and from a continuous improvement to radical "soft," social sciences. This is radically different from the separation of "craft" and
redesign of business unit processes. If these industry leaders are correct, then at the "science," as exemplified by job shop and mass-production manufacturing, respective-
dawn of the agile manufacturing epoch, the neo-operations strategies of world-class ly. Experimentation, statistical process control, expert systems controls, process simu-
manufacturers will leverage advanced technologies and best practices toward broader, lation, computer modeling, global task coordination via satellite communications and
enterprisewide agility. The goal of customization, which is the mass production of wide area and local PC networks, and advanced materials science are commonplace in
customized goods and services (Davis, 1987; Pine, 1993), will prioritize mass person- the best manufacturing entities. Equally important, but less frequently explored, are
alization of products and services. the social systems designed to exercise the creative possibilities afforded by scientific
knowledge and technology (Leonard-Barton, 1995; Galbraith et aI., 1993). The "new"
combinative sciences behind neo-operations require executives to also debunk
38.3.3 Propositions on World-Class Manufacturing Tayloristic notions of functional "separatism" (Roth, 1996, to appear). As operations
becomes an integrated part of enterprisewide global processes, greater proportions of
Manufacturing's radical transformation from the industrial age to the information age manufacturing work will be spent on knowledge work, especially communication and
is perhaps no more apparent than in its evolving technology adoption. As a component information handling (Roth and Marucheck, 1994; Badelt and Roth, 1995). Designing
of neo-operations strategy, here we explore three issues concerning the deployment of agile global business processes is more complex than simulating total product design
advanced manufacturing technologies by world-class manufacturers. For semantic and processes of manufacturers with supercomputers. Ethnographers and other social
clarity, manufacturing technology is defined here as hardware, physical equipment, scientists are being deployed by companies like Xerox to obtain extraordinarily
software, tools, techniques, and methods of production or making which extend detailed understandings of the fabric of the firm's tightly interwoven sociotechnical
human capabilities (Schon, 1967). More simply, it is a "physical structure or knowl- systems (Seely-Brown, 1993).
edge embodied in an artifact (software, hardware, methodology) that aids in accom- To leverage combinative hard and soft sciences, managers must know more than
plishing a task" (Leonard-Barton, 1990, p. 3). how each individual part of the system performs in isolation but how the parts interact
Technological advancement creates opportunities for economies of scope. synergistically as a whole. Uncovering and recognizing these integrating patterns is
Economies of scope "exists when the total cost of production given a quantity of two important to extrapolating a portfolio of management choices. Consider the traditional
or more products in one facility is less than or equal to the total costs of producing the "over the wall" transfer from engineering to manufacturing. Prototypes worked in the
same quantity of those products in a set of facilities each of which is dedicated to a laboratory, but not in full production. Today, systems thinking has bolstered the appli-
single product" (Noori and Radford, 1995, p. 264). In practice, this indicates that a cation of simultaneous or concurrent engineering (Giffi et aI., 1990; Wheelwright and
high degree of process flexibility is required to produce more variety, faster, at similar Clark, 1992; Leonard-Barton, 1995). This systems approach is quite different from the
quality and costs. With the appropriate infrastructure, Goldhar et al. (1991) suggest single-faceted, slice-and-dice approach of mass production. Moreover, top manage-
that integrating flexible production and information technologies can translate into ment must always be mindful that each part of the system works in conjunction with
fundamentally different product designs, production methods, and business processes. all others. In this research, I assume that best practices are a reasonable proxy for the
Flexible processes, especially software-driven, computer-integrated systems, afford application of the state of the art in the social sciences in manufacturing. Best prac-
economies oj'integration (Noori, 1990; Noori and Radford, 1995). "Economies of tices applies to the infrastructure, including development of employees as information
integration refers to the simultaneous presence of economies of scale and economies processors, decision makers, and facilitators; integrated manufacturing strategies;
of scope" (Noori and Radford, 1995, p. 264). "Intelligent" integrated production- cross-functional teams, and so on. Lack of attention to the whole can be more lethal
including flexible computer-numerically controlled (CNC) machine tool centers, robot than any individual failure. Thus I hypothesize:
assemblers and materials handlers, and expert-system diagnostics and process control
software-are the hallmark of modern computer-integrated manufacturing (CIM) sys-
H2: World-class manufacturers are more likely to combine best practices with the
tems. application of advanced technologies than their non-world-class counterparts,
For more than two decades, however, manufacturers have been struggling with ceteris paribus.
Third, customer requirements for increased value-added will catapult agile manu- selves into "virtual communities of practice" in order to move seamlessly between
facturing into an epoch of strategic agility, which I propose is necessary to satisfy projects and tasks. More formally:
knowledge-era customers. "Mass personalization"-the ability to discover each cus-
tomer's unique needs and then deliver them beyond their expectations-must extend
H3: World-class manufacturers have higher levels of technological leadership than
beyond the adoption of advanced technologies, per se. Roth and Jackson (1995) their non-world-class counterparts, ceteris paribus.
empirically show that a firm's absorptive capacity is limited by the technological com-
petencies of employees. Thus, the term technological leadership is applied to encom-
pass the entities' overall level of technologically competent knowledge workers, state-
of-the-art manufacturing processes, organizational knowledge, and unique process 38.4 COMPETITIVE PROGRESSION THEORY
capabilities. Technological leadership produces economies of knowledge. "Economies
of knowledge means that the firm is able to use its business acumen, combined with
As strategic thinkers, executives know that they must first have a clear understanding
skilled people and experience with advanced technologies, to create an organization
of factors critical to success-those that will win orders to grow the business and that
that consistently identifies, assimilates, and exploits new knowledge more effectively
will retain customers to sustain the business in an increasingly turbulent global mar-
and efficiently than the competition" (Roth, 1996, p. 30). Generative organizational
ketplace. Critical success factors comprise the manufacturer's current portfolio of
learning and know-how are created by enhancing people skills with the application of
competitive capabilities and those requisite capabilities prioritized for meeting the
advanced process and information technologies. Economies of knowledge enable new
competition in the future. Understanding how capabilities are acquired most effective-
blendings of integration, infrastructure, and structure to generate entirely new business
ly and efficiently becomes a first order question. Stemming from the Japan 2000
economics. "The ultimate logic is that each employee is potentially a business" (Davis
Research Project, Jinicho Nakane first proposed that building manufacturing capabili-
and Davidson, 1991). Notably, technological leaders define the rules of competition;
ties must follow a specific sequence, regardless of what competitive priorities were
they are not bound by the rigid, hard-wired facilities, technologies, rules, and loca-
planned. Nakane (1986) rationalized distinctions between competitive priorities and
tions that belong to the industrial age. New questions arise, however, concerning how
capabilities like this: "In general, if some companies want to offer 'flexibility' as a
to organize manufacturing, where to locate production and control, and what technolo-
competitive priority, it is necessary that at least they have already qualified for a min-
gies should be used under which circumstances.
imum level of abilities on quality, dependability, and cost improvement. If they have
Clearly, technological leadership extends operations beyond the manufacturing
not such ability, they get a chaos condition and end tragically." Ferdows and De
function toward synergistic, enterprisewide processes. Many of the basic ideas and
Meyer (1990) subsequently reported the empirical observations that generic competi-
skills developed for agile manufacturing can be expanded in moving the firm toward
tive capabilities seemed to accumulate in an orderly fashion from quality to delivery
strategic agility. Strategic agility represents the metamorphosis of the production
to flexibility to cost. They used the metaphor of a sandcone to explain a phenomena
metaphor from that of a mechanistic, "working" machine to that of "The Knowledge
they observed in their European sample of manufacturers. Later in my own empirical
FactoryTM" -an organic, learning organization that produces knowledge as a key by-
research with various coauthors, I repeatedly observed this "sandcone" effect in
product (Roth et aI., 1994). As operations evolve from physical production of tangible
aggregate U.S. samples of manufacturers, cross-sectionally, and over time (Roth and
goods to the manufacture of invisible assets-service, knowledge, and ideas-the new
Miller, 1992; Roth and Giffi, 1994) and within various industries including the auto-
work is largely cognitive, organic, and virtual. The term cognitive suggests that supe-
motive (Roth and Marucheck, 1992), electronics (Roth and Chapman, 1993), and ser-
rior people skills and organizational knowledge are limiting resources, as opposed to
vices (Roth, 1994).
capital and equipment; organic means that operations is constantly changing and
Prior empirical research describing the "sandcone" effect was not a theory, per se,
growing; and virtual implies that work can take place anywhere at any time.
but rather a series of observations taken at different points in time over different sam-
Technological leadership stresses intelligent connectiveness of invisible assets, such
ples. These observations lay the foundation for a competing theory; Le., the competi-
are the marrying of communities of practices and natural workgroups with intelligent
tive progression theory of knowledge-based competencies. Recall that strategic agility
support and control systems.
is operationally defined by the simultaneous accumulation of multiple competitive
Knowledge workers, including managers, engineers, technicians, and workers who
capabilities (see also Fig. 38.2). This new theory posits:
are technically equipped to skillfully maneuver the organization in the knowledge era
must adeptly use increasingly powerful, versatile, and user-friendly advanced tech-
nologies to enhance their cognitive productivity. Thus, finding ways to leverage Sustainable combinative competitive capabilities accumulate in a sequential progres-
knowledge workers such as the development of communities of practice is of para- sion forward-from quality to delivery to flexibility to price leadership-over an innova-
mount importance for strategic agility. Communities of practices are the formal or tion cycle, leading to strategic agility. Despite any intended generic competitive priorities
to the contrary, higher level organizational knowledge-based competencies are required to
informal workgroups who get the work done (Seely-Brown, 1993). Take, for instance,
move efficiently between successive stages within a cycle; and that over successive inno-
Oticon, a Danish manufacturer of hearing aids. Otic on has recreated its business to vation cycles, increasingly higher levels of combinative capabilities are attained by re-
create strategic agility (LaBarre, 1994). Lars Kolind, Oticon's CEO, envisions the peating the progression. Because innovation cycles are shortening due to the rapidity of
relationships among value-chain networks to create his vision of a holistic, "organic" technological progress and globalization, other sequences of generic capability-seeking
business. Oticon's knowledge workers bring "clusters" of skills to the job. They bring behaviors produce system entropy, forcing firms either to recycle back to acquire first
the intelligence that uniquely integrates the new tools of production-computers, order capabilities (e.g., quality or delivery) or to make capability trade-offs that are less
telecommunications, and automated systems; and they dynamically reconfigure them- endurable over the long run.
NEO-OPERATIONS STRATEGY 38.15
dence constraints and sequencing observed in the progression. Absorptive capacity

represents a synthesis of organizational know-how, technological prowess, and social
values that enable the firm to identify, assimilate, and exploit new knowledge. Over
the past decade, I have observed literally hundreds of manufacturing facilities and
practices in action. I noticed that as manufacturers moved through each successive
stage in the progression, the proverbial "bar" was raised. Managers needed to tackle
increasingly greater process compexities and higher level organizational obstacles
along the way. These hurdles took a multiplicity of forms: technological constraints,
deficiencies in people skills, bureaucracy, communications, general management abili-
ties, and/or other types of organizational slack. Because forward progression necessi-
tates passing more stringent hurdles, prior manufacturing process choices may inhibit
progress.
Extrapolating from absorptive capacity, organizational knowledge is path dependent
on the level of prior accumulated knowledge. Theoretically speaking, increasingly high-
er levels of capabilities translate into requirements for heightened knowledge-based
competencies. Consider the following: Each innovation cycle coincides with spanning a
tree of processes, wherein the relative organizational knowledge required for process
improvements branch outward from the site/function level (Q) to the supplier/customer
distribution system processes (D), to crossing functions and business units (F), and
finally to enterprise processes that span the global value network (PL). Thus, the prece-
dence constraints can be gleaned from the perspective of rapidly expanding process
complexities. The following further illustrates these path dependencies.
Two knowledge-based competencies explain the observed competivive progres-

sion. First, is what I call, the laws of operations physics; the second, pertains to the 38.4.1 Why Quality First?
firm's overall capacity for managing complexity and stimulating organizational learn-
ing. Operations physics offers a theoretical basis for the observed simultaneity of ben- From a pragmatic perspective, quality alone is no longer good enough for competitive
efits accruing in the progression. All organizational work processes have input, trans- advantage. More and more empirical data supports the assertion: Quality is an "order
formation, and output variability associated with differences in materials, changing qualifier." Even in service organizations, the quality of "tangibles" used in the deliv-
customer demands, hard and soft technologies, procedures and systems, worker skills, ery system affects customers' perceptions of value and satisfaction. The most success-
and so forth. From statistical theory on process control, we know that process variance ful quality practitioners, such as Xerox, Motorola, and Toyota, continue to reset the
can be partitioned into common and special cause variation. Each process has natural standards expected by customers. No company is immune from the pressure to serve
tolerance limits which specify its inherent capability to conform to external require- its customers more effectively. To do so, they must first acquire quality capabilities.
ments (Deming, 1987). Imagine now that generic capabilities tend to share overlap- Competitive progression theory posits that quality is a prerequisite for the long-term
ping work processes. This property implies "physical" process co-variance. capability development. I argue that quality capabilties are much more than offering
By analogy, a basic tenet of competitive progression theory is this: the work pro- order qualifiers to the marketpJace. The pursuit of quality affords effective and effi-
cesses associated with creating any single generic capability can be partitioned into cient approaches to process variance reduction and organizational learning [e.g.,
one of two categories: (I) unique, or capability-specific process properties (ai' i = I to kaizen (continuous improvement)].
4, for quality (Q), delivery (D), flexibility (F), or price leadership (PL), respectively); Senior executives in high-performing organizations have long recognized that the
(2) interdependent properties, or process commonalities. Clearly, changing one capa- Deming-Shewhart plan-do-check-act wheel is a primary building block of process
bility will automatically impact the others. The cumulative magnitude of the impact knowledge, and that increasing the velocity of rotations through the wheel accelerates
will vary by the relative degrees of process commonality, or overlap; and the direction learning. When quality is viewed as only an "outcome," and not an ongoing process
is related to process synergy. Suppose a firm is working toward six sigma product for learning, research indicates that it typically becomes a vehicle for downsizing and
quality. A portion of this effort translates into better delivery. There is less rework, cost cutting. In these instances, quality is not sustainable; it quickly becomes a fad,
better process predictability, and more residual organizational energy to devote to de- and benefits are short-term. Executives will look for the next panacea after the troops
livery. Therefore, IlD = x (ao' IlQ). Similarly, work processes that influence Q also discover the ploy. Thus, quality capabilities are predicated on an understanding of pro-
impacts other upstream capabilities F and PL, but so does improved delivery. Thus, duction process capability afforded by what the grass-roots organization has learned
IlF = y (a" IlQ, IlD) and PL = z(a4, IlQ, IlD, IlF). Each newly acquired, or enhanced about making "good" products and services. It is the "knowing" that is important to
generic capability, can act synergistically to modify other capabilities with which it building organizational absorptive capacity. Basic knowledge competencies, derived
shares common processes. Under certain conditions, however, diminishing returns are from the mastery of total quality management (TQM) principles, form the foundation
possible (Hirasawa, Menor, and Roth 1996). for tackling more higher-level, more process-complex capabilities. Quality capabilities
Absorptive capacity (Cohen and Levinthal 1990) offers the rationale for the prece- include:
1. Understaning customer requirements now and those anticipated in the future. edge and information within core business processes to improve overall responsive-
2. Mastering "science," technology, and/or the subject matter behind products and ness, increase speed to market, and expand market penetration. Customers are also one
production processes. of the organization's best sources of competitor intelligence and new ideas.
3. Knowing processes: mapping, common-cause/special-cause variation, process
capabilities, and systems thinking.
38.4.4 Price leadership leverages the Enterprise
4. Developing proactive "solution" search behaviors; e.g., vision, benchmarking, and
intrinsic motivation. Next, sustainable price leadership occurs only when product innovations and enter-
5. Understanding of psychology and social sciences, including leadership, communi- prise processes add to the firm's competitive arsenal by reducing total costs over a
cations, conflict management, and change management. product-family life cycle. Understanding product and process variation facilitates the
use of flexible technology to reduce costs. One leading Japanese manufacturer said
6. Using tools for making process improvement a seamless part of daily work, includ-
during an interview, "We push process improvements until people become the limiting
ing sharing of individual and group tacit knowledge and basic quality methods.
resource, then only do we introduce automation." Under these circumstances, techno-
logical advancements can be effectively used to substitute for direct labor, enlarge
people competencies, streamline processes, or expand the product functionality, defin-
38.4.2 Delivery Reliability Expands Process Capabilities
ition, and/or ease of use for the customer. It is for this reason that leading manufactur-
Delivery reliability means filling customer orders completely by the dates promised ers will be better able to attain economies of knowledge.
100 percent of the time. For consistent, on-time delivery capabilities, more extensive Thus, manufacturers who prioritize price leadership must understand the sources of
process predictability is required, crossing over manufacturing boundaries to the dis- product and process variation, establish deliberate strategies for accelerating learning,
tribution system. Clearly, delivery reliability cannot be cost-effective without product and leverage enterprise processes. Hewlett-Packard's global supply-chain approach to
quality. In world-class companies, superior customer relationships thrust the enterprise its printer business (Lee and Billington, 1995), Baxter 1. V. Systems Divisions
into a state of extraordinary customer focus (Giffi et aI., 1990). Consequently, at the Operations Strategies (Roth et a!., 1994), and Nortel's Switching Global Business
beginning of the second step of the competitive progression, more information and Process Reengineering (Badelt and Roth, 1995) are good examples. Otherwise, total
process knowledge sharing must occur cross-functionally and along the value chain. cost reduction tactics may actually hollow out long-term competitiveness rather than
Customer-supplier relationships add depth to organizational knowledge. enabling firms to cumulatively "have it all!" With each step on the progression, enter-
Adding to the delivery process complexity, products and relationships must be prise nonvalue-added costs are driven out.
local and global simultaneously. Manufacturing companies are increasingly chal- In summary, competitive capabilites are interdependent both in "physical" ways
lenged to deliver on locally imposed constraints on globally similar products. A global' since they share common work processes, and in "intangible" ways, since increases in
supplier must offer a standard product but be able to customize it for local consump- knowledge-based competencies are necessary (Roth, 1996; Marucheck, Kemp, and
tion or use. A simple example: Hewlett-Packard's DeskJet printers, although globally Trimble, 1994; Roth and Giffi, 1994). Movement on the progression impacts the
sourced at a single point, must have manuals written in the domestic language and whole progression-like the Ferdows-De Meyer (1990) metaphor of building a sand-
components that can run on local electrical currents. HP customers demand a globally, cone. To the extent that the cumulative model of capability development is built on the
uniform base price with cost-plus to account for freight and other uncontrollable notions of operations physics and absorptive capacity, the phenomena should hold
regional expense differences. Thus, distribution processes must be capable of deliver- broadly. I hypothesize:
ing the same levels of support and service around the world, and at the same time, be
able to reliably provide "local" contents in the offering (e.g., environmental, safety, H4: Generic combinative competitive capabilities are built cumulatively, from quali-
energy, cultural issues). ty to delivery to flexibility to price leadership. ceteris paribus.
Taking a holistic view, each step upward simultaneously increases the firm's know-
38.4.3 Flexibility Shatters Boundaries ledge base-its absorptive capacity to exploit and use external knowledge (Cohen and
Levinthal, 1990, pp. 137-138):
Quality and delivery pave the way for flexibility. Gerwin (1993) discusses the creation
of manufacturing flexibility. Stewart (1992) illustrates flexibility in practice.
"Closeness to customers," enabled by delivery capabilities, heralds intimate customer A technologically progressive environment is not simply determined by past perfor-
knowledge which is a prerequisite for flexibility. In relationships, process interdepen- mance .... It also depends on the firm's absorptive capacity .... The greater the organiza-
dencies are a business norm. Integration provides a competitive edge for process flexi- tion's expertise and associated absorptive capacity, the more sensitive it is likely to be to
bility, defined as the ability to produce varying sizes, use various materials with quick emerging technological opportunities ... some organizations have the requisite technical
knowledge to respond proactively to the opportunities present in the environment.
changeover capability, or manufacture varying product mixes and volumes. At a high-
er level, customer relationships enable the organization to bring new products to mar-
ket quickly and other innovations. One highly profitable Fortune 500 manufacturer Roth and Jackson (1995) empirically show that the absorptive capacity of people
routinely uses its product development engineers as customer service agents and field enhances capability development, which underpins market performance. Experience
service technicians. Relationships are efficient means to incorporate customer knowl- with multiple technologies, especially integrating, enabling, and information-based
technologies, should increase the firm's absorptive capacity to leverage those technolo-
gies for building multiple capabilities. Recall that strategic agility was defined in terms
of possessing combinative competitive capabilities. Technological leadership, which
matches people skills and experiences with advanced technologies, is expected to
enable significant levels strategic agility. Thus, the following hypothesis:
H5: A holistic approach to technology will coincide with strategic agility. ceteris
paribus.
38.5 COMPETITIVE CAPABILITIES AND

TECHNOLOGICAL EXPERIENCE
Determining how to "best" run tomorrow's manufacturing organization is a recurrent

issue for top management. Strategic benchmarking of critical success factors prevents
"blind" benchmarking because it identifies the current competitive strengths and
weaknesses of a broad array of global players. Strategic manufacturing epochs and
competitive progression theory provide a context for crafting new strategy, but empiri-
cal tests of the propositions are important: Are capabilities developed cumulatively on
a global basis? Have world-class manufacturers made more headway along the com-
petitive progression, and hence, can they be defined as "more agile"? Is capabilities-
based competition associated with technological progress? Are best manufacturing
practices also linked to agility? To address these questions, this research subjects to
empirical scrutiny the current capabilities of manufacturing leaders. Manufacturing
technologies, particularly those which have been proposed as enablers of strategic
agility, are also considered.
In the 1992/93 study, senior manufacturing executives from more than 1300 manu-
facturing business units (MBUs) completed the survey. For purposes of the analyses
38.5.1 Research Database presented in this report. 254 MBUs from Europe, 291 from Japan, and 676 from North
America were included. The breakdown of industries and revenues of responding
Since the mid-1980s, trends and developments in the strategies and performance of MBUs are given in Fig. 38.3. A follow-up study on a small sample of nonrespondents,
manufacturers have been benchmarked annually through the DTT-UNC Global combined with industry statistics, indicates the findings are biased toward manufactur-
Manufacturing Technology and Strategy Vision Project, a collaborative survey ing leaders. Over 40 percent had parent organizations with greater than $500 million
research effort between Deloitte Touche Tohmatsu International and researchers from in annual sales revenues; and 45 percent are market leaders with greater than 25 per-
the Kenan-Flagler Business School at The University of North Carolina at Chapel Hill cent market share for their primary products.
(hereafter DTT-UNC GMTSP). The original survey was initiated in 1987 as a means
to triangulate the findings of one of the most comprehensive field studies to assess the
state of the art in world-class manufacturing in North America sponsored by the 38.5.2 Manufacturing Business-Unit Performance
National Center for Manufacturing Sciences (Giffi et a!., 1990). The sampling frame
was the Fortune 1000 manufacturers supplemented by additional lists from directories Of the total 1221 respondents, almost one-third (32 percent) indicated that their manu-
of manufacturing firms reporting at least $50 million in annual revenues. Manufactur- facturing organization was "world-class or approaching (WC); the remainder tended to
ing divisions or business units from larger parents may have less than $50 million in be "competitive" (NWC). Respondents were separated by objective measures of busi-
annual revenue. By 1993, the survey included Japan, Mexico, Brazil. South Africa, ness-unit performance in order to validate their own designation of world-class status
and the European Common Market countries of France, Germany, Italy, Spain, and the and as not to create a tautology in examining their capability and technology profiles
United Kingdom. Survey research was complemented by case-based field research in (Hambrick, 1984; Venkatraman and Ramanujam, 1987). Objective measures were col-
five global corporations. Senior executives, line staff, and employees were inter- lected on average annual sales, return on assets, inventory turns, market share of pri-
viewed regarding their perspectives of evolving manufacturing strategies and con- mary products, and pretax profits. Table 38.2 shows that the world-class group
cerns. The GMTSP is a strategic benchmarking study designed to gauge broad-scale exhibits stellar performance on traditional business-unit criteria In addition, we used
manufacturing strategies and strategic directions, in contrast, the more tactical bench- additional perceptual measures of business performance and outside criteria to vali-
marking at the plant or functional unit level. date the world-class status, such as reputation and expert opinions.
NEO-OPERATIONS STRATEGY 38.21
38.5.3 Operational Indexes
Indexes are data reduction devices wherein a respondent's responses to several related
items may be summarized into a single score. In general, composites of several items
taken together provide a more comprehensive and accurate measure of a latent con-
struct in comparison with single questionnaire items. Exploratory factor analyses and
reliability analyses were performed separately for the construction of indexes over the
three conceptual domains of theoretical interest: competitive capabilities, technologi-
cal experience, and best manufacturing practices. Note that there were no published
instruments available which were shown to have sufficient reliability and validity
across global regions. Each of the multi attribute indexes here had sufficient reliability
for newly developed scales (Churchill, 1979; Nunnally, 1978). Each item displays
construct validity consistent with the extant literature. The North American data was
used for index calibration. The Japanese and European subsamples were used as vali-
dation samples. Importantly, the psychometric properties hold for each global region,
suggesting that the results are not an artifact of the set of firms in the calibration sam-
pie and making cross-cultural comparisons possible.
Content and construct validity was established for the indexes. Content validity
indicated that the items included in the survey adequately represent the concepts in the
domain in which the generalizations are made. Content validity is largely determined
during the design and pilot phases of instrument construction. To maximize content
validity, the extant literature on world-class manufacturing was examined and related
field research incorporated expert judgments of executives. The instrument has been
continuously refined from 1989 to 1993. The survey instrument contains a large pool
of representative items on manufacturing strategy contents, competitive capabilities,
and performance. Regarding construct validity, each index was examined to determine
whether it actually corresponded to the theoretical concept of interest and shared vari-
ance. Each index possesses the property of unidimensionality (Carmines and Zeller,
1979).
Generic Competitive Capabilities. A list of 42 capability attributes found in the lit-

erature was presented to the respondents as follows: "Listed below are the typical crit-
ical success factors for competing in an industry. Scan over the entire list. Please cir-
cle the number that best corresponds to your business unit's current competitive
strength on each factor, relative to your primary competitors in the same markets."
The instruments used to operationalize the capabilities employed five-point self-
anchoring scales. Of the 42 capability attributes, 20 captured the five generic dimen-
sions of interest in this research. The remaining capability indexes (not shown here)
will be used to assess unique, as opposed to generic, competitive strength in later
research. The generic capabilities of quality, delivery, flexibility, and price leadership
were operationalized as multiattribute indexes from the set. Table 38.3 displays the
items which make up each index, the coefficient alphas by global region, and the item-
to-total index correlations. Similar information is given for an index of process-
focused technological leadership.
The generic capability indexes are
Quality: The quality index consists of five attributes generally associated with
superior product quality: product reliability, customer perceived quality, the degree
to which the product conforms to standards, durability, and the general functionality
of design. These five items represent the "tangible" attributes indicated by Garvin's
(1987) dimensions of quality .
Delivery: Three attributes signify delivery reliability. The first is manufacturing's
ability to ship on schedule. This requires a high degree of internal coordination. The mation systems. Multiattribute technology indexes, the items making up each index,
remaining two attributes indicate information flows with customers, either by hav- and their corresponding reliabilities are given in Table 38.4. Of special note is the high
ing the process capability to rapidly confirm orders or to be able to promptly degree of internal reliability of each index across global regions. These classifications
resolve complaints. provide strong support for the implementations suggested in the manufacturing tech-
nology literature.
Flexibility: To be able to respond quickly to the macro forces surrounding markets
Each of the technology indexes is now summarized:
and customers, manufacturers must have responsive business processes. This
degree of responsiveness requires a significant degree of coordination and process Process Enablers: This index comprises eight items which provide advanced sup-
integration cross-functionally and cross-organizationally with customers and support functions for production. One set of support activities is used to monitor the
pliers. Five items that connote process flexibility are the ability to rapidly change production activities by gathering information about the process. These include
product mix, to produce a wide variety within the same facilities, to rapidly change computer-aided inspection, computer-aided testing, vision systems, and fail-safing
production volumes, rapidly handle custom orders, and reduce product changeover processes. If adjustments are necessary, humans can intervene almost on an excep-
times. Economies of scope, speed and economies of integration are implied by the tion basis. A second category of enablers supports materials handling and storage.
aforementioned attributes. Technologies in this group are automated storage and retrieval systems, automated
Price leadership: Price leadership construct is represented by three items: the abili- materials handling, and bar coding to identify the correct items to be picked, inven-
ty to offer lower priced products than competitors, the ability to manufacturer simi- toried, and retrieved. Robots are multifunctional machines which can perform both
lar products at a lower cost, and the ability to meet competitors' prices. Price lead- direct production and production support activities. Because robots were included
ers are able to garner higher margins and can be more price responsive than the here, it is likely that their primary usage is for manufacturing support tasks, such as
competition. Therefore, they will have more resources for investment and can materials handling, machine loading, and pick-and-place maneuvers.
simultaneously satisfy customers and stakeholders. Information Technology: The information system index represents eight basic infor-
Technological leadership: Technological leadership is a sociotechnical measure of mation technologies (ITs) for communications, integration and coordination, intelli-
three critical resources: "hardware," "orgware," and "thoughtware." The four-item gence, and control. Information technologies are used to automate administrative
index consists of superior manufacturing processes in terms of the state-of-the-art information processing tasks internally, such as electronic mail (e-mail), and exter-
applications and their unique capabilities. The third attribute reflects the firm's nally by integrating information cross-functions and electronic data interchange
overall technical know-how in the organization. This reflects, in part, the firm's with suppliers and customers. Integration of manufacturing internally relies on
ability to leverage its organizational knowledge. The fourth item is a workforce technologies that link together information from the various work centers, such as
with superior technological skills. Taken together, they are manifestations of the local area networks, personal computers, relational databases, and artificial intelli-
firm's potential absorptive capacity. gence and expert-systems software and hardware that enables machines to intelli-
gently sense and manipulate their environments.
The ability to compete on the first four generic capabilities-quality, delivery, flexibil-
Design Interfaces: Six items constitute an index of product and process design tools
ity, and price leadership-together implies that the firm has the strategic agility to use
that are used to enhance the productivity of engineers and facilitate the effective
different combinations of its resources to meet the diverse needs of its customers at
coupling of engineering and manufacturing activities. Product design tools included
different times. Technological leadership refers to a combination of resources which
in the index are computer-aided design (CAD), which creates, stores, and retrieves
are used to build competitive capabilities and core competencies (Prahalad and Hamel,
product and process information; computer-aided engineering (CAE), which
1991). A measure of process technological leadership was operationalized in this study
ensures that design specifications are met; and value analysis and value engineer-
as described in the fifth entry above. ing, which are methods for product and process simplification. Design for manufac-
ture and simultaneous or concurrent engineering provide a new framework and
Advanced Manufacturing Technologies. One measure of technological advance-
approach for designers and manufacturing to work collaboratively in order to devel-
ment is the firm's relative degree of experience with advanced technologies. Although
op products and processes concurrently.
literally hundreds of different types of advanced technologies are available to manu-
facturers, this research is restricted to advanced hardware, software, and methods Production Planning and Control: This index comprises four disciplines and con-
technologies which can be broadly applied to manufacturing operations, including trol mechanisms that enable the organization to plan, schedule, and execute produc-
those for product and process design, automating production, enhancing production tion and materials requirements effectively. Just-in-time (lIT) is a management phi-
planning and control, and information technologies. [See Noori and Radford (1995, losophy of throughput improvement, lead-time reduction, and waste reduction.
pp. 279-284) and Giffi et al. (1990, chaps. 7 and 10) for detailed descriptions of the Kanban systems are the manual information control systems that are used to physi-
advanced technologies covered here.] Executives were asked to respond to each of 31 cally "pull" products through production. MRP-II is a companywide system for
technology types as follows: "Listed are a set of specific technologies and techniques planning and controlling resources. Many companies operate MRP-II and lIT con-
that are being applied in manufacturing. Please indicate the degree of experience your currently, or a hybrid of each. Total productive maintenance (TPM) is a method for
MBU has with each, from no experience to 'state-of-the-art' experience." enabling production employees to become responsible for setting up and adjusting
Out of the technologies presented, 27 were found through item analyses to repre- their own equipment and for performing minor routine maintenance.
sent five broad dimensions of advanced operations technology: process enablers, com- Flexible Automation: This two-item index represents production equipment that
puter numerical control, design interfaces, production planning and control, and infor- enables the production of a variety of products with little time for changeovers.
Each technology contains its own microcomputer and is controlled by software pro-
grams. The computer numerical control (CNC) machines are not dependent on a
host computer, whereas the distributed numerical control (DNC) machines are con-
nected to a central computer and can share programs and information.
38.6 RESULTS AND DISCUSSION
Hypothesis 1 states that world-class manufacturers have experience with multiple ad-
vanced manufacturing technologies. This follows directly from the economies of
scope and economies of integration required in postindustrial manufacturing (Goldhar
et a!., 1991; Noori, 1990; Noori and Radford, 1995). Using the five operational index-
es of experience with advanced manufacturing technologies, a two-way analysis of
variance was performed with world-class status and global regions as the main effects
(Table 38.5). The results show that there are significant interaction effects between
world-class status and global region (p < .001) for each of the five categories of tech-
nology. There is some juxtapositioning of the relative magnitudes of technological
experience among global manufacturers.
The North American manufacturers tended to have the same pattern of technologi-
cal experience buildup between the world-class and non-world-class groups, from
adoption of information technologies (ITs) to the design and manufacturing interfaces
types to production planning and control to flexible automation to process enablers.
Their counterparts in Europe and Japan did not show uniform adoption patterns of
technology between the world-class and non-world-class groups. For example, experi-
ence with flexible automation ranked highest for the world-class Japanese manufactur-
ers, in contrast to the non-world-class Japanese group, whose experience with flexible
automation was dismally low. There has been a tremendous drive toward IT-enabled
business process reengineering over the past 5 years, especially in the Western
regions; therefore, it is not surprising that IT was the top-rated technology group in
North America and Europe, controlling for world-class status. It was notable that in
both regions world-class manufacturers had the same experience profiles with multi-
ple advanced technologies, but not their world-class counterparts.
The technology profiles depicted in Fig. 38.4 support H5. The world-class groups
within each global region have relative magnitudes of experience with advanced tech-
nology that are significantly above their non-world-class counterparts. These data sug-
gest that the world-class groups are more likely to be actively engaged in pursuing a
broad array of technologies, especially those that have boundary-spanning potential
such as the IT and design interfaces. The theory of absorptive capacity suggests that
synergistic benefits can be derived from these cumulative experiences. In other words,
the world-class groups aspire to build a greater capacity to leverage advanced manufac-
turing technologies in order to gain added flexibility due to economies of scope and
economies of integration.
Hypothesis 2 posits that world-class manufacturers are more likely to combine best
practices with applications of advanced technology. To test H2, a multiattribute index
was derived from an exploratory factor analysis of manufacturing programs believed
to represent the content of best manufacturing practices (Ward et a!., 1994; Giffi et a!.,
1990). The index reflects the relative degree of managerial commitment and resources
placed on nine key action programs to improve the effectiveness of manufacturing
over the past 3 years. Items included are: (1) "work teams," (2) "broadened job
responsibilities," (3) "continuous improvement (kaizen)," (4) "total employee involve-
ment," (5) "worker training for new skills," (6) "manufacturing cells," (7) "statistical
process control," (8) "integrated manufacturing strategy with the business strategy,"
and (9) "worker-cross-training programs." Each item was measured on five-point self-
anchoring scales, where 1 = "no commitment," 3 = "moderate commitment," and 5
= "significant commitment."
Each manufacturing business unit's best-practices index score is computed as the
average of its responses over the nine scale items. The reliability coefficient,
Cronbach's alpha, for the index was .89. Moreover, the relative emphasis on best prac-
tices was significantly greater for the world-class group in contrast to the non-world-
class (p<.000 I). This best practices scale is similar to the infrastructural capability
programs reported by Ward et al. (1994, p. 343) and includes an integrated strategy
item which is an aspect of their manufacturing involvement construct. My best-prac-
tices index is a broader infrastructural composite than theirs because it also includes
process improvement tactics of cellular manufacturing, statistical process control, and
other continuous improvement programs. The best practices index is a proxy for the
application of the social sciences to operations by linking the "know what" with the
"know how."
Table 38.6 contains the correlations between the relative degree of management
emphasis on best manufacturing practices and the MBU's experience with various
types of advanced technologies. Hypothesis 2 is sustained by these data overall and by
global region. While statistically significant, the association between experience with
flexible automation and best practices is the weakest. This may reflect the mistaken
belief by many executives that computer-controlled technologies can substitute for
labor without additional investments in the manufacturing infrastructure (Roth, 1986).
It was commonplace in the 1980s to make hefty investments in automation without
taking a holistic perspective. These results support the thesis that for technological
advancement, both hard and soft sciences are required (Adler, 1993; Seely-Brown,
1993). Cross-functional and cross-organizational integration, enabled by technology,
must be accompanied by capable people and processes.
The third hypothesis addresses the technological leadership as a competitive
weapon. Technological leadership is manifest by a high degree of organizational
know-how, combining people with superior technological skills, and state-of-the-art
process technology. (See Table 38.2 for technological leadership index definition.) To
validate the operational measure, the results in Table 38.7 show that the technological
leadership index is indeed associated with both the adoption of best practices and
experience with advanced manufacturing technologies. Most importantly, technologi-
calleadership extends technical competence beyond the manufacturing function to the
organization. For example, it is one thing to have experience with advanced manufac-
turing technology; it is quite another to be at the leading edge. General management
must know how to direct it and the organization must have the absorptive capacity to
use it.
Figure 38.5 highlights technological leadership capabilities of the global players.
In support of Hypothesis 3, as predicted, the world-class group exhibits higher levels
of technological prowess in comparison to the non-world-class group in each global
region. Advanced technology is a necessary but not sufficient condition for perfor-
mance. These findings corroborate those of Ward et al. (1994, p. 351), who state
"Technology alone is not enough. At least one other dimension of proactiveness must
be vigorously pursued." World-class manufacturers are more apt to be proactive in
their multifaceted approach to technological leadership. World-class players may
indeed be gaining competitive advantage through economies of knowledge. Future
research is required to determine exactly how they are exploiting their "invisible"
knowledge assets.
Hypothesis 4 states that the cumulative model of capability development is ubiqui-
tous. Figures 38.6 and 38.7 offer the most substantive support for competitive progres-
sion theory to date. On average, the levels of capability development in a broadly seg-
mented sample of global manufacturers follow hypothesized progression. For each
competitive capability, the differences between world-class and non-world-class
groups are significant at the .001 level (Table 38.8). The average competitive capabili-
ties of the non-world-class group are not only relatively low but-contrary to conven-
tional wisdom-also follow the theoretical progression. Competitive progression pre-
dicts that the logic of statistical variation, process capabilities, and value-chain
process knowledge increases a manufacturing entity's inherent capabilities to deploy
its resources most effectively. Consider, for example, a non-world-class manufacturer
attempting to compete on price, without understanding the progression logic concern-
ing quality or delivery competencies. Traditional cost-cutting methods in manufactur-
ing have been shown to only exacerbate quality and delivery problems, which subse-
quently drive costs up. Ample empirical evidence exists. The reader has only to refer
to Crosby's Quality Is Free or the classic works of quality gurus Deming or Juran.
[See Giffi et al. (1990, chap. 2) for an overview of the gurus and a comprehensive pic-
ture of the "quality revolution" and world-class manufacturing.]
Holding world-class status constant, the competitive progression exists within each
global region (Figure 38.7). More compelling evidence that competitive progression is
rooted in basic operations physics is suggested by the observed progression in the
non-world-class group. To the extent that the competitive progression theory is robust.
future research must address how to accelerate progress in any innovation cycle.
Moreover, practitioners need to think long and hard in not pursuing the logic of the
theory in their manufacturing strategies. Quality must be addressed first. but not just
NEO-OPERATlONS STRATEGY 38.37
Correlations between the two canonical variates on each function are assessed by the
significance of canonical correlation. The squared canonical correlation represents the
maximum percent of variance accounted for by the canonical relationship.
The first model represents a "disjunctive" technology strategy in which the set of
broad-based technological experiences is the predictor of combinative competitive
capabilities as the criterion set. The second model is formulated with a "holistic" tech-
nology strategy, combining technological leadership and best manufacturing practices
as the predictor set [see Giffi et al. (1990, pp. 141-145) for related empirical research
on holistic and disjunctive manufacturing strategies].
The first model tests the multivariate relationships between the set of generic com-
petitive capabilities and experience with advanced manufacturing technologies taken
as a set. The results in Table 38.9 are quite interesting. Overall there was a statistically
significant canonical correlation between a high level of competitive strength on the
criterion set of quality, delivery, flexibility, price leadership, and technological experi-
ence. The canonical function I criterion set, highly descriptive of strategic agility, was
related to a set of four of the five broad-based technological experiences types in the
predictor set. In Modell, the adoption of flexible automation was not related to strate-
gic agility. This finding presented a quagmire since flexible automation was expected
to be a forerunner of flexibility and price leadership. A second canonical function
emerged in the overall set whereby process enabler technologies, flexible automation,
and design interfaces were positively related to quality, but negatively correlated with
delivery and flexibility. At first this second function also appeared puzzling. On
inspection, although weak, canonical function 2 in the overall sample is indicative of
strategies for highly capitalized, standardized production.
When viewed by global region, several disparities emerged in contrast to the over-
all sample. The Japanese canonical structure relationships mimicked those of the over-
all sample. In contrast, the European canonical criterion set did not equate to our defi-
nition of strategic agility, while the North American one did. Each multivariate
relationship revealed quite different technology strategies. Within the European group,
high levels of experience with process enablers, information systems, and production
planning and control, devoid of experience with flexible automation and design-manu-
facturing interfaces, were associated with high delivery, flexibility, and price leader-
ship capabilities. This appears to be due to a traditional shop-floor focus on delivery
and flexibility allowing for a huge variation in product quality. In North American
canonical function I, relatively high levels of experience with all technology groups,
except flexible automation, were related to increased strategic agility, whereas in the
North American canonical function 2, high levels of technological experience pro-
duced high quality but disabled process flexibility. The percent of variance accounted
for by the canonical relationships between experience with technology and experience
with multiple technologies was relatively low, ranging from 3 to 15 percent. These
Model I results provide no consistent explanations between the role of advanced man-
ufacturing and competitive strength.
In the competing Model 2, technological leadership which represents superior peo-
ple and process technologies combined with best manufacturing practices was chosen
to predict strategic agility (Table 38.10). The criterion set in canonical function I in
each region connotes strategic agility which is highly correlated with the combination
of technological leadership and best practices. Importantly, the holistic approach to
technology explained significant percentages of the variance accounted for, from 21
percent in Europe to 46 percent each in North America and Japan. The first canonical
function in each region corroborates the findings of Roth and Jackson (1995) that the
firm's absorptive capacity is limited by the expertise of people who must have the req-
uisite knowledge to leverage the technology for competitive advantage. Technological
leadership is a primary lever, and best practices, a secondary lever for strategic agility.
Model 2 results are highly consistent with the emerging practice-based research on
agility (Goldman et al., 1995). Arguably, a holistic approach to technology choices is a
key component for the neo-operations strategies of firms seeking to compete on strate-
gic agility. European manufacturers' strategic choices incorporated a modestly higher
level of emphasis on best practices in contrast to their global counterparts. At the same
time, their strategic payoffs in agility were no better than those of the North
Americans and slightly worse than the Japanese.
Considering the findings reported in Tables 38.8 and 38.9 together, the implications
are striking. Experience with technologies, regardless of type, many be a necessary
but insufficient condition for competing. Interestingly, in both Japanese samples, the
various types' experience with multiple advanced technologies seemed be highly cor-
related with one another, as did the criterion sets. Yet, the holistic strategy of Model 2
showed about three times the explained variance of Modell. A higher level of confi-
dence can be generated by explicitly developing a technology strategy in which people
and the manufacturing infrastructure are consistent with the business strategy.
Aligning requisite people ski1\s and technological skills is perhaps the greatest chal-
lenge for acquiring strategic agility and gaining economies of knowledge.
38.7 CONCLUSIONS
This exploratory research brings forth a number of new concepts and ideas for manag-
ing postindustrial manufacturing enterprises under the mantra of neo-operations strate-
gy. In particular, the research indicates that winning in global markets requires the tech-
nological leadership to leverage new knowledge in the form of combinative
competitive capabilities. Executives need an expanded vision of combinative capabili-
ties and an understanding of how lasting capabilities are acquired. This chapter propos-
es a new competitive progression theory of capability development. A series of
hypotheses has been developed to test alternative strategies that counter For example, speed-to-market may be the order winner in one market whereas deliv-
the mass-production logic. Empirical tests of the hypotheses were made using a global ery may be more critical in another. Interestingly, Porter-like (Kotha and Orne, 1989)
database of more than 1200 manufacturing business units, spanning North America, static notions of strategic positioning are seemingly at odds with the neo-operations
Europe, and Japan. Stellar performers, called the "world-class group," have distinctive strategy. Dynamic leveraging of a portfolio of integration, infrastructural, and struc-
approaches to technology that are associated with higher levels of strategic agility, tural choices with changing customers demands is what will potentially create exciting
operationalized as combinative competitive capabilities on quality, delivery, flexibility, levels of "customerization" (Hirasawa et a!., 1995). Unfortunately, many manufactur-
and price leadership. Contrary to conventional wisdom, the world-class manufacturers ers are stuck in the monotony of the industrial age; their anachronistic, mechanistic
around the globe share similar strategic profiles. This fact, coupled with competitive manufacturing perspectives limit their ability to become savvy global players.
progression theory, offers evidence of a convergence hypothesis in operations manage-
ment-namely, that through economies of knowledge, world-class players are more apt
to capitalize on global resources, and hence are less dependent on local resources for
competitive advantage. The subject of a unifying theory of operations is ripe for future 38.8 SUMMARY
research.
A number of intriguing questions remain to be explored. For example, how does Confronted by quantum shifts in global markets and a rapidity of movement in techno-
the concept of factory focus fit with progression theory? Paradoxically, focus capabili- logical progress, firms require unprecedented levels of strategic agility. Strategic agili-
ties are directly linked to process choices, which seemingly supports tradeoff theory ty is operationally defined as combinative competitive capabilities on quality, deliv-
and runs counter to competitive progression theory (Skinner, 1978; Berry et aI., 1991). ery, flexibility, and price leadership. The traditional logic of the industrial era does not
The notion behind factory focus is that simplicity drives out complexity, leading to equip manufacturers for competing on strategic agility. As a result, the game plans of
better performance. One could extrapolate from competitive progression theory: A leading manufacturers around the world dynamically changing to build capabilities-
process focus contributes to accelerated movement through the progression for an based competitiveness. In this chapter, I argue that twenty-first century competition
innovation cycle because variance and complexity are reduced. Ironically, focus limits requires a fundamentally new strategy: Neo-operations strategy links combinative
the firm's absorptive capacity to change production technologies, as described in the competitive capabilities and advanccd manufacturing technology strategies under the
"great nuclear fizzle" case (Hill, 1989). In other words, is a process-focused factory rubric of economies of knowledge. The stage for building strategic agility through
less agile? Under what circumstances does it matter? neo-operations strategy is set. Hypotheses about how sustainable competitive capabili-
Another important question is: Given the competitive progression theory, why do ties are accumulated support a new competitive progression theory.
some firms, even some of the most successful, stop making progress? The answers to
this question are very complex and are the subject of future research. Early findings
suggest that a combination of factors are culprits, including attempts to bypass steps in
the progression, organizational "setpoint" or inertia to change, management compla- 38.9 REFERENCES
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Goldhar, J. D., M. Jelinek, and T. W. Schlie, "Competitive Advantage in Manufacturing through Pine, J. B., Mass Customization: The New Frontier in Business Competition, Harvard Business
Information Technology," Internat!. J. Technol. Management, Special Publication on the Role of School Press, Boston, 1993.
Technology in Corporate Policy, 162-180, 1991.
Piore, M. J., and C. F Sabel, The Second Industrial Divide: Possibilities for Prosperity, Basic
Goldman, S. L., and R. N. Nagel, "Management Technology and Agility: The Emergency of a Books, New York, 1984.
New Era in Manufacturing," Internat. J. Tech. Management, 8: 18-38, 1993.
Prahalad, C. K., and G. Hamel, "The Core Competence of the Corporation," Harvard Business
Goldman, S. L., R. N. Nagel, and K. Preiss, Agile Competitors and Virtual Organization, Van Review, pp. 79-91, May-June 1991.
Nostrand-Reinhold, New York, 1995.
Roth, A. V., "Achieving Strategic Agility Through Economies of Knowledge," Strategy
Gray. A. E., A. Seidmann, and K. E. Stecke, "A Synthesis of Decision Models for Tool Leadership, (formerly Planning Review), 24(2): 30-37, Mar.-Apr. 1996.
Management in Automated Manufacturing," Management Science, 39(5): 549-567, 1993.
Roth, A. v., Strategic Planning for the Optimal Acquisition of Flexible Manufacturing Systems
Hambrick, D. C. "Taxonomic Approaches to Studying Strategy: Some Conceptual and Technology, Doctoral Dissertation, Ohio State University, Columbus, Ohio, 1986.
Methodological Issues," J. Management, 10(1): 27-41, 1984.
Roth, A. v., and R. J. Chapman, "Competing in the Electronic Industry: Benchmarking World-
Hayes, R., and S. Wheelwright, Restoring our Competitive Edge: Competing through Class Performers," J. Electronics Manufacturing, 3: 39-57, 1993.
Manufacturing, Wiley, New York, 1984.
Roth, A. V., and C. A. Giffi, "Winning in Global Markets: Neo-Operations Strategies in U.S. and
Hayes, R. H., S. C. Wheelwright, and K. Clark, Dynamic Manufacturing, Free Press, New York. Japanese Manufacturing," Operations Management Review, 10(4): 1-35,1995.
1988. Roth, A. v., and C. A. Giffi, "Critical Factors for Achieving World Class Manufacturing:
Henkoff, R., "New Management Secrets from Japan-Really," pp. 135-146, Nov. 27,1995. Benchmarking North American Manufacturing Strategies," Operations Management Review,
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Global Agility," UNC-Kenan-Flagler Business School Working Paper presented at the Institute the Future, Deloitte Touche Tohmatsu International Research Report, Cleveland, Ohio, 1993.
for Operations Research and Management Sciences Fall Meeting, New Orleans, October Roth, A. V., and W. Jackson, "Strategic Determinants of Service Quality and Market
29-November 1,1995. Performance," Management Science, 41(11): 1720-1733, Nov. 1995.
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Kim, J. S., L. P. Ritzman, W. C. Benton, and D. I. Snyder, "Linking Product Planning and Process Kettinger, eds., Business Process Change: Reengineering Concepts, Methods and Technologies,
Idea Group Publishing, Harrisburg, Pa., pp. 453-474, 1995.

Roth, A. v., and A. S. Marucheck, "Defining World Class Manufacturing," Proceedings of the
Annual Meeting of the Decision Sciences Institute, 1992.
Roth, A. V., A. S. Marucheck, A. Kemp, and D. Trimble, "The Knowledge Factory for
Accelerated Learning Practices," Planning Review, pp. 26-33,46, May-June 1994.
Roth, A. v., and J. G. Miller, "Success Factors in Manufacturing," Business Horizons, 35(4):
1973-81, 1992.
Schon, D., Technology and Change: The New Heraclitus, Delacorte Press, New York, 1967.
Schonberger, R. J., World Class Manufacturing: The Lessons of Simplicity Applied, Free Press,
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Skinner, W., Manufacturing in the Corporate Strategy, Free Press, New York, ] 978.
Stalk, G., and T. M. Hout, Competing against Time, Free Press, New York, 1974.
Stewart, T., 'Brace for Japan's Hot New Strategy," Fortune, Sept. 21, 1992,62-74.
Ulritch, D., and J. B. Barney, "Perspectives in Organizations: Resource Dependence, Efficiency,
and Population," Acad. Management Review, 9(3): 471-481,1984.
Venkatraman, N., and V. Ramanujam, "Measurement of Business Economic Performance: An This appendix includes a listing of Universities offering courses or advanced degree
Examination of Method Convergence," J. Management, 13Ll: 109-122, 1987. programs in the management of technology (MOT). The selection comprises various
Vickery, S. K, C. Droge, and R. R. Markland, "Production Competence and Business Strategy: geographic areas as well as educational institutions with different perspectives on the
Do They Affect Business Performance," Decision Sciences, 24(2): 435-456, 1993. requirements for advanced degrees in MOT. The degree programs span the continuum
Ward, P. T., G. K. Leong, and K. K Boyer, "Manufacturing Proactiveness and Performance," from special courses tacked onto an M.B.A., an M.B.A. with specialization in some
Decision Sciences, 25(3): 337-358, 1994. aspect of MOT, and what by today's standards might be considered as an advanced
Wheelwright, S. C., and K. B. Clark, Revolutionizing Product Development: Quantum Leaps in degree in MOT sponsored jointly by the school of engineering and the school of man-
Speed, Efficiency, and Quality, Free Press, New York, 1992. agement. Some universities also offer single courses in MOT.
Womack, 1. P., D. T. Jones, and D. Roos, The Machine that Changed the World, Rawson While MOT is an evolving and multidisciplinary field that is practitioner-oriented,
Associates, New York, 1991. the associated advanced degree programs often fall short of meeting practitioner
requirements. Chapter I of this handbook outlines the many issues involved in MOT.
But few of the suggested advanced degree programs would meet those requirements.
From this editor's perspective, one who has spent almost 50 years in technology-
related operations, the requirements at a minimum require all the basic courses in an
M.B.A. plus those courses related specifically to managing and integrating the tech-
nology functions within the business unit. If approached from a one-time education
process, the work would require the equivalent of three full academic years. The chal-
lenge to academia and industry: Design the educational delivery system for MOT
based on a continuous (lifetime) learning process. Management of technology requires
people with not only depth but breadth of knowledge and experience as well.
University of Alabama in Huntsville

Complete address: MSM Program
Administrative Science Building, Room
102
The University of Alabama in Huntsville
Huntsville, AL 35899
Phone: (205)895-6024 or UAH Admissions
Office at (800)UAH-CALL
E-mail: evansd@email.uah.edu
Principal contact: Dr. Doria Evans
Degree offered: Master of Science in Management
(M.S.M.)
A.1
A.2 APPENDIX A
The leaders of Huntsville's dynamic business and government sectors urged the
University of Alabama in Huntsville (UAH) to provide leadership in a business area
neglected by traditional business programs: managing technology. The future of
American business lies in technology. That's why the heart of our Master of Science
in Management (M.S.M.) is in the management of technology (MOT). MOT links
management with engineering and science to help organizations meet the challenges
of fast-changing technology. It is relevant in both service and manufacturing organi-
zations. Our MOT program goes beyond the traditional M.B.A. program to prepare
individuals to make decisions in environments of greater uncertainty and global com-
petition.
Huntsville provides the ideal environment for an MOT program, surrounded as we
are by many high-technology organizations. The campus is part of the second-largest
research park in the United States. The park houses more than 50 Fortune 500 firms.
NASA and the U.S. Army Missile Command are also in Huntsville. Students interact
with managers in these organizations, who daily face the special struggles associated
with technology. We instill in our students a commitment to teamwork, an essential
ingredient to solving highly complex problems. UAH and its College of
Administrative Science are nationally recognized. Our master's program has been rec-
ognized by the National Research Council as I of 19 programs in the nation with a
major thrust in the management of technology.
UAH's M.S.M. curriculum includes an exciting mixture of business and technolo-
gy. You will take courses in specific disciplines and other courses which integrate the
material you have learned. At the beginning of your program, you will develop an
overview of MOT by exploring emerging technologies and their business potentials.
You will interact with instructors in the graduate program, who will link their courses
with MOT. Late in the program, you will study with our MOT Eminent Scholar, Dr.
William E. Souder. He will acquaint you with critical aspects of the new-product
development process, from idea to marketing analysis, manufacturing, and delivery.
Your last course will prepare you to develop strategies to use technology to your
firm's competitive advantage. In the remaining courses, you will develop specific
advanced business skills and their application to MOT, such as forecasting technology
development, marketing new products, and managing information technology.
University of Brighton Business School

Center for Management Development
Complete address: Mithras House
Lewes Road
Brighton East Sussex BN2 4AT, U.K.
Phone: 01273-642947
Fax: 01273-642980
E-mail:
Principal contact: Ms. Sheena McCann
Degrees offered: M.S. Technology Management, M.B.A.
Technology Management
Aims of the programs:
To provide an advanced understanding of the functions of management

To develop a strategic orientation to the application of technology
To provide students with a challenging opportunity to explore and develop their
A.4 APPENDIX A INSTITUTIONS OFFERING MOT COURSEWORK A.5
Degrees offered: Master of Engineering in Telecommun- for commercial purposes. The international activities of the program include the inter-
ications Technology Management national residency and accompanying coursework in international technology manage-
ment as part of the M.S. in MOT, and research and programmatic collaboration with
The objective of the program is to develop engineers and computer scientists into various leading universities in Europe.
managers who can deliver innovative telecommunications systems and services. The
program focuses on a synthesis of communications systems engineering and manage- Harvard Business School
ment of engineering processes. Major areas of attention include network design, pro- Complete address: MBA Admissions
tocols and performance, software engineering, wireless and satellite communications, Soldiers Field Road
and manufacturing systems analysis. Students take required courses and electives in Boston, MA 02163
communications systems engineering and in the management of engineering process-
Phone: (617)495-6127
es, and complete a research-based thesis or a problem investigation project. Admission
requirements: Applicants must have a bachelor's degree in electrical engineering or Fax: (617)496-9272
computer science or related discipline, with honors standing, and at least 2 years of E-mail:
work experience in the telecommunications industry.
Principal contact: Admissions Office
Georgia Institute of Technology Degree offered: M.B.A.
Complete address: School of Management
The Harvard Business school provides a series of elective courses in technology and
Management of Technology Program
operations management in its traditional M.B.A. program. These courses include
Georgia Institute of Technology
Atlanta, GA 30332-0520
Business logistics: from product supply to after-sales service
Phone: (404 )894-1464
Designing, managing, and improving operations
Fax: (404)894-1552
Managing innovation
E-mail: william.rigg@mgt.gatech.edu
Managing product development
Principal contact: William M. Riggs
Operations strategy
Degrees offered: Graduate Certificate in Management of
Technology, Master's Degree in Janice Hammond, Kim Clark, and Steven Wheelwright are all faculty teaching in the
Management of Technology technology and operations management area:
The Georgia Tech MOT program is an institutewide, interdisciplinary effort, centered

In our area we deal with innovation, and it is important to remember that not every
in the School of Management. The program has three major components: idea flies. The dynamic of our teaching group and the quality of class discussions help us
executive/professional education, programs for full-time students, and research. refine ideas, gain feedback, and build insight. We learn from each other's experiences and
Executive/professional education is unusually important in MOT, since so many engi- from our students.
neers and scientists eventually need further education to enhance their ability to deal The relationship between research and teaching is nowhere more integrated than in the
with the business and policy issues that are in the context of technology development area of technology and manufacturing. On-going relationships with the world's leading
and commercialization. In response to this need, the Georgia Tech MOT program manufacturing firms allow faculty members to bring into the classroom the issues that
offers a master's degree program in MOT delivered on the "executive" format-alter- will determine competitive success in the coming decades. Managers of the future must
nate weekends, interspersed with two residency periods of I-week duration, and a understand the power of technology in business. We are trying to help students see this
fundamental link. It is exciting to be part of shaping a new generation of business leaders.
European residency lasting 2 weeks. This program attracts technical professionals and
managers with 5 to 15 years of relevant work experience, who are sponsored by their
employers. In addition to the master's program, short courses on MOT topics are Stuart School of Business
offered several times per year. An MOT Certificate is offered for full-time students, Illinois Institute of Technology
with enrollment open to any graduate student with a technical background. The Complete address: 565 West Adams Street
Certificate requires 21 credit hours of study, including three specialized MOT courses. Chicago, IL 60661
The keystone of the program is an MOT project course in which interdisciplinary
Phone: (312)906-6526
teams of students work in local companies to solve real technology management prob-
lems. A key objective of the MOT program is to help focus attention on the ongoing Fax:
results of the considerable MOT-related research under way at Georgia Tech, and to E-mail:
help shape the future research agenda. One element of this is a working paper series
Principal contact: Dr. Joel D. Goldhar
on innovation, entrepreneurship, and the management of technology. The program has
a strong international component, consistent with the rapid internationalization of Degree offered: M.S. in Operations and Technology
business activity and the accompanying flow of technology across national boundaries Management
Successful organizations of all types-business, government, banks, health care, and stration. A special feature of this program is the Management of Technology and
the military-need highly skilled people and sophisticated technology in order to Innovation project (MTI), which has been running for 10 years. This is a research
develop and deliver high-quality products and services more quickly and at low cost. partnership between INSEAD, other academic institutions, and a group of large inter-
These organizations also need a new kind of manager who can understand technology, national corporations, where research has been carried out to determine the strategic
work in teams, manage complex situations, supervise highly trained professionals, and organizational capabilities needed to transform technology into competitive com-
and initiate change-managers who know how to meet their goals and objectives. mercial products. The director of the program, Arnoud de Meyer, is Associate Dean at
Illinois Institute of Technology's M.S. in Operations and Technology Management INSEAD, Professor of Technology Management, and has a Ph.D. from the University
will help you become such a manager. The program is designed for people who get of Ghent. His research interests concern the management of technical innovation and
things done and want to learn how to get them done better, faster, and at lower cost. the use of new technologies in manufacturing. He has published extensively about
This advanced degree program, the only one of its kind in the Chicago area, empha- communication in R&D departments, the use of information systems in manufactur-
sizes problem solving, people skills, and the practical realities of team building and ing, and the internationalization of the R&D function.
project management. It focuses on complex operations that depend on the deployment INSEAD's International Manufacturing Program is a 2-week program running once
of advanced technology and highly educated people. It concentrates on systems that a year in June. Its objective is to show that manufacturing, properly managed, can be a
demand high quality and rapid reaction times. The program is designed so that you formidable competitive weapon in this age of increasing global competition. The pro-
and the students who enter with you will move through as a group. As you progress in gram is designed for senior managers in manufacturing. These may be from corporate
the program, you and your classmates will have a common base of knowledge. This manufacturing or other technical functions such as engineering, R&D, or information
lets your professors maintain better control of the course content and, ultimately, it technology. On past programs, participants have represented as many as 16 different
means your learning time will be more productive. The faculty, full-time academics, nations. The faculty teaching on past programs have been of seven different nationali-
with extensive teaching, research, and consulting experience, are supplemented by ties. The contents of the program are influenced by and designed on the basis of origi-
expert practitioners from industry. This dual perspective, which integrates theory and nal INSEAD research in the field of manufacturing management. Cases on real com-
practical experience, will prepare you for problem solving in a future where business panies are used in about half of the sessions to illustrate the points being taught. This
challenges will differ vastly from those of the present. The program consists of 12 takes the form of participants reading, then working in small groups, and finally com-
courses, each of four quarter hours, for a total of 48 quarter hours. Courses are ing together in class for discussion. Special features of this program include benefiting
offered on Saturday mornings and afternoons in a lock-step sequence, so the courses from the research of the Global Manufacturing Futures Project, which has been ongo-
will be offered just when you need them. Students whose reimbursement options are ing for the past 14 years. This is research carried out by INSEAD, plus an American
limited may complete the program on a 30-month schedule. The program is designed and a Japanese university, looking at the comparative techniques, approaches, and
for individuals who have a minimum of 6 years' work experience, a demonstrated manufacturing performance resulting from the strategies of major manufacturing
leadership ability, and a strong commitment to an intellectually demanding academic firms. Faculty research is presented to participants, and a computer simulation is used
experience. as part of the action learning process. The director of the program, Luk Van
Wassenhove, is professor of Operations Management and Operations Research and
INSEAD (The European Institute of Business Administration) Doctor in de Toegepaste Wetenschappen Katholieke Universiteit te Leuven. His cur-
Complete address: INSEAD rent research focuses on supply-chain management, time-based competition, business
Boulevard de Constance process reengineering, and quality and process improvement. He has published exten-
77305 Fountainebleau Cedex sively on these subjects. Before joining INSEAD, he was professor of operations
France research at the Econometric Institute of the Erasmus University, Rotterdam. He also
served on the Faculty of Engineering at the Katholieke Universiteit te Leuven.
Phone: (33) I 6072 42 90
Fax: (33) I 607455 13 Haas School of Business
University of California
E-mail: execed@insead.fr
Complete address: Haas School of Business
Principal contact: Executive Education, Janet Burdillat
University of California, Berkeley
Degree offered: INSEAD Diploma, certifying attendance S545 Student Services Building
Berkeley, CA 94720-1900
INSEAD's Strategic R&D Management Program is a I-week program running once a
year in April. The program is designed for senior managers involved in R&D or with Phone: (510)642-4993
responsibility for technical organizations who need a creative business perspective in Fax: (510)642-2826
order to manage imaginatively the interfaces with other functions in the organization. E-mail: aberbook@euler.me.berkeley.edu
It does not review the basics of R&D management. The aim is to broaden outlook by
improving management techniques and remaining attentive to the market, while main- Principal contact: Susan Aberbook
taining technological competence. The participants are international and of widely Degree offered: Certificate offered to master's students in
varied experience. In about half of the sessions, cases based on real companies are Engineering and Business on comple-
used, many of which have been specifically developed by INSEAD faculty for this tion of Management of Technology
program. They are usually discussed in small groups before a lecture or class demon- course requirements
The Management of Technology (MOT) program was started in 1988 to bring together in addition to understanding the flow of materials and products through the manufac-
Haas School of Business and College of Engineering faculty in joint research and teach- turing process, a successful manufacturing/technology manager must understand and
ing efforts that address various aspects of the technology commercialization and adop- appreciate the nature and importance of innovation and product development, manag-
tion process. The industrial partners who helped establish the program emphasized that ing quality and costs, developing human resources, understanding information tech-
it should cover the entire range of functional disciplines-manufacturing, marketing, nology and its strategic importance, understanding the global marketplace, and creat-
and R&D (engineering)-as well as all aspects of the technology development ing strategic value through technology. The option has six core modules in which
process-from product definition and technology development resource allocation students must complete one course from a set of electives: Human Resources in
through process development, manufacturing rampup, and delivery of the new technolo- Manufacturing, Product Design and Development, Production Planning and Control,
gy to the marketplace. The MOT program supports a certificate program open to mas- Systems Integration and Information Management, Total Quality Management, and
ter's and Ph.D. students in both the College of Engineering and the Haas School of Manufacturing Strategy. In addition, electives from the Purdue University Schools of
Business. Certificates are awarded to students, along with their degrees, when they com- Engineering are strongly recommended. Extensive fellowship and internship support
plete four elective courses in the management of technology. Well-received MOT cours- are also available. Significant feedback is incorporated into the option through the
es include Professor Paul K. Wright (Mechanical Engineering) course on Intelligent industrial advisory board of CMME.
Manufacturing Systems, Visiting Professor David McKendrick (Haas School) course on
Managing Innovation and Change, and a new course cotaught by Professor Alice Center for Innovation Management Studies
Agogino (Mechanical Engineering) and Dr. Sara L. Beckman (Haas School) on Lehigh University
Managing the New Product Development Process. Many engineering students also par- Complete address: 621 Taylor Street
ticipate in the MOT Joint Learning Seminar, coled by the former Vice President, Bethlehem, PA 18015
Manufacturing at Hewlett-PacKard, Hal Edmondson, and Professor David Hodges, Dean
Phone: (610)758-3427
of the College of Engineering, in which the students complete technology-oriented pro-
jects with local technology companies. In addition to basic courses on management of Fax: (610)758-3655
technology subjects, MOT seminars have been added that expose students to current Principal contact: Dr. Alden S. Bean
technologies and technology management issues. The Emerging Technologies Seminar,
Degree offered: Master of Science in Management of
hosted through the Center for Information and Technology Management, invites speak-
Technology (M.S.-MoT)
ers to address various technology topics such as mobile computing and multimedia soft-
ware development. The MOT Seminar on Project Management, coled by Dr. Sara Lehigh University's M.S.-MoT program is designed to meet the needs of technologi-
Beckman (Haas School) and Professor Bill Ibbs (Civil Engineering-Construction cally driven companies-companies whose competitive advantage depends on the
Management), invited project managers from biotechnology, software, and electronics generation and implementation of technology. MoT is a relatively new field that is on
manufacturing companies to talk about the basics of project management. the cutting edge of advanced management training. It integrates business and engi-
neering interests in a number of new and exciting ways, focusing on technology-relat-
Krannert Graduate School of Management
ed issues dealing with strategic and tactical decisions in technology-intensive firms
Complete address: Krannert Graduate School of and industries. The program prepares graduates to effectively deal with
Management
Krannert Building Internal accountants, financial managers, marketing and sales executives, multi-
Purdue University functional team members, economists, etc.
West Lafayette, IN 47907-1310 External sources of technology, strategic alliance partners, customers and vendors,
Phone: (317)494-4413 cooperators and competitors, regulators and public policy makers, etc.
Fax: (317)494-9658 Organization transformation and change; creating, acquiring, commercializing, and
E-mail: herbm@mgmt.purdue.edu implementing technology; strategy formulation and implementation to achieve
brady@mgmt.purdue.edu competitive advantage; etc.
Principal contact: Dr. Herbert Moskowitz The M.S.-MoT degree is a 36-credit program including an M.S. thesis. The program
Degree offered: Master of Science in Management consists of nine required courses and three electives which can be completed in I year
or part time in 2 years. The MoT curriculum is designed specifically to achieve the
The Manufacturing/Technology Management option represents a very flexible, cross- above objectives and offers application to real-world situations through case studies
functional degree program in the Krannert Master of Science in Management program. and a thesis. The master's thesis is a capstone educational experience in which the
This option was developed and is administered through the Center for the knowledge students have acquired in the program is applied in a real-world research
Management of Manufacturing Enterprises (CMME). The option has an interdiscipli- setting. Ideally, this will involve field research in the form of a case study related to an
nary focus that takes full advantage of the strengths of the Krannert culture, most aspect of managing the generation of or implementation of innovative technology in
notably cross-functional interaction and cooperation. It is predicated on the belief that the student's organization or other field site.
INSTITUTIONS OFFERING MOT COURSEWORK A.11
A.10 APPENDIX A
Massachusetts Institute of Technology Center for the Development of Technological Leadership

Sloan School of Management Institute of Technology, University of Minnesota
MIT Management of Technology Program Mailing address: Center for the Development of
Technological Leadership
Complete address: Suite E52-101
50 Memorial Drive 107 Lind Hall
Cambridge, MA 02142-1347 207 Church Street SE
Minneapolis, MN 55455
Phone: (617)253-3733
Phone: (612)624-5747
Fax: (617)253-3154
Fax: (612)624-7510
E-mail: mitmot@sloan.mit.edu
E-mail: MOT@cdtl.umn.edu
Principal contact: Ms. Rochelle Weichman
Principal contact: Dr. Y. Shulman, Director
Degree offered: Master of Science in the Management of (612)624-9807
Technology shulman@cdtl.umn.edu
http://www.cdtl. umn.edu/
The MIT Management of Technology Program is an educational experience designed
to develop strategic leaders for organizations. To be effective, technology-based lead- Degree offered: Master of Science in Management of
ers must develop a special managerial perspective-one that is different from that Technology (M.S.lMOT)
offered by a general management or M.B.A. program. The MIT Management of
Technology program was developed to offer this perspective. The program is dedicat- CDTL Description. The Center for the Development of Technological Leadership
(CDTL) was established at the University of Minnesota in 1987 with an endowment
ed to developing leaders who
from the Honeywell Foundation. The mission of CDTL is to promote leadership in
Understand the critical linkages between technology and the overall business strate- technology by supporting appropriate research and by providing Institute of
gy
Technology students and technical professionals in industry with educational opportu-
nities for increased breadth and depth in technical management, business, and liberal
Lead high-performance, cross-functional teams to produce the right product or
arts.
process for the right application
CDTL is an interdisciplinary center with participation by the Institute of
Develop and implement strategies for leading the organization's technological Technology, the Curtis L. Carlson School of Management, the College of Liberal Arts,
advances and innovative changes the Hubert H. Humphrey Institute of Public Affairs, and the College of Agriculture.
Are skilled in working across international and cultural boundaries
Work effectively with technical and nontechnical professionals MOT Program Description. Technical professionals must remain current in their
fields of expertise. Those who seek to manage and lead technological activities must
The MIT Management of Technology program has been offered jointly by the Sloan also be able to competently manage innovative projects; motivate and challenge spe-
School of Management and the MIT School of Engineering since 1981. It was the first cialized staff; strive toward corporate goals; understand foreign cultures; manage con-
master's degree program in the world to focus directly on the management of technol- flicts; communicate persuasively and effectively; and integrate technical functions
ogy. The Management of Technology program is education, not training. Participants with other parts of the organization, including marketing, manufacturing, and strategic
complete the program with an expanded vision with respect to their functional roles, planning.
their entire organization, their responsibilities to society and their country, as well as The University of Minnesota's Master of Science in the Management of
their personal and professional responsibilities in the world. The curriculum consists Technology Program (M.S./MOT) provides technical professionals with the knowl-
of a carefully balanced mixture of formal course work by management and engineering edge, skills, tools, and values that will enable them to assume leadership roles within
faculty, as well as formal and informal seminars with senior managers responsible for their organizations and bring technical advances to the global market.
the technical resources and technology strategy of their organizations. The Developed in 1989, this intensive, practitioner-oriented graduate program is
Management of Technology program is divided into five segments with several cours- designed for experienced engineers and scientists who have achieved springboard
es in each segment: positions in their organizations and have demonstrated a potential for technological
leadership. It is a 2-year, executive-format program with classes held on alternating
Strategic Aspects of Technology Management Fridays and Saturdays. Two off-campus residencies are held each year. The 2-year
Managerial Decision Making integrated curriculum develops additional technical expertise and specific managerial
capabilities required of those who direct groups of technical professionals or who
Human and Organizational Factors in Technology Management
oversee technological activities. International technology management issues are
Managing Product/Process Development addressed during a lO-day international residency held in the Asia-Pacific region dur-
Applied Research ing the second year.
The Management of Technology program is the first of its kind to be offered in the
The basic curriculum is fixed but requires three graduate-level electives. upper Midwest. Because of its diversity, the availability and support of eminent facul-
A.12 APPENDIX A
Principal contact: Dr. Gearold Johnson, Academic Vice

ty, and its strong, longstanding relationship with the corporate community, the
President
University of Minnesota is uniquely qualified and positioned to offer this program.
Degree offered: Master of Science Degree
Polytechnic University
The NTU curriculum in Management of Technology (MOT) allows technical profes-
Complete address: 6 Metrotech Center
sionals and managers to complete a 2-year interdisciplinary program of instruction
Brooklyn, NY 11201
leading to a Master of Science Degree in MOT. This program links engineering, sci-
Phone: (718)260-3175 ence, and management disciplines and addresses the planning, development, and
Fax: (718)260-3874 implementation of an organization's strategic and operational objectives in bringing
E-mail: gschiIIi@duke.poly.edu today's technologies to the marketplace. MOT deals with the issues and methodolo-
gies involved in innovation, technology transfer, integration of technologies into
Principal contact: George A. SchilIinger strategic objectives of the firm, managing technical resources, evaluation of obsoles-
Degree offered: Master of Science in the Management of cence, replacement criteria, managing large and complex projects, and technological
Technology assessment and evaluation. Candidates for a degree in Management of Technology
complete 45 credits over the course of the 2-year program. NTU has brought together
As one of the first accredited universities to offer an advanced degree in the some of the nation's leading academic instructors and business experts in the formula-
Management of Technology, Polytechnic is a leader in developing the basic concepts tion, development, and implementation of this program. The degree is pursued on a
and approaches involved in MOT. The curriculum melds the content of an MBA pro- part-time basis; each trimester the students take 2 courses at their work location via
gram with new subjects that meet the requirements of changing, innovative, and tech- satellite for a total of 12 courses over the 2 years. The courses include Technology and
nology-intensive corporations. But rather than grafting a few courses onto a traditional Economic Analysis, Managerial Accounting and Technical Systems, Manufacturing
management program, Polytechnic has developed a thoroughly innovative, integrated Systems and Technology Strategy, Technology and Financial Decision Making,
curriculum. The course of study incorporates a range of new and important technolog- Managing and Leading Technical People, R&D Management, Business Unit Strategy
ical subjects and issues in the framework of traditional management education. The and Operations, Taking Technology to Market, Strategic Management of Technology
emphasis throughout is on practical applications, and on the effective management of and Innovation, Quality Management, Scientific and Technical Institutions, and
the enterprise. Technological subjects and issues include the folIowing: the process of Analysis of Emerging Technologies. The students work together as a group; during the
innovation in the firm; the strategic management of research and development, engi- course of the program, the students are brought together for seven I-week residencies
neering, and operations; the reduction of new-product development times; the effec- at different locations. At these residencies, the MOT faculty, as well as top experts
tive use of information systems and technologies; the effect of new technologies on from industry, education, and government, participate as lecturers. Additionally, all
strategies of the firm; moving into new technologies: timing and choice; internal tech- students complete individual field projects at their companies.
nology venturing; strategic alliances for technology acquisition and product develop-
ment; high-tech marketing; risk management of technological projects; development School of Postgraduate Management Studies (SPMS)
of core competencies; and technology development in the "boundaryless" corporation Complete address: Faculty of Business Administration
with customers, suppliers, and even competitors. In this new curriculum, even tradi- National University of Singapore
tional subjects such as finance are taught with technological issues in mind. For Singapore 119260
instance, calculations on return on investment must now take into account the risks
Phone: (65) 772-6324
associated with obsolescence of existing capital equipment and technical personnel.
Similarly, instruction in conventional methods of operations management considers Fax: (65) 775-3955
the new knowledge and skills needed to manage continually changing products and E-mail: FBAWPK@nus.sgorFBAKS@nus.sg
processes and the interaction of manufacturing with product development, marketing,
Principal contact: Dr. Wong Poh Kam, Deputy Director,
and strategy. The curriculum as a whole reflects an intensive reappraisal of what mod-
SPMS, Director, Centre for
ern managers need to know to compete in complex volatile, technology-intensive, and
Management of Technology
highly competitive global markets. They include the most recent insights, theories,
and lessons learned by technology managers, academic researchers, and management Dr. Kulwant Singh, Deputy Director,
consultants from recent U.S., European, and Japanese experience. Centre for Management of Technology
Degree offered: Master of Science
National Technological University
Complete address: 700 Centre Avenue The Master of Science in Management of Technology program is offered in collabora-
Fort Collins, CO 80526 tion with the Postgraduate School of Engineering (PSE), National University of
Singapore. It addresses both the managerial as welI as the technical aspects of technol-
Phone: (970)495-6400
ogy-intensive businesses in order to assist technical professionals to assume increas-
Fax: (970)498-0601 ing managerial responsibilities as their careers progress. The program is particularly
E-mail: GerryJ@mail.ntu.edu or relevant for those involved in R&D management, engineering project management,
Tina@mail.ntu.edu
and manufacturing management as well as product development and marketing in Principal contact: Dr. George F. Farris, Director
high-tech industries. Technical entrepreneurs, government technology planners, and Technology Management Research
other technical personnel who are expecting increasing management responsibilities Center
will also benefit from the program. The M.Sc. program has a strong link with the
Degrees offered: M.B.A. with concentration in MOT,
Faculty's Centre for Management of Technology (CMT), which serves as a focal point
to conduct industry-related research and consulting work in technology management. Ph.D. Management of Innovation and
Technology
This ensures that the program has a good mix of theoretical and practical approaches
to the management of technology. All M.Sc. (Mgt. of Tech.) candidates must complete Description of MOT Program: We offer a concentration in the Management of
a total of 12 courses from core management and technology streams of study. Four Innovation and Technology for our M.B.A. students. Students must take four elective
technology streams of study are available: systems engineering, manufacturing and courses beyond their other M.B.A. requirements, including two courses which are
electronics, civil engineering, and information technology. Candidates can therefore required for the concentration and two others which can be selected from a list of possi-
design a study plan that emphasizes specialization in domain-specific technology ble options. The required courses include Management of Science and Technology (the
management skills or covers broad technology management disciplines. Besides pro- process of innovation, stimulating creativity and translating it to organizational output,
viding a foundation in core management skills, the curriculum is designed to provide and developing an innovative climate) and Organizations of the Future (managing
management training in technical functions, such as management of R&D, product knowledge-based organizations, with permeable boundaries, networked relationships,
innovation and commercialization, management of technical professionals, and tech- and the transformation processes under way in such organizations). Additional courses
nology strategy. Courses are offered on both part-time and full-time bases. Admission are Management of Technical Professionals (in cooperation with the National Technical
requirements are a good undergraduate degree and relevant work experience. An University), High Technology Entrepreneurship, Management of Information Service
acceptable GMAT or GRE score, while not required, is recommended. The term runs Organizations, and a number of other courses. Our school also offers courses on the
from July to November and January to April. The program is into its fourth year and management of innovation and technology at both the undergraduate and Ph.D. levels.
has an average intake of about 60 students per year. About 10 percent of the students
George Washington University
come from overseas.
Complete address: 2130 H Street, NW, Suite 632
Rochester Institute of Technology Washington, DC 20052
Complete address: 104 Lomb Memorial Drive Phone: (202)994-7541
Rochester, NY 14623-5608 Fax: (202)994-4606
Phone: (716)475-6221 Principal contact: Ms. Patty Rice
Fax: (716)475-7450 Degree offered: Master's in Engineering Management
E-mai]: rjbbbu@rit.edu (emphasis on marketing of technolo-
Principal contact: Dr. Robert Barbato, Associate Dean gy), D.Sc.
Degree offered: Techno]ogy Management M.B.A. This concentration prepares students to market technical products and services in the
domestic and international markets. Marketing is the business function that identifies
The major benefit of earning a Rochester Institute of Technology M.B.A. is the num-
unfulfilled needs and wants and defines and measures their magnitude, determines
ber of technological resources available on campus, from advanced laboratories for
which target markets the organization can serve, decides on appropriate products, ser-
statistics to courses for highly specialized technologies. The student gains the special-
vices and prepares to service those markets, and calls on everyone in the organization
ized knowledge to translate technological advances into new products and services to "think and serve the customer." We stress the fundamentals of marketing and their
through the Technology Management M.B.A. concentration. Concentration courses application in the technical field of engineering.
include Introduction to Technology Management and Managing High-Tech
This concentration also provides a systematic treatment of global-scale marketing,
Organizations and two electives. Students may elect to have a second concentration
with an emphasis on marketing management and strategy, and deals with how techni-
area giving them cross-functional expertise. The RIT M.B.A. degree program requires
cal marketing managers can analyze, understand, and be more effective in the global
18 graduate credit hours. RIT is on the quarter system and has rolling admissions. The
marketing environment. Issues of global marketing are treated within the broad con-
RIT College of Business is accredited by ASCSB.
text of U.S. competitiveness, i.e., the ability to compete in national and global mar-
Rutgers, the State University of New Jersey kets. The primary objective is to explore and manage the specific array of strategic
issues involved in entering overseas markets and in conducting marketing operations
Faculty of Management on a global, as opposed to a domestic scale.
Address: Department of Organization Management
180 University Avenue University of Western Sydney, Macarthur
Newark, NJ 07]02 Complete address: Faculty of Business and Technology
Phone: (201 )648-1650, 648-5984, 648-5982 University of Western Sydney, Macarthur
P.O. Box 555
Fax: (201)648-1664
Campbelltown NSW 2560, Australia
A.16 APPENDIX A
Phone: 046 203699 College of Engineering and the David Eccles School of Business, with cooperation of
Fax: 046 266683 other parts of the University such as the College of Science, the Technology Transfer
E-mail: l.delacy@uws.edu.au Office, the Office of the Vice President for Research, and the Office of the Vice
President for Academic Affairs. The program is designed with "management of tech-
Principal contact: Lizette DeLacy
nology" as an integrative theme which links various disciplines and departments,
Degree offered: Master of Technology Management rather than as a separate academic field; but a core group of specialized courses in the
field of management of technology has been established by both the College of
The Master of Technology Management is an innovative program designed to assist Engineering and the School of Business as the centerpiece of the program. The pro-
managers to plan, develop, and implement technological and managerial innovations gram has a number of special features, including
to shape and accomplish the strategic and operational objectives of an organization.
This course is designed for managers who are seeking to improve their understanding 1. An international subtheme (emphasizing international technology ventures and
of the issues involved in economic development based on technological innovation global business)
and the application of technology to achieve continuous improvement. It will improve
2. Courses tailored to the distinctive strategic context of "middle-sized" economies
managerial effectiveness by developing a knowledge of operations management in a
(e.g., the Rocky Mountain states in North America, or the smaller nations of Latin
technology based enterprise. The multidisciplinary nature of managing technology America and Asia)
requires managers to be able to understand the many interlinking facets of organiza-
tions and systems both large and small. The master's program has been designed to 3. Educational experiences for students in the program emphasize "learning by
enable and encourage interaction between participants to enhance their skills as com- doing" through interdisciplinary teams working on "real-world" problems of tech-
municators, leaders, and team members. The Master of Technology Management is nology enterprises
designed, developed, and presented by a team of academics and business people who 4. MOT aspects of the program designed to complement existing engineering and sci-
are focused on making technology work to optimize the management and performance entific programs at the University of Utah
of business organizations. Entry to the Master of Technology Management requires
successful completion of a degree in a technical or business-commerce area plus a Students engaged in specialized graduate study in the sciences, medicine, or engineer-
minimum of three (3) years of postgraduate work experience or Graduate Diploma or ing may enroll in the Management of Technology Program while remaining within
Graduate Certificate with a satisfactory grade point average and appropriate work their core area of study; they would graduate with an M.S. or Ph.D degree in their core
experience. In exceptional circumstances, the University may recommend an entry scientific or technical field, with anuij MOT emphasis integrated into their pro-
into the program when the applicant does not have these formal requirements, but can gram. Alternatively, students engaged primarily in business studies may complete an
demonstrate equivalent knowledge and experience. The program consists of five core M.B.A. or Ph.D. degree with an emphasis in MOT technology. Modules in the MOT
subjects and three elective subjects offered Over two semesters in the full-time mode. are presently being developed for undergraduate programs (in business and engineer-
The core subjects provide interdisciplinary skills in quality management, innovation, ing) and for the Executive M.B.A. degree. The University of Utah's Management of
technology management strategies, performance measurement, and decision support Technology Program also includes an interdisciplinary universitywide seminar series
systems. The elective streams allow participants to focus on a particular technological and cross-departmental research activities.
environment such as manufacturing, energy, transport, or water resources.
The University of Utah

Complete address: Management of Technology Program
106 KDGB
The University of Utah
Salt Lake City, Utah 84112
Phone: (801)581-7758
Fax: (801)581-7214
E-mail: mot@business.utah.edu
Principal contact: Dr. Kevin W. Willoughby
Director, Management of Technology
Program
Degrees currently offered: M.B.A. (Management of Technology),
M.S. (Management of Technology)
The Management of Technology Program at the University of Utah was established in

1995. It is a comprehensive universitywide program, based on an axis between the
AACSB American Assembly of Collegiate
Schools of Business
ABMA Army Ballistic Missile Agency
AHP analytical hierarchical process
AMHT advanced manufacturing hardware tech-
nology
AMMT advanced manufacturing management
technology
ARPA Advanced Research Project Agency
ASEE American Society for Engineering
Education
ASEM American Society for Engineering
Management
BDA behavioral decision aids
BPR business process engineering
CAD computer-aided design
CAM computer-aided manufacturing
CAPP computer-aided process planning
CC communications and computer
CE concurrent engineering
CEO chief executive officer
CIM computer integrated manufacturing
CNC computer numerical control
CPM critical path method
CS corporate strategy
CT computerized tomography
DARPA Defense Advanced Research Projects
Agency
DICE Defense Initiative on Concurrent
Engineering
8.1
B.2 APPENDIX B ACRONYMS AND ABBREVIATIONS B.3
DOD Department of Defense MAUF Multiattribute Utility Function

DFT distance from target MAUT Multiattribute Utility Theory
DHM decentralized hierarchical modeling MBA Master of Business Administration
DRAM dynamic random access memory MBU manufacturing business unit
DRC designated research center MRD material requirements document
DSS decision support system MRP material resource planning
EE envision and enact MTBF mean time between failures
EEC European Economic Community NASA National Aeronautics and Space Admin-
Engineering Management Society istration
EMS
NC numerical control
EMSA enterprise modeling by structural analysis
NGT next generation technology
EPA Environmental Protection Agency
NIC newly industrialized nations
ES expert system
NIH National Institutes of Health
ETMI European Technology Management
Initiative NIH not invented here
FCC Federal Communications Commission NSF National Science Foundation
FDA Food and Drug Administration OECD Organization for Economic Cooperation
FMS flexible manufacturing systems and Development
OEM original equipment manufacturer
GERT Graphical Evaluation and Review
Technique O/PD organizational and professional develop-
GMTSP Global Manufacturing Technology and ment
Strategy Vision Project OSHA Occupational Safety and Health
GNP gross national product Administration
PC personal computer
GPSS General-Purpose Systems Simulation
PDSA plan-do-study-act
IAMOT International Association for
Management of Technology PERT program evaluation and review technique
IEEE Institute of Electrical and Electronics PIMS profit improvement of marketing strategy
Engineers PPM Project Portfolio Management
IMD Institute for Management Development PPP phased project planning
INFORMS Institute for Organization and QFD quality function deployment
Management Sciences
R&D research and development
IPM integrated process management
RDEC Research, Development, and Engineering
IRC Interdisciplinary Research Centers Center
IT information technology RIA research impact assessment
IURC Industry University Research Centers R-MEN research-management expert network
JIT just-in-time RR review and react
KBDSS Knowledge-based Decision Support RTC resistance to change
Systems
SBU strategic business unit
KSA knowledge, skills, and abilities
SCI science citation index
LCD liquid crystal displays
SGC stage-gate concepts
LDC least developed countries
SME small manufacturing enterprise
LED light emitting diodes
SPC statistical process control
MAUA Multiattribute Utility Analysis
B.4 APPENDIX B
SSF Space Station Freedom

STEP standard for the exchange of product
model data
SWOT strengths, weaknesses, opportunities,
threats
TAl technology advantage index
TAS technology advantage score
TC technology cycle
TCS teaching company scheme Abernathy, William J., 8.3, 23.10 Gold, D. M., 3.9
Ackoff, R., 16.2, 16.3, 16.4, 16.32 Gomory, R., 23.9
TG technology gradient Anderson, P., 23.8 Goold, M., 18.19
TGN technology gradient network Andrews, K. R, 7.1 Gunasekaran, A., 17.1, 17.2
TIM technology and innovation management Argyris, c., 20.4
TOP integration of technology, organization,
Hamel, G, 3.9
and people
Betz, Frederick, 8.6 Hammer, M., 16.1, 16.2
TPM total productivity model Block, P., 19.14 Handy, C., 18.19
TQM total quality management Botkin, J., 19.2 Harrigan, K. R, 20.10
Bowen, H. K., 19.2 Hayes, R., 18.19
TSTM total systems approach to management
Brod, c., 16.9, 16.10
TTM time to market
VGA video graphics array Johnsrud, c., 17.1, 17.2
Campbell, A., 18.19
Champy, J., 16.1, 16.2
Chandler, A., 7.1 Kamm, Judith, 1.28
Clark, K., 8.3,18.19,19.3,23.10,23.11, Kash, Dan E., 9.1
23.14 Keys, L. K., 3.13
Cooper, R G., 32.3 Kim, D. H., 19.9
Crosby, P., 7.5 Kleinschmidt, E. J., 32.3
Kocaoglu, D., 19.4
Kolb, D. A., 19.9
Dalmia, G., 20.10
D' Aveni, R A., 6.4
Davis, S., 19.2 Lohr, Steve, 5.1
Demb, A., 5.2
Deming, W. E., 16.18, 19.9
Dodson, M., 18.19 Martin, J., 16.13
Drucker, P., 6.11, 20.2 Maslow, A., 16.13
McLagan, P.A., 20.1, 20.6
Mintzberg, H., 7.1,11.8
Filipczaj, B., 20.7 Mitroff, 1.1., 19.2
Fisher, G., 6.14 Morgan, G., 18.19
Forrester, J. w., 13.12, 16.2 Morone, Joseph, 8.3
Gaynor, G. H., 18.16, 18.19 Naisbitt, 1.,17.16

Gelertson, D., 16.33 Neubauer, E E, 5.2
*This index includes authors whose work is discussed in text. It is not a listing of contributors to
the Handbook.
1.1
1.2 AUTHOR INDEX
Okko, P., 17.1, 17.2 Schumpeter, J., 6.3

Senge, P. M., 13.12, 16.2, 18.19, 19.6,20.11
Patel, P., 18.19

Snow, C. P., 6.12
Stata, R., 19.8 -------
SUBJECT INDEX
Pavitt, K., 18.19 Steele, L., 6.13
Peters, T., 18.19
Pfeffer, J. L., 20.2
Porter, M., 6.7, 6.8, 7.2, 7.12, 7.14 Teece, D., 6.12
Prahalad, C. K., 3.9 Thomson, R., 18.20
Thurbin, P. J., 18.20
Thurow, L. c., 3.10
Quinn, J. B., 7.1 Tilton, J. E., 22.7
Tushman, M., 23.8
Abbott Laboratories, 34.4 Aspartame, 34.3 to 34.27
Reisman, A., 13.2 Absorptive capacity, 38.1 to 38.2 applications of, 34.12 to 34.13
Roberts, Edward, 1.3, 13.12 Waetjen, w., 20.7 Academic paradigms, 6.10 approval by FDA, 34.13 to 34.14
Rubenstein, Albert H., 8,4 Wang, Daniel, 8.7 ACTION model, 11.13 to 11.14 aspartame opportunities and problems, 34.3
Russel, Bertrand, 13.5 Wheelwright, S. c., 19.3,23.11,23.14 Activity-based costing, 26.16 to 34,4
Whiston, T. G., 18.20 Activity-based management, 26.16 case study teachings, 34.20 to 34.24
Worlton, J., 12.1 Adding value, 19.14 changing sweetener markets and, 33.14 to
Schein, E. H., 4.9 Administration: 33.16
Schendel, D., 22.6 requirements, 1.5 to 1.6 indicators of business success with, 34.17 to
Schon, D., 20,4 Zwicky, F., 12.8, 13.13 in tripartite model, 1.14 to 1.16 34.19
Administration and management differences, joint commercialization with General Foods,
1.5 to 1.6 34.11 to 34.12
Adoption of technology, 11,4 to 11.6,11.14 life after government approval, 34.7 to 34.10
Advanced management technologies, 7.20 life after Monsanto, 34.19 to 34.20
Advanced manufacturing hardware and software manufacturing of, 34.10 to 34.11
technologies, 7.19 to 7.20, 38.24 to 38.28 market launch, 34.16
Advanced manufacturing management tech- NutraSweet group formation, 34.17
nologies, 7.19 safety concerns, 34.7
Aesthetics and customer service, 7.21 Searle, company background, 34.3 to 34,4
Agility: Searle's new strategic process, 34.19
description of, 7.24 Assessment of design quality, 10.29
in global business processes, 38.11 to 38.13 Assets:
in technology adoption, 11,4 complementary, 4.12 to 4.13
AHP (analytical hierarchical process), 15.3 core technology, 4.3 to 4.5
Alpha test requirements, 24.6 organizational, 4.5 to 4.10
American Productivity and Inventory Control Automation, 35.2
Society, 11,4
Analog Devices, Inc., 19.8
Analytical hierarchical process (AHP), 15.3 Baggage from the industrial age, 38.8 to 38.9
Analyzing organizational impacts of new tech- Baldrige award, 1.4
nology, 11.3 to 11.19 Barriers, disconnects, and practices in team dri-
Apple Computer, 6.14 ven projects, 25.12 to 25.13
Aptitude testing of technology managers, 21.6 Barriers to implementing management of tech-
to 21.11 nology (MOT), 29.1 to 29.13
Architectural innovation, 8,4 achieving holism in eliminating, 29.10
Areas of culture, 4.9 to 4.10 change in removing, 29.5 to 29.8
ARPA (Advanced Research Project Agency), elements of change, 29.5
26.19 resistance to, 29.6
Artificial sweetener history, 34.3 to 34.27 types of change, 29.6 to 29.8
1.3
1.4 SUBJECT INDEX SUBJECT INDEX 1.5
Barriers to implementing management of tech- Business unit performance (Cont.): Chronological mapping (Cont.): Competitiveness (Cont.):
nology (MOT), (Cont.): critical success factors for, 10.20 example of video tape recording technology, dynamics of, 6.4 to 6.5
desire for equity, 29.4 to 29.5 culture requirements for, 26.16 to 26.17 13.8 financial approach to, 6.1 to 6.2
desire for personal growth, 29.4 environment for success in, 21.1 to 21.3 types of technology information for, 13.7 generic strategies of, 7.8 to 7.9
fallacy of programmable change, 29.10 examples from electronics and computer Chrysler Corp., 7.23, 32.2 job security and, 3.10
forces underlying organizational structure, industries, 32.1 0 to 32.12 Chunnel (underwater tunnel connecting England metacompetencies for, 6.20 to 6.21
29.2 executive level actions in, 10.9 and France), 1.16 resource based model of the firm for, 6.18 to
implementing change, 29.8 to 29.9 future infrastructure impact on, 32.10 Co-word-based mapping, 13.6, 13.9 to 13.11 6.21
nature of organizational change, 29.5 integrating management of technology bibliometric method of, 13.10 risk aversion and, 6.2
pressure for efficiency, 29.2 to 29.4 (MOT) in, 33.6 to 33.10 co-word-based map of chemical engineer- sustainability of, 7.3
pressure for stability, 29.4 marketing dimensions related to, 32.10 to ing knowledge, 13.11 Complementary assets, 4.12 to 4.13
Base technologies, 4.4 32.11 description of, 13.9 Compliance issues, 36.10 to 36.11
Behaviors in complex systems, 19.11 to 19.12 measuring functional performance as part of, Jackard index for, 13.10 Computers (laptop and notebook), 23.14 to
Benchmarking in manufacturing, 37.11 to 37.40 33.2 to 33.3 Cognitive mapping, 13.6, 13.11 to 13.13 23.15
appendix to, 37.33 to 37.37 objectives of, 10.7 description of, 13.11 to 13.12 Conceptual mapping, 13.1, 13.13 to 13.17
benefits of technology investment, 37.10 to opportunities in, 10.13 of R&D problems, 13.12 approach to building a conceptual map, 13.15
37.19 processes in, 33.9 to 33.10 Combinative competitive capabilities, 38.1 to to 13.16
glossary of terms, 37.37 to 37.40 project process approach to measuring, 38.4 background of, 13.13 to 13.14
investment decisions in, 37.19 to 37.22 33.3 Communication, 30.3 description of, 13.13
overview ofrespondents, 37.24 to 37.31 scanning process in, 10.14 in creating change, 29.3 levels of, 13.14 to 13.15
scope of study, 37.1 unit profitability, 32.9 to 32.10 Communities of practice, 38.12 of technology knowledge, 13.17
skill needs, 37.22 to 37.24 Company level performance, 32.12, 32.14 Concurrence phenomena, 31.15
technology use, 37.2 to 37.10 Comparison of traditional and neo-operations Concurrent engineering, 16.16, 30.3
Benchmarking in R&D, 14.6 to 14.7 Canon, 4.4 strategy, 38.3 Continuous improvement, 16.1
Beta test descriptions, 24.6 Canonical correlation analysis, 38.36 Competition for design resources, 23.10 Continuous learning, 30.9 to 30.10
Bethlehem Steel, 7.2 Capability: Competitive advantage, 7.1 to 7.27 Conversion entities, 5.15
Bibliometric studies, 31.11 to 31.15 created,S. I 0 to 5.11 assessment of, 26.11 to 26.12 Core competency:
Biotechnology products, 8.7 foundations of complex, 38.13 to 38.14 capabilities of technology for, 38.18 to 38.28 analysis of, 6.23 to 6.26
Biotechnology systems, 8.7, 8.9 in modeling, 11.7 to 11.8 choosing products and services, 7.4 description of, 6.23
Boeing Corporation, 7.23,11.16,23.2,28.4 to Capability-based competition, 38.6 to 38.13 contribution from technology to, 7.1 to 7.27 impact of technology change, 8.4
28.5 Cause and effect observations, 16.3 early availability as, 7.22 leveraging of, 6.20
Boundaries of virtual markets, 38.5 Cellular events and states, 8.9 high quality as, 7.18 as part of product definition, 36.15
Breakthrough zones, 5.19 to 5.21 Challenges, competitive, 22.14 to 22.16 linking technology to, 7.11,7.26 portfolio of, 6.19 to 6.21
Building knowledge base for competitive Change: of low price, 7.16 in semiconductor industry, 6.25
advantage. 26.11 to 26.12 communication in creating, 29.3 priorities in achieving, 38.14 to 38.15 Core technologies, 1.26
identification of, 5.20 cultural resistance to, 29.7 progression theory of, 38.13 to 38.18 Core technology:
Business, theory of, 6.11 dynamics of, 4.14 ways of creating, 7.12 assets, 4.3 to 4.5
Business architecture: elements of. 29.5, 29.8 to 29.9 Competitive analysis: competency, 8.3, 8.9
goals and strategies, 2.4 to 2.5 eliminating barriers to, 29.10 to 29.11 in product definition, 36.7 to 36.10 Corning, 8.3
phases of, 2.5 ineffective interactions in creating, 29.7 of products, 25.9 to 25.10 Corporate boards:
Business management model, 6.4 inference ladder of, 29.7 view of technology, 2.8 expertise in technology, 5.6
Business process reengineering interdependen- management of. 16.2, 26.22 to 26.24 Competitive capabilities, generic, 38.21 to 38.28 implications for decision processes, 5.5 to
cies. 16.4 organizational context in, 29.5 to 29.6 Competitive challenges, 22.14 to 22.16 5.7
Business schools: political resistance to, 29.6 to 29.7 Competitive progression theory, 38.13 to 38.18 involvement in technology, 5.1 to 5.24
impact on business management, 6.13 resistance to, 3.13. 29.6 Competitive strategy: modes of operation, 5.2
impact on technical management, 6.3 Chaos theory, 16.7 characteristics of, 7.2 strategic directions, 5.6
Business strategy. 2.7 Characteristics of neo-operations view of capa- description of, 7.2 Corporations as systems, 16.2
Business unit assets: bilities-based competition, 38.7 to 38.9 generic, 7.8 to 7.9 COSAT model, 11.12 to 11.13
external, 4.10 to 4.11 Checklist for product platform renewal projects, as iterative process, 7.3 Cost or price, 7.4
internal, 4.5 to 4.10 25.13 to 25.14 Competitiveness: leadership, 7.8, 38.17, 38.24
Business unit performance: Chronological mapping, 13.6 to 13.9 description of, 7.3 CPM (Critical Path Method), 15.2
complexities of, 21.12 to 21.13 example of, 13.7 dimensions of, 3.10 Created capability, 5.10 to 5.11
Creativity and innovation: Design: Engineering process (Cont.): First mover advantage, 6.16
creativity budgets, 9.3 competition for resources, 23.10 prototyping for, 10.22 Five forces model, 6.8
distinctions between, 1.16 dominant, 23.9 simulation of, 10.22 Focus:
for new products, 9.3 interface index for, 38.25 Engineering Research Center for Biotechnology on investment, 10.11
stages of creative process, 2.8 quality assessment of 10.18 Process Engineering, 8.7 as strategy, 7.9
Critical Path Method (CPM), 15.2 Development chain: Enterprise engineering: Forces that drive product variety and rate of
Cross-disciplinary forums, 14.7 to 14.8 definition of, 2.2 application of, 16.31 change, 23.8 to 23.12
Cross-functional problem solving, 19.7 to 19.8 management of, 2.3 communication requirements for, 18.18 to cost constraints, 23.9
Culture: Development of complementary assets, 4.12 to 18.19 market forces, 23.9 to 23.10
of industry technology, 8.2 4.13 conditions for implementing, 16.16 to 16.22 technological discontinuity of, 23.8
influences on and of, 4.9 to 4.10 DICE (defense initiative on concurrent engi- context diagram for, 16.27 Ford, Henry, 38.8
of university technology, 8.2 neering), 26.19 design as related to, 16.2 Ford Motor Co., 3.3, 3.9
Customer: Digital Equipment Corporation, 6.21 EMSA (enterprise modeling by structural Forecasting:
choices available to, 38.5 Dimensions of manufacturing epochs, 38.6 to analysis) model, 16.18 to 16.28 approaches to, 12.1
education of, 7.26 38.8 application of, 16.31 to 16.32 delphi method, 12.6
focus on, 7.4 Disconnects, barriers, and practices in team dri- future of, 16.32 to 16.34 logic tree, 12.1 to 12.2
needs of, 23.9 ven projects, 25.12 to 25.13 introduction of the concept of, 16.1 to 16.2 functional parameters, 12.2 to 12.5
requirements of, 2.10 Discontinuous innovation, 8.4 model related to, 16.18 purposes of, 12.6 to 12.7
satisfaction by, 26.8 Dislocation, 3.2 systems age and, 16.2 to 16.16 use of experts, 12.5 to 12.7
service to, 7.6 Distribution, 1.13 to 1.14 tools for, 16.22 to 16.30 Forecasting and planning, 12.1 to 12.11
willingness to buy, 23.9 Documentation, 11.8 vision of expectations from, 16.19 to 16.21 Foundations of complex capabilities, 38.14 to
Customer service, aesthetics and, 7.21 Domains of influence, 16.7 Epochs in manufacturing, 38.8 to 38.10 38.15
Dominant design: Ernst & Young, 11.4 Framework for product model and family com-
competitive standards for, 22.10 European Airbus Consortium, 7.3 petition, 23.1 to 23.21
DARPA (Defense Advanced Research Project emergence of, 23.9 Evolution of man and tools, 16.9 to 16.10 criteria for generational product competition
Agency),26.]9 Dominant firm concept, 6.15 Examples of R&D strategic requirements: in, 23.7 to 23.8
Decentralized hierarchical modeling (DHM), Downsizing, 3.10 appliance manufacturer, 14.5 forces that drive variety and rate of change in,
15.3 DRAM (dynamic random access memory): in chemicals, 14.5 23.2 to 23.3
Decision criteria, 10.11 description of, 23.5 in dairy products, 14.5 levels of analysis in, 23.3
Decision processes: model change or new product, 23.5 to 23.6 in food processing, 14.2 product competitive life cycle in, 23.12 to
development steps, 2.3 DuPont, 30.10, 34.4 in household products, 14.4 23.16
integrity in, 14.6 Dynamic complexity, 19.14 Expanded product lines, 7.23 contribution to research on innovation,
nonlinearity of power and load in, 18.15 Dynamics of change, 4.14 Expert systems: 23.16
in use of technology, 2.3 Dynamics of innovation, 3.3 description of, 15.8 dynamics of interaction in, 23.16
Decision support systems: inference engine for, 15.8 to 15.9 unanswered questions relating to, 23.16
history of, 15.1 to 15.5 selection of, 15.9 to 15.10 units of analysis for, 23.16 to 23.17
identifying killer parameters, 15.6 to 15.8 Economic model, 6.12, 15.2 using the, 23.16 to 23.17
in mapping technology, 13.4 Economies: Framework for system-wide learning, 19.15
model of, 15.11 of integration, 38.10 Factory automation, 35.2 Functional integration, 15.20
objective functions, 15.2 to 15.3 of scope, 7.24, 38.10 Family competition, framework for product policies for, 7.2
priorities in product definition, 36.13 to 36.14 Education: model and, 23.1 to 23.21 structure for, 29.2
in product substitution context, 22.5 to 22.7 as dynamic process, 13.5 Fast food industry, 1.16
in R&D management, 15.1 to 15.23 in technology management, 1.28 to 1.29, 19.4 Firm:
selection process, 15.3 to 15.5, ]5.21 to 19.5 infrastructure, 6.7 to 6.8 Galbraith, J. R., 28.3
Defense Advanced Research Project Agency Elements of change, 29.5, 29.8 to 29.9 as portfolio of competencies, 6.19 to 6.20 Gaynor, G. H., 30.4
(DARPA), 26.19 Emerging technologies, 1.26, 4.4 specializations and resources of, 6.19, 29.3 General Electric, 4.14, 7.2
Defense initiative on concurrent engineering Empowerment, 10.27 staffing levels and performance, 10.23 General Foods, 34.22
(DICE),26.19 Engineering management as element of MOT, strategy of, 2.2 General Motors, 23.11
Delivery reliability, 38.23 13.3 to 13.4 (See also Institutions) General Motors-Hughes Electronics, 4.2
Deloitte Touche Tohmatsu, 38.18 Engineering process: First generation management, 9.4 Generic competitive capabilities, 38.21 to
Delphi method in technology forecasting, 12.6 archiving of intellectual property in, 10.22 First International Conference on Engineering 38.28
Denver airport project, 1.16 documentation in, ]0.22 Management, 1.3 Generic competitive strategy, 7.8 to 7.9
GERT (graphic evaluation and review tech- Information (Cant.): Innovation (Cant.): Interdisciplinarity (Cant.):
nique), 15.2 integration in decision processes and learning, purpose of, 10.1 study of, 1.3
Global Manufacturing Technology and Strategy 18.3 to 18.24 radical, 8.2 systems of, 30.2
Vision Project, 38.18 to 38.19 Information technologies: radical systems, 8.2 training at different levels for, 30.2 to 30.5
Global Manufacturing and Vision Project, 38.4 linkages upstream and downstream, 7.13 recommendations for building, 9.10 to 9.13 Interdisciplinary and interfunctional relations,
Goal statements, 16.21 networks, 3.13 regular, 8.4 30.1 to 30.13
Government Results and Performance Act Infrastructure management, 26.18 to 26.19 revolutionary, 8.4 need for developing, 30.1 to 30.2
(GRPA),31.2 Innovation: role of, 9.1, 27.13 to 27.15 organizational changes for, 30.10
Graphic evaluation and review technique in action, 4.12 to 4.13 for single product cash flow, 10.6 patterns of response to, 30.6 to 30.10
(GERT), 15.2 broadening scope of, 27.14 in small and large firms, 18.10 to 18.11 dominant forms of action in, 30.6 to 30.7
GRIPS analysis tool, 11.9 to 11.10 building high performance organizations for, standards of, 10.10 learning skills derived from, 30.9
9.10 to 9.13 synchronous, 7.18 level of education in responding to, 30.7 to
in business context, 10.4 to 10.9, 23.2 to 23.3 time dynamic of, 10.5 30.8
Hewlett-Packard, Inc., 6.12,10.15,11.16,11.17, for cash flow cycle, 10.6 types of, 8.2, 9.3 role of, 30.5
36.2 to 36.3, 38.15 characteristics of environment for, 9.9 value driven, 9.4 training for, 30.2 to 30.6
HiTech, Inc. and Labellt!, 24.13 to 24.17 early warning signs of problems in, 9.11 work environment for, 9.8 to 9.10 Interfaces, 27.1 to 27.17
complete analysis of, 24.17 check-up for, 10.29 to 10.30 Innovation engine, 10.10 to 10.13 associated with R&D, 27.4 to 27.6
customer and user needs assessment for, and creativity, 1.16,9.3 Innovation environment, 10.26 to 10.29 explanation of, 27.2
24.15 to 24.16 as crossfunctional effort, 10.13 to 10.14 description of, 10.27 need for managing, 27.1
product definition for, 24.13 to 24.15 description of, 2.8, 9.2 leadership roles in, 10.27 organizational, 27.2 to 27.4
product definition change management, 24.17 developing metrics for, 9.8 Innovation learning: approaches to management of, 27.2 to
prototype management of, 24.16 to 24.17 differentiated from creativity, 2.9 extrinsic motivation for, 19.7 27.3
technology assessment for, 24.17 dynamics of 3.3 intrinsic motivation for, 19.7 explanation of, 27.2
HITOP analysis tool, 11.10 to 11.12 elements 01',10.17 stages of, 19.7 to 19.8 selection of instruments for managing, 27.3
Honeywell, Inc., 6.21 foreign influence on, 10.3 Institutions: to 27.4
Honeywell foundation, 5.1 for generating cash, 10.5 description of, 6.14 to 6.15 at the project level, 27.6 to 27.15
Hudson Institute, 20.4, 20.6 human side of, 9.10 as dominant firm, 6.15 communication and commitment, 27.6 to
Human resources, 20.10 impact on: management of competencies, 6.16 to 6.19 27.7
Human Sciences Research Council, 5.1 business performance, 10.4 and technology, 6.15 to 6.16 dynamic performance, 27.13 to 27.14
competitiveness, 10.3 (See alsa Firm) opponents ,27.13
core competencies, 8.4 Integrated process management (IPM) para- project planning, 27.7
IBM Corp., 3.5, 3.9, 4.1, 6.6, 6.14, 6.21,17.3 incremental, 8.2, 8.4 digms, 16.18 uncertainty, management, and communica-
Idea generation, evaluation, and selection, 9.5 incremental to radical, 9.3 Integrating reliability and performance, 7.21 tion, 27.9 to 27.13
Idealized unknown basic technologies, 1.26 influence on business performance by, 9.8 Integration, functional, 7.2, 15.20, 29.2 between R&D and marketing, 26.17 to 26.18
Impact of technology change on competency, intluence of people on, 9.8 Integration of technology and management, 10.14 International dimensions of project manage-
8.4 information tlow in, 10.14 Integration in technology organizations, 28.1 to ment, 35.4 to 35.8
Imperial Chemical, 30.10, 34.6 integration of functions for, 9.4 28.15 International Motor Vehicle Program, 11.4
Implementation of management of technology judgment measures for, 9.7 cost effectiveness of, 28.7 Interorganizational action, 22.18 to 22.19
(MOT), 1.8 to 1.9 in large and small firms, 18.10 to 18.11 MICOM (U. S. Army Missile Command) Interpersonal skills in management of technolo-
Incremental innovation, 8.2, 8.4 lessons from the past about, 9.1 to 9.4 28.9 to 28.11 gy (MOT), 21.3 to 21.4
Industrial age baggage, 38.8 to 38.9 marketing of, 10.3 modes of, 28.8 Introducing new technologies, 23.11
Industrial technology culture, 8.2 measuring performance of, 9.3 to 9.4 nonstructural influences of, 28.1 to 28.15 Invention, description of, 3.3
Industry-university research centers: metrics of, 10.5 people and tools for, 16.17 to 16.18 Investment in technology:
bridging two views of, 8.11 niche-creation strategies for, 8.4 requirements for, 28.1 to 28.2 choice and balance in, 9.2
requirements for, 8.11 to 8.12 opponents of, 27.13 structure for, 28.2 to 28.6 focus on, 10.11
technology transfer between, 8.12 to 8.13 phase determined roles in, 27.11 cross-functional teams in, 28.4 recovery time of, 37.20 to 37.21
Industry-university research cooperation for planning for, 9.11 hierarchy in, 28.2 related to manufacturing, 37.18 to 37.20
new generation technology, 8.10 process for, 10.1 to 10.30, 27.12 liaison positions in, 28. 3 clusters of, 37.9 to 37.10
Information: graphical map of, 10.2 matrix organizational methods for, 28.6 relevant use, 37.4 to 37.6
as global commodity, 38.5 to 38.6 process model for, 9.4 to 9.6, 10.13, 26.8 to project manager positions in, 28.5 IPM (integrated process management) para-
flow 01',10.14 26.9 Interdisciplinarity: digms, 16.18
intlow and outtlow, 18.4 to 18.5 stages in, 9.5 to 9.6 actions of, 11.17 ISO 9000, 1.4
.10 SUBJECT INDEX SUBJECT INDEX 1.11
lackard index for co-word-based mapping, Leader, Inc. and SendQuick (Cont.): Learning organization (Cont.): Management (managing) (Cont.):
13.10 customer and user needs assessment for, contemporary analysis of, 18.9 to 18.23 objectives of, 10.11
faguar,3.9 24.19 to 24.20 description of terms for, 18.11 to 18.12 in project selection, 15.20
fobs: organizational history of, 24.18 to 24.19 related to learning skill acquisition in, R&D interface in, 26.17 to 26.18
requirements in technological society, 20.5 to product definition for, 24.19 18.11,18.12 to 18.18 second generation, 9.4
20.6 product definition change management, 24.21 imperati ves for the, 20.10 to 20.12 skills in management of technology (MOT),
security in, 19.14 prototype management of, 24.21 to 24.22 infrastructure in, 19.13 to 19.14 21.3
technology assessment for, 24.21 introduction to, 18.3 to 18.4 strategic (see Strategic management)
Leadership: literacy and illiteracy of technology special- technical alliances, 26.12
Kearney, A. T., 11.4 in management of technology (MOT), 1.5, ists in, 20.9 to 20.10 as technology,!. 7
Key technologies, 4.4 26.5,36.15 need for, 18.6 to 18.18 traditional concept of, 21.1 to 21.2
Keys to introducing management of technology in new science, 16.7 processes, 19.1 to 19.17 Management and administration:
(MOT), 1.29 to 1.32 Learning: significance of, 18.3 to 18.4 description of, 1.5 to 1.6
Knowledge: attentionalload and skill stages in, 18.6 theoretical framework of, 18.4 to 18.6 differences between, 1.5 to 1.6
acquisition of, 16.6 channel capacity in, 18.6 to 18.7 Leveraging technologies, 1.26 requisites for, 1.5
description of, 13.1 to 13.5 complexities of, 18.5 Lincoln Electric, 3.6 Management gaps, 6.10, 6.12, 6.23
growth: conditions for, 18.7 Linkages: Management paradigms, 6.9 to 6.10
as combination of disciplinary branching corporate view of cycles of, 19.9 coordination of, 7. \3 Management policies, 7.17
and interdisciplinary crystallization, examples of, 18.6 description of, 7.12 to 7.\3 Management of technology (MOT):
13.2 to 13.3 feedback view of, 19.11 of firm's specializations, competencies, and activities in, 33.12
by convergent thinking, 13.2 framework for, 18.6 to 18.7, 19.15 resources, 6.2 basic skills for, 20.5 to 20.6
by divergent thinking, 13.2 by groups and teams, 19.7 to19.9 for optimization, 7.\3 board involvement in, 5.5 to 5.6
imperatives, 19.2 individual and group process representation of strategy and operations, 14.4 contrast of Japan with United States, 6.17 to
methodology for building base of, 26.10 to 26.11 of,19.10 technology to competitive advantage, 7.11 6.18
representation of, 13.6 information absorption in, 18.7 upstream and downstream, 7.13 cross-disciplinary need in, 2.2
role of experiential practice, 19.3 interdisciplinary skills for, 30.9 to 30.10 Linking technologies from four countries, 35.1 description of, 1.4, 33.2
theory of, 13.6 means for improving: to 35.10 educational deficiencies for, 20.5 to 20.6
Knowledge-based decision support systems in large organizations, 18.18 communications in, 35.1 to 35.10 educational requirements for, 5.6, 20.3
(KBDSS),15.3 in small organizations, 18.18 credos of parent organization, 35.2 expertise in, 5.6
Knowledge-based structures, 13.5 multidirectional communication and involve- cultural issues in, 35.6 to 35.7 at functional level, 5.4
Knowledge in management oftechnology ment in, 18. \3 documentation in, 35.7 implementation of, 1.8 to 1.9
(MOT): organizational (see Organizational learning) implementation guidelines for, 35.8 to 35.10 infrastructure for, 33.12
classification of, 19.4 process characterization in, 19.9 to 19.10 language problems in, 35.5 to 35.6 as integrated effort, 1.4 to 1.5
importance of, 19.2 process model for, 19.2, 19.13 to 19.15 project scope in, 35.4 integrating functions in, 33.6 to 33.10
role of, 19.2 processes in, 19.5 to 19.6 technology issues in, 35.7 interpersonal skills in, 21.3 to 21.4
types of, 19.2 to 19.4 skill acquisition from, 18.7 transfer of technology, material, and people in Japan, 6.16 to 6.18
Knowledge mapping: stages of, 19.12 in, 35.8 keys to introducing 1.29 to 1.32
application to technology for, 13.2 to 13.5 types of, 18.6 Lotus 1-2-3, 15.9 knowledge in, 19.2 to 19.4
assumptions for, 13.4 to 13.5 Learning disabilities, 16.2 leadership in, 1.5, 26.5, 36.15
description of, 13.1 Learning organization: learning challenges for, 20.4 to 20.5
history of, 13.1 to 13.2 acquisition oflearning in, 18.4 Management: limits of, 1.5
methods of, 13.6 analytical perspectives of, 18.19 to 18.23 decision models for, 16.6 management issues. 1.21 to 1.26
uses of, 13.3 to 13.4 approaches to developing a, 18.23 to 18.24 quantitative methods for, 16.6 managing [see Managing the management of
Known technologies, 1.26 cellular structure and integration hierarchy in. Management (managing): technology (MOT) process]
Kofman model, 19.8 18.13 across borders, 35.1 to 35.10 measuring benefits from, 33.1 to 33.33
Kolb model, 19.8 challenges for optimizing performance in, challenges of technology for, 21.2 to 21.3 phases of, 1.8 to 1.9
Kraft Foods, 34.22 18.16 to 18.18 education, 21.1 to 21.4 process control model for, 33.10 to 33.11
channels of information for decision process- of external resources, 26.9 role of hierarchies in, 20.3 to 20.4
es in, 18.12 first generation, 9.4 role of innovation, 1.5
Laptop computers, 23.14 to 23.15 characteristics of, 20.\ 0 human side of, 9.10, 26.5 role of professionals in, 20.3 to 20.4
Leader, Inc. and SendQuick, 4.0, 24.18 to 24.22 characterization of processes in, 19.9 to 19.16 matrix, 26.15 role of resources in, 33.11 to 33.12
complete analysis of, 24.21 to 24.22 in complex systems, 19.12 missing dimensions in, 6.4 scope of, 1.8 to 1.9
Management of technology (MOT) (Cant.): Managing the management of technology Manufacturing (Cant.): Measuring benefits from management of tech
ski1ls for, 1.17 to 1.26, 4.5, 20.2 to 20.3 (MOT) process (Cant.): epochs in, 38.6 to 38.12 nology (MOT), selecting measurement
in service organizations, 1.15 to 1.16 managing time, 26.20 to 26.22 operational indices for, 38.21 to 38.28 parameters for (Cont.):
from a systems perspective, 3.4, 3.14 to 3.16 decision making in, 26.21 to 26.22 ramp-up in, 10.20 for projects, 33.15 to 33.17
strategic dimensions of, 5.3 to 5.5 description of requirements for, 26.2] skilled users of, 37.6 to 37.9 up-front work for, 33.3 to 33.4
substitutes for, 3.9 diagnosing time constraints and losses in, statistical study in, 37.1 to 37.40 MCC (Microelectronics and Computer
system solutions for, 20.4 to 20.5 26.20 technologies in, 38.10 Technology Corporation) 26.13
Management of technology in the product sub- process model, 26.3 to 26.4 vision group in, 19.3 McGraw-Hili, Inc., 3.9
stitution context: core competency and product development Mapping (see Chronological mapping; Medtronic, Inc., 5.5
emerging views of, 22.7 to 22.11 in, 26.8 to 26.9 Cognitive mapping; Conceptual mapping; Megatrends 2000,17.16
perspectives on, 22.3 to 23.23 in exploration through development, 26.6 Co-word-based mapping; knowledge map- Mental models, 19.8
process of product displacement in, 22.11 to as a function of time, 26.4 ping; Research mapping) Message elements, 5.16
22.12 subprocesses in creating opportunities, 26.6 Market-pull strategy, 17.2 Metacompetencies, 6.23 to 6.25
purpose of using, 22.6, 22.19 to 26.8 Marketing: examples of, 6.24 to 6.25
research teachings in, 22.5 to 22.6 Managing software projects, 24.2 to 24.22 conjoint analysis in, 25.10 MICOM (U. S. Army Missile Command), 28.9
resource-based challenges in, 22.13 to 22.14 competitive analysis matrix for, 24.12 development of, 10.19 t028.11
response strategies to, 22. ] I to 22.18 description of 3 case studies, 24.3 experimenting in, 34.22 to 34.23 Microelectronics and Computer Technology
risks involved in, 22.16 to 22.19 examples of, 14.5 feedback from, 7.24 Corporation (MCC), 26.13
requirements for reducing, 22.17 to 22.18 label making, 24.2 to 24.3 introduction of new products, 10.20 Microsoft, 6.6
strategies for, 22.13 product definition for, 24.2 quick-response requirements for, 23.9 to 23.10 Middle, Inc. and AddressNow, 24.8 to 24.13
time of entry as component of success in, marketing requirement documents (MRDs) research in, 25.8 to 25.9 complete analysis of, 24.11
22.17 to 22.18 for, 24.2 to 24.3 strategic issues in, 14.4 to 14.5 customer and user needs assessment for, 24.9
Managing the management of technology Middle, Inc. and AddressNow, 24.3 to 24.13 Matsushita, 4.9 to 24.10
(MOT) process, 26.3 to 26.25 agreement on features for, 24.3 to 24.4 Measuring benefits from management of tech- product definition for, 24.8
integrating resources, functions, and infra- history of, 24.3 nology (MOT), 33.1 to 33.33 product definition change management, 24.13
structure, 26.9 to 26.15 launch of, 24.3 approaches to, 33.18 to 33.22 prototype management of, 24.1 0 to 24.11
competitive assessment of, 26.11 project organization for (Middle, Inc., "as is" analysis for, 33.21 technology assessment for, 24.12
effect of internal organization and bound- HiTech, Inc., Leader, Inc.), 24.7 to control systems for, 33.20 to 33.21 Minnesota Mining and Manufacturing (3M),
ary spanning, 26.14 to 26.15 24.8 expected output from, 33.20 4.4,4.9,6.12,30.10,36.14
environmental assessment for, 26.10 to timelines, 24.4 to 24.5 managing processes, 33.19 to 33.20 MIT Biotechnology Process Engineering
26.11 Middle, Inc. (AddressNow) (see measuring integration, 33.21 Center, 8.9
sources of scientific and technical knowl- Middle, Inc.) management of technology (MOT) process MIT Commission on Industrial Productivity,
edge in, 26.12 to 26.14 HiTech, Inc. (Labellt!) (see HiTech, Inc.) model, 33.10 to 33.12 11.4
systematizing technical acquisition for, Leader, Inc. (SendQuick) (see Leader, point of origin for, 33.6 to 33.10 Model-based life-cycle development, 16.24
26.14 Inc.) business process related to, 33.9 to 33.10 Model Learning Workplace, 11.8 to 11.19
technical knowledge requirements for, Manufacturing: levels of integration at, 33.6 Modeling capability, 11.7 to 11.8
26.11 to 26.12 of aspartame, 34.10 to 34.11 problems associated with, 33.] to 33.2 Models:
managing change in. 26.22 to 26.24 benchmarking study, 37.1] to 37.40 questions to be asked, 33.22 to 33.33 business management, 6.4
in cultures in R&D and marketing, 26.22 to appendix to, 37.33 to 37.37 for activities related issues, 33.31 to 33.33 Deming, 19.8
26.23 benefits of technology investment, 37.10 to for infrastructure related issues, 33.29 to economic, 6.12, 15.2
model for measuring effectiveness of, 37.19 33.31 EMSA (enterprise modeling by structural
26.23 glossary of terms for, 37.37 to 37.40 for resource related issues, 33.22 to 33.29 analysis), 16.18 to 16.28
managing functional interactions, 26.4 to investment decisions in, 37.19 to 37.22 redefining research and development for, 33.6 five forces model, 6.8
26.20 overview of respondents, 37 24 to 37.3 ] to 33.7 Kofman, 19.8
downward transfer of technology in, scope of study, 37.1 scaling measurement parameters for, 33.17 to Kolb, 19.8
26.18 skills needs, 37.22 to 37.24 33.18 learning process, 19.2, 19.13 to 19.15
from exploration through extensions, 26.5 technology use, 37.2 to 37.10 scope of requirements for, 33.4 to 33.5 management of technology:
financial and cultural boundaries in, 26.16 business unit performance in, 38.19 to defining impact of, 33.5 to 33.6 inputs to, 33.33
to 26.17 38.21 defining performance in, 33.5 measurement of, 33.13
infrastructure requirements for, 26.18 to development in, 10.18 selecting measurement parameters for, 33.13 process, 33.11
26.19 differences in small and large plants, 37.2 to to 33.17 mental,19.8
integrating mechanisms for, 26.15 37.3 for people performance, 33.13 to 33.15 open system, 26.3
Models (Cant.): Neo-operations strategy, drivers of change in NutraSweet (Aspartame) (Cant.): Orgware, 5.10
partially closed system, 26.4 (Cant.): indicators of business success with, 34.17 to Outcome metrics in R&D, 26.6
resource-based model of the firm, 6.18 to 6.21 speed to market as, 38.5 34.19 Ownership, 15.21
structured enterprise, 16.18 to 16.19 technology choices as, 38.5 joint commercialization with General Foods,
TOP (technology, organization, people), 11.5 virtual markets as, 38.4 34.11 to 34.12
to 11.8 hypothesis conclusions for, 38.28 to 38.39 life after government approval, 34.7 to 34.10 Pace of technology adoption, 11.3 to 11.4
traditional strategy, 6.6 introduction to theory of, 38.1 to 38.4 life after Monsanto, 34.19 to 34.20 Pacing technologies, 1.26, 4.4
tripartite organization, 1.12 to 1.17 new ideas and concepts in, 38.39 to 38.41 manufactl ing of, 34.10 to 34.11 Paradigm(s):
Modular technologies. 3.9 to 3.10 strategic manufacturing epochs in, 38.6 to market launch, 34.16 IPM (integrated process management), 16.18
Monsanto, 34.19 to 34.20 38.12 NutraSweet group formation, 34.17 reengineering to a new, 16.2
Morphological analysis: heritage from industrial age, 38.8 to 38.9 safety concerns, 34.7 shifts in, 16.1
description of, 12.2 questions to be answered regarding, 38.6 to Searle: structural enterprise modeling as a new, 16.18
process for, 12.9 to 12.10 38.7 company background, 34.3 to 34.4 Partially closed system model, 26.4
oftechnology, 12.8 to 12.9 world-class manufacturing in, 38.10 to new strategic process, 34.19 Peer review, 31.6 to 31.11
MOT [see Management of technology (MOT)] 38.13 characteristics of, 31.6 to 31.7
Motivations for targeted-basic research, 8.5 New product innovation: conclusions on, 31.10 to 31.11
Motorola, 5.5, 6.12, 6.14, 38.9 break-even time, 10.7 Open system model, 26.3 levels ofresearch evaluation for, 31.8 to 31.9
Multiattribute utility analysis, 15.5 to 15.6 cash flow in, 10.7 Operational flexibility, 38.23 criteria for, 31.9
Multiattribute utility function, 15.2 as driver for growth, 10.4 Operational indices of generic competitive capa- problems with, 31.10
Multiattribute utility theory, 15.2 expectations of, 10.10 bilities, 38.21 to 38.24 questions to be asked in, 31.9 to 31.11
introduction of, 10.29 Operational issues in MOT, 1.19 to 1.21 People:
management focus for, 10.9 to 10.10 Opportunities: as competitive advantage, 20.2
National Association of Manufacturers, 37.11 and product information sets, 10.18 attributes of, 10.11 as resource, 20.2
National Center for Manufacturing Sciences, reducing time for, 10.7 creation in R&D, 26.7 Performance:
38.18 New products: discarding projects, 10.30 company level, 32.12, 32.14
National Institute of Standards and Technology attractiveness of, 7.6 in external environment, 26.10 to 26.11 expectations, 1.23
(NIST), 11.6, 11.12 cycle time for, 7.22 recognition of, 9.5 parameters, 12.2 to 12.5
National Institutes of Health, 31.1 fast prototyping for, 7.22 to 7.23 scanning process for, 10.16 Personal computers (PCs), 4.1
National Research Council, 12.5 New technologies: Optimizing return on investment (ROI), 10.10 PERT (Program evaluation and review tech-
National Research Council Task Force Report adaptation of, 3.6 Organic enterprise, 18.10 nique), 15.2
on MOT, 2.1 introducing, 23.11 Organization for Industrial Research, 11.4 Phases of business architecture:
National Resources Committee, 12.5 organizational impacts on, 11.3 to 11.9 Organization of research: research and development phase, 2.6
National Science Foundation, 31.1,37.1 transition to, 3.13 centralized, 8.4 research and technology phase, 2.5
NCR,6.21 New York Times, 5.1 decentralized, 8.5 Phases of management of technology (MOT),
NEC Corp., 3.3 Next generation technologies: hybrid, 8.5 1.8 to 1.9
Neo-operations strategy, 38.1 to 38.44 examples of, 8.10 Organizational dimensions: Planning in R&D:
beyond mass production, 38.9 to 38.10 innovation in, 8.2 assets of, 4.5 to 4.10 as a function of company size, 14.3
competitive capabilities and technologies, strategy for, 8.10 context of change in, 29.5 to 29.6 by morphological analysis, 12.9
38.18 to 38.27 Niche-creative innovation, 8.4 levels of analysis in, 32.3 staff requirements for, 14.3
business unit performance for, 38.19 NIST (National Institute of Standards and meaning of success in, 32.1 to 32.2 Planning technology:
database for analysis of, 38.18 to 38.19 Technology), 11.6, 11.12 structure of, 4.7 activities in, 12.1 to 12.11
operational indices for, 38.21 to 38.28 Not invented here (NIH) impact on and from Organizational learning: progress in, 12.7 to 12.8
competitive progression, 38.13 to 38.18 culture, 4.9 achievement states in, 20.12 Portfolio management:
boundaries in, 38.16 to 38.17 Notebook computers, 23.14 to 23.15 descri ption of, 19.6 information environment for, 10.24
expanding process capabilities in, 38.16 NutraSweet (Aspartame), 34.3 to 34.27 dynamic complexities in, 19.4 managing bottlenecks in, 10.26
price leadership in, 38.17 to 38.18 applications of, 34.12 to 34.13 implications of, 20.12 project selection, 10.24
quality first requirements for, 38.5 to approval of by FDA, 34.13 to 34.14 leadership in promoting, 20.13 to 20.14 Precursors of technology, 2.9
38.16 aspartame opportunities and problems, 34.3 performance indicators for, 19.6 Price or cost, 7.4
theory of, 38.13 to 38.15 to 34.4 role of stewardship in, 19.14 to 19.15 Price leadership, 38.17, 38.24
drivers of change in, 38.4 to 38.6 case study teachings, 34.20 to 34.24 technology literacy as gateway to, 20.14 to Princi pIes for understanding behaviors of com-
age of customers as, 38.5 changing sweetener markets and, 33.14 to 20.15 pIe x systems, 19.11 to 19. 12
information as, 38.6 33.16 training and development, 20.14 Procedures, 4.6
Process enablers index, 38.25 Product issues, model variety and rate of change Product-service differentiation, 7.8 to 7.9 Project(s) (Cont.):
Product classification, 1.27 (Cont.): Product shelf life, 3.11 to 3.12 SAPPHO, 36.3
Product definitions, 36.1 to 36.20 evolutionary patterns of, 23.4 to 23.7 Product stability, 7.7 skills for, 10.20
competitive analysis for, 36.7 to 36.10 measuring, 23.19 to 23.21 Product substitution context: sources of uncertainty in, 28.3
compliance issues in, 36.10 to 36.11 perception of attributes, 36.5 to 36.7 background in, 22.4 stages of, 15.11 to 15.12
core competencies related to, 36.] 5 perfonnance, 7.5 to 7.6 emerging view of, 22.7 to 22.11 types of, 32.8 to 32.9
leadership actions in, 36.15 planning for, 26.17 to 26.18 entrance of new industries in, 22.7 to 22.8 uncertainty management in, 27.9 to 27.13
]ocalization issues in, 36.11 platfonns, 7.23, 23.12, 25.1 to 25.2 established concepts for applying, 22.5 to up- front requirements, 33.3 to 33.4
marketing channel and support descriptions positioning and value, 36.12 to 36.13 22.7 Project phases, 4.11 to 4.12
in, 36.13 to 36.14 process control, 7.19 impact of and on incumbent finns, 22.4 Project scheduling:
product and value positioning as requirement process for, 2.7 impact of and on new firms in, 22.4 textbook methods, 15.4
in,36.12t036.13 product and value positioning as requirement implications for managers, 22.20 use in R&D, 15.4 to 15.5
project and business plan as part of, 36.] 6 to in, 36.12 to 36.13 implications of using, 22.19 to 22.21 Project selection, 13.4
36.]8 project and business plan as part of, 36.16 to importance of, 22.3 Project Teammate, 23.14
research issues in, 36.2 to 36.3 36.18 influencing strategies in, 22.17 Proprietary technologies, 1.26
resource requirements for, 36.16 proposal requirements, 2.11 interorganizational actions in, 22.18 to 22.19 Protein production projects, 8.9
risk analysis in, 36.14 to 36.15 reliability, 7.20 technology issues involved in, 22.11 to 22.19 Prototypes of next generation technology sys-
steps in, 36.1 to 36.3 research issues in, 36.2 to 36.3 Production: tems, 8.10
strategic alignment, 36.4 to 36.5 resource requirements for, 36.16 costs related to, 7.15 to 7.17
strategic dependencies, 36.15 risk analysis in, 36.14 to 36.15 entities of, 5.15
understanding user and customer needs, 36.5 at stage of transfer, 9.5 planning and control index, 38.25 to 38.28 Quality:
to 36.7 standardization of, 23.1] to 23.12 Program evaluation and review technique description of, 7.5
Product delivery reliability, 38.16 steps in, 36.1 to 36.3 (PERT), 15.2 role of technology in, 7.18, 38.21
Product genesis, 1.12 to 1.13 strategic alignment, 36.4 to 36.5 Project(s): selection process and value of, 10.25
Product issues: strategic dependencies, 36.15 classification of, 15.10 to 15.19 Quality function deployment, 10.16
adaptability of, 7.6 tradeoff between model variety and rate of critical success factors, 10.20 Quantitative methods of research performance
attributes of, 36.5 to 36.7 change, 23.10 dependencies for success of, 32.9 and impact:
awareness of requirements, 7.7 transitioning paths in product model and fam- description of, 15.4 to 15.5, 15.19 to 15.20 bibliometrics in, 31.11 to 31.15
change intensity of software, 23.5 to 23.6 ily competition, 23.15 efficiencies in managing, 32.6 conclusions on, 31.17 to 31.19
competition life-cycle, 23.12 understanding user and customer needs, 36.5 as engines for renewal, 19.3 concurrence phenomena in, 31.15
competitive analysis for, 36.7 to 36.10 to 36.7 impact on customers, 32.6 cost-benefit and economic analysis of, 31.25
compliance issues in, 36.10 to 36.11 variety and intensity of, 23.2 to 23.3, 23.4 to implementation across different cultures, 35.8 to 31.27
cost effective substitutes, 3.3 23.5 to 35.10 expert networks in, 31.17
computer-aided engineering, 2.12 Product life cycle, 3.3, 3.12 infrastructure for, 32.7 in management, 16.21 to 16.22
core competencies related to, 36.15 Product platforms: integration and cost effectiveness, 28.7
decision priority list for, 36.13 to 36.14 case history in renewal of, 25.2 to 25.5 interfaces in, 27.4 to 27.15
definition process for, 10.] 6,36.] to 36.20 description of project, 25.2 to 25.12 management process for, 10.20 to 10.24 Radical systems innovation, 8.2
design and technology, 2.12 renewal of, 25.] to 25.15 manager responsibilities, 10.21, 28.5 to 28.6 Rand Corporation, 12.6
development process for, 10.17 to 10.18 renewal in manufacturing, 25.1 to 25.2 matrix structure, 28.6 R&D [see Research and development (R&D)]
cxpansion of product lines, 7.23 results from renewal of, 25.] 4 to 25.15 means and ends in, 27.9 to 27.11 Rapid prototyping, 16.16
families for, 7.23, 23.3 speed to market potential in renewal of, 25.11 measures of successful performance, 32.5 to Recognition and rewards, 10.29 to 10.30
description of, 23.2 to 25.12 32.6 Reductionism, 16.3
gating steps, 2.11 team organization for renewal of, 25.7 model of, 15.6 Reengineering:
leadership actions in, 36.15 team principle in renewal of, 25.11 to 25.12 monitoring and termination, 15.18, 27.8 to motivation to implement, 16.3
localization issues in, 36.11 team programs in renewing, 25.12 to 25.15 27.9 paradigm for 16.2
making transitions in introducing ne, 23.12 to team requirements for managing renewal of, organization, 28.6 to 28.7 Regular innovation, 8.4
23.15 25.7 to 25.8 ownership, 15.21 Reinforcing product attributes, 7.8
marketing, 2.12 thought architecture requirements for, 25.5 to performance, 1.16 Relation between innovation and markets,
marketing channel and support descriptions 25.7 phases of, 4.11 to 4.12 8.4
in, 36.13 to 36.14 assumptions for, 25.5 to 25.6 planning of, 27.7 Research, organization of, 8.4, 8.5
model variety and rate of change, 23.3 to 23.4 utilization factor for renewal of, 25.11 portfolio of information needs for, 10.26 Research, targeted-basic (see Targeted-basic
description of. 23.2 Product process relation, 4.11 to 4.12 ranking projects, 15.7 research)
Research and development (R&D): S curves: SpL'L'd10 murkl,t, 38.5 Sun Technologies, 6.6
culture of, 26.16 to 26.17 description of, 12.2 to 12.5 Slltllc~ of Icul'l1ing, 19.12 Sunbeam Corp., 4.11
description of, 31.1,33.6 fitting technology to, 12.3 to 12.4 Stundurdi/ulion, 23.11 to 23.12 Supporting technologies, 1.26
investment in, 33.6 reference to, 17.3 Slunlcy Works, 23.4, 23.6, 23.8 Sweetener market, 34.14 to 34.16
outcome metrics in, 26.6 scientific buse for, 12.4 l'vohllion of product lines, 23.7 Swiss Federal Institute of Technology, 11.4
planning of, 12.9, 14.3,27.8 to 27.9 Sandia National Labs., 11.13 Slulcol'-thc-urt-technologies, 1.26 Swiss watch industry, 4.2
practice in, 27.16 Science and technology, 6.13, 8.1 Sll'vens Inslitute of Technology, 19.4 SWOT (strengths, weaknesses, opportunities,
project SAPPHO, 36.3 Scouting technologies, 1.26 Sll'IIll'gic ugility, 38.1 to 38.40 and threats), 6.7 to 6.8, 26.10
role ofteams, 36.1 to 36.20 Searle, G. D., and Company, 34.3 to 34.27 Strulegic core competency in plant and equip- System behavior, 16.12 to 16.16
sources of science and technology knowledge Second generation management, 9.4 ment, 10.10 System development process:
in, 26.12 to 26.14 Self-directed teums, 10.30 Strategic munugement: architectural view of, 16.27
steps in, 36.1 to 36.3 Service industries, 1.7 unulyticul tools, 6.8 to 6.9 behaviors in complex systems, 19.Il to
use of resources, 14.2 Sharp Corp., 4.4 urchitecture for integrated approach, 6.21 to 19.12
vitality, 14.6 Simultaneous engineering, 23.9 to 23.10, 30.3 6,27 dynamics of, 29.11
Research and development strategy: Skills for management of technology (MOT), dilemmas in, 6,5 functional view of, 16.26
examples of requirements, 14.2 to 14.5 1.17 to 1.26, 4.5, 20.2 to 20.3 direction of, 5.3 operations view of, 16.25
integrity in, 14.6 Smith, Adam, 38.8 intent of, 6.21 risk and failure view of, 16.28 to 16.29
perceived as problem solving, 14.2 Social preferences and technology, 5.21 to limitutions of, 6.6 to 6.7 System integration, 19.3
planning, 14.2 to 14.4 5.22 of munagement of technology (MOT), 1.17 to Systems:
preconditions for developing, 14.1 Sociotechnical analysis, 11.8 1.18, 6.4 behavior of, 16.12 to 16.16
Research impuct assessment: Software products change intensity of, 23.5 to Strutegic manufacturing epochs, 38.6 to 38.13 boundaries for implementation, 16.7 to 16.9
benefits of, 31.2 to 31.3 23.6 Strategic marketing, 14.4 to 14.5 complex, principles for understanding behav-
problems with, 31.2 Software programs: Strategic partnering, 4.13 ior of, 19.11 to 19.12
Research mapping, 13.3 to 13.4 ACTION, 11.3 to 11.14 Strategy: corporations as, 16.2
Research organization, 8.4 to 8.5 COSAT, 11.2 to 11.13 of business architecture, 2.5 evolution of, 16.9 to 16.12
Research performance effectiveness and impact GRIPS, 11.9 to 11.10 as competitive advantage, 4.8 future directions and implications of, 16.2 to
(RPEI), 31.1 to 31.23 HITOP, 11.10 to 11.11 description of, 7.1 to 7.2 16.5
assessment of, 31.3 Software projects, 24.2 to 24.22 examples of, 14.2 to 14.5 integration of, 19.3
conclusions on retrospective studies, 31.4 to competitive analysis matrix, 24.12 financial approach to, 6.1 to 6.2 interaction between the parts of, 16.4
31.6 description of 3 case studies, 24.3 ofthe firm, 2.2 interaction with environment, 16.13
project Hindsight, 31.3 Labelmaking, 24.2 to 24.3 generic competitive, 7.8 to 7.9 laws of adaptability, entropy, and manage-
project TRACES, 31.3 to 31.4 marketing requirement documents (MRDs) implementation of, 6.5 ment, 16.16
retrospective studies, 31.1 to 31.5 for, 24.2 to 24.3 market-pull,17.2 methodology, 16.5 to 16.7
Department of Energy (DOE), 31.3 to Middle, Inc. and AddressNow, 24.3 to 24.13 for next generation technology, 8.10 multiple views of, 16.14 to 16.15
31.4 agreement on features for, 24.3 to 24.4 scope and framework of, 7.9 principles related to, 16.12 to 16.16
Office of Health and Environmental history of, 24.3 a slow road, 14.8 to 14.9 thinking, 19.10 to 19.13
Research (OHER), 33.4 launch of, 24.3 for technology, 8.3 tools:
Science and Engineering Indicators report, product definition, 24.2 technology-push as, 17.2 EMSA (enterprise modeling by structural
31.14 project organization for (Middle, Inc., time as variable, 3.10 analysis), 16.24 to 16.3 I
Resistance to change, 3. I 3, 29.6 HiTech, Inc., Leader, Inc.), 24.7 to 24.8 traditional model of, 6.6 for exploring and developing, 16.22 to
Resource constraints, 16.6 timelines, 24.4 to 24.5 types of, 7.2 16.31
Restructuring, 3.2 for Middle, Inc. (AddressNow), 24.4 (See also Neo-operations strategy) workflow maps as, 16.22 to 16.24
Return on investment, optimizing, 10.1 () (See a/so Middle, Inc. and AddressNow) Strengths, weaknesses, opportunities, and Systems approach to technology management:
Revenue and profit growth, 10.29 for HiTech, Inc. (Labellt!), 24.5 threats (SWOT), 6.7 to 6.8, 26.10 benefits of, 3.15
Revolutionury innovution, 8.4 (See a/so HiTech, Inc. und Labellt!) Structural enterprise model, 16.5 boundaries of, 16.8
Risk unulysis in product definitions, 36.14 to for Leader, Inc. (SendQuick), 24.5 Success dimensions of technology-based organi- challenges to, 16.32 to 16.33
36.15 (See a/so Leader, Inc. and SendQuick) zations, 32.1 to 32.15 context diagrams for, 16.14
Risk taking, 10.28 Sony Corp., 7.23 assessment framework for, 32.3 to 32.5 economic transactions in, 16.11
Rolm Corp., 3.9 Specializations and resources of the firm, 6. I 9, business unit level impact on, 32.9 to 32.12 envelope of, 7.23
RPEI (reseurch performance effectiveness and 29.3 company level impact on, 32.12 to 32.14 optimization of, 16.4
impact), 31.1 to 31.23 staffing level and performunce, 10.23 project level activity related to, 32.5 to 32.9 refinements to, 16.22, 16.31
Systems theory and thinking: Technology (Cont.): Tcd1l1ology forecasting: Technology management preparation:
challenges to, 16.3, 16.32 to 16.35 measurement of effectiveness of, 32.2 nppnmches to, 12.1 criteria for success, 21.11 to 21.13
model for management of technology (MOT), order of constraints, 5.19 logic tree, 12.1 to 12.2 future directions for, 21.13
1.10 to 1.12 as organism, 5.10 with Delphi method, 12.6 learnability as a requirement for, 21.5 to 21.6
Systems thinking, 19.10 to 19,13 and organizational knowledge, 19.3 use of experts, 12.5 to 12.7 project management skills for, 21.6
planning, 12.1 to 12.11, 26.6 functional parameters, 12.2 to 12.5 roles, responsibilities, and actions for, 21.12
precursors of, 2.9 normative approach, 2.9 skills inventory for, 21.5 to 21.6
Targeted-basic research: research, 2.9 principles of, 2.6 Technology managers:
examples of, 8.7 to 8.8 strategy, 2.7, 7.14 purposes of 12.6 to 12.7 administrative skills, 21.5 to 21.6
planning for, 8.5 theory of, 5.6 Tcchnology gradient: aptitude testing of, 21.8 to 21.9
planning procedures in, 8.6 to 8.7 skyway, 5,9 henefits of using, 17.12 to 17.16 future directions for, 21.13
precursors of planning research, 8.6 types of, 4.4 concept in basic situations for applying, 17.3 lack of skills, 6.11
Taylor, Frederick, 38.8, 38.11 ubiquitousness of, 7.12 to 17.5 for a new business environment, 21.1 to 21.3
Teams: use of, 2.3 conceptual framework for measuring, 17.14 preparation of, 21.11 to 21.13
accountability of, 20.2 to 20.3 visible, 6.3 ueseription of, 3.12,17.3 to 17.4 requirements of, 6.27 to 6.29
barriers, disconnects, and practices in projects zones of, 5.19 cxamples 01',17.5 to 17.8 skill requirements of, 6.27 to 6.29, 21.2
driven by, 25.12 to 25.13 Technology analysis: incorporating in business decisions, 17.10 to Technology matrix description, 5.17
cross- functional, 28.4 basics of, 5.9 to 5.11 17.12 Technology obsolescence, 3.4
interpersonal skills for, 20.15 environmental issues, 5.22 matrix of, 17.5 Technology performance rates of change, 12.3
managerial prerequisites for, 16.2 tools for, 5.9 measurement 01',17.6 to 17.10 Technology-push strategy, 17.2
role in product definition, 36.1 to 36.20 Technology and social preferences, 5.21 to 5.22 technology advantage index (TAl), 17.8 Technology ratios, 1.27
self-directed, 10.30 Technology base: technology advantage score (TAS), 17.8 Technology threshold, 3.11
Technological change, 3.10 adaptation of, 4.13 to 4.14 ten step procedure for, 17.15 Technology transfer:
Technology: as business framework, 4.13 to 4.14 examples of calculations, 17.8 to 17.12 in different economies, 3.7
acquisition of, 26.14 components of, 4,2 to 4.3 providers and recipients in using, 17.5 to 17.6 inter- and intra-organizational issues in, 17.1
adoption of, 11.4 to 11.6, 11.14 examples of, 4.2 to 4.3 Technology interactions: to 17.2
agility of, 11.4 political and social influences, 4.11 evolution of, 5.17 as know-how, 6.12
choices in, 38.5 Technology-based innovation: fusion of, 5.17 methodologies for application, 17.2 to 17.3
examples of, 11.4 to 11.5 first generation of, 9.4 Technology literacy: in next generation of technologies, 8.12 to
failure rate of, 11.4 requirements for, 9.5 achievement of, 20.7 8.13
alternative approaches, 7.11 to 7.12 second generation of, 9.4 to 9.5 basic skills, 20.5 to 20.6 problems in, 2.5
bottlenecks in, 8.1 Technology-based organizations (see Success of board members, 5.2 to 5.6 relation between introducer, imitator, transfer-
from a business perspective, 2.4 dimensions of technology-based organiza- as competitive advantage, 20.2 er, and transferee, 17.4
choice of, 7.12 tions) components of, 20,8 to 20.9 as resource, 1.12
commercialization of, 9.6 Technology change: description of, 20.6 to 20.9 strategy, 8.3
consequences of selection, 3.11 issues in,S, 17 to 5.19 dimensions of, 20.7 as tool, 1.5
anu corporate boards, 5.16 to 5.24 socioeconomic impact of, 6.3 historical perspective of, 20.1 to 20.2 Technology users and environmental factors,
description 01',1.5 to 1.7, 5.10, 6.2, 7.11 Technology classification, 1.26 to 1.27,5.13 to in learning organizations, 20.10 to 20.12 3,8
developing a data base for, 32.2 to 32.3 5.17 new paradigms for, 20.3 to 20.5 Telemecanique Electrique, 35.2 to 35.4
diffusion of, 9.6 approaches to, 5.13 organizational implications of, 20.12 to 20.14 Tenets of technology management, 3.8 to 3.14
uiscontinuities in, 6.27, 23.8 Technology cycle, 3.5 as resource, 20.11 description of, 3.8
emerging, 1.26, 4.4 Technology decision requirements, 2.3 statistics regarding, 20.6 Texas Instruments, 4.9
as entity, 5.1 () Technology entity: of technology specialists, 20.9 to 20.10 Theory of business, 6.11
first mover advantage, 7,21 to 7.22 classification of, 5.21 training and development for, 20.14 Theory of knowledge, 13.6
hardware and management, 7.17 to 7.18 description of, 5.11 to 5.12 Technology and low cost and low price, 7.15 to Thompson-RCA,4.2
indices for, 38.21 to 38.28 function of, 5.11 7.18 Thought architecture requirements, 25.5 to 25.7
and institutions, 6.15 to 6.16 Technology feasibility, 3.4 Technology management: assumptions for, 25.5 to 25.6
investment in (see Investment in technology) Technology flow process: architecture, 2.7 3 M (Minnesota Mining and Manufacturing),
invisible, 6.2 to 6.3 feasibility of, 3.4 to 3.5 description of, 3.2 to 3.3, 6.27 4.4,4.9,6.12,30.10,36.14
leadership in, 8.3, 38.24 for given technology, 3.7 as emerging discipline, 2.1 to 2.4 Time:
life-cycle model of, 23.8 to 23.9 phases of, 3.4 payoff, 2.10 benefits of reducing innovation time, 10.9
linking from four countries, 35.1 to 35.1 () technology cycle, 3.8 practice of, 3.16 benefits of reducing time to market, 10.8
1.22 SUBJECT INDEX
Time (Cant.): U.S. Army Missile Command (MICOM), 28.9

financial impact of slip, 10.8 to 28.11
as strategic variable, 3. IO U.S. House of Representatives, 3.11
value of, 10.8
TOP (linking technology, organization, and peo-
ple): Value-chain:
analysis of, 11.12 acti vities of, 7. IO
expectations of, 11.16 to 11.17 analysis, 6.7 to 6.8
problems in implementation, 11.5 description of, 7.10
sample worksheet of, 11.12 input/output analysis, 7. IO to 7.I1
steps in analysis for, 11.1 I linkages with, 7.12 to 7.13
tools for implementation of, 11.6 Value engineering, 7.20
use of tools, 11.17 to 11.18 Videocassette recording technology map, 13.3
Toyota Motor Co., 38.9 to 13.4
Tradeoffs between product development objec- Virtual communities of practice, 38.12
ti ves, 10.12 Virtual markets. 38.4
Transition from forecasting to planning, Virtual organizations, 6.16
12.5 Von Braun, W., 28.8
Tripartite organization model:
in administration, 1.14 to LIS
in distribution, 1.13 to 1.14 Wang Laboratories, 6.14
in product genesis, 1.12 to 1.13 Whiston, T. G., 30.2, 30.3, 30.4, 30.10
applied to products, 1.12 to 1.17 Workforce:
applied to services LIS to 1.16 literacy and illiteracy of, 20.6
programs, 20.4
statistics, 20.6
Unisys, 6.21
Up-front project management, 33.3 to 33.4
Use of technologies, 2.3 Xerox Corp., 38.9

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vi CONTENTS CONTENTS vii

4.1. Introduction 4.1 7.1. Introduction 7.1

8.1. Industrial Need for Science 8.1

18.6. References 18.24 22.5. References 22.21

19.1. Introduction 19.1 23.1. Units of Analysis 23.2

Chapter 25. Product Platform Renewal: Concept to Commercialization

Part 4 The New-Product Process 26.1. Introduction 26.3

27.1. Introduction 27.1 31.1. Background 31.1

Part 6 Case Histories and Studies

Chapter 34. NutraSweet-Eureka! Gary S. Lynn 34.3

34.7. Conclusion 34.24 Appendix A. Institutions Offering Courses or Advanced Degrees in

Appendix B. Acronyms and Abbreviations B.1

Chapter 35. Communication in an International Environment: Linking

Chapter 36. Product Definition: Keys to Successful Product Design

36.1. The "What" Steps 36.3

Chapter 37. Benchmarking Manufacturing Technology Use in the

37.1. Introduction 37.1

Chapter 38. Neo-Operations Strategy: Linking Capabilities-Based

38.1. Introduction 38.1

Theodore W. Schlie is an Associate Professor of Technology Management in the College of

Perspectives on Technology Management

Gerard H. (Gus) Gaynor

In a speech at the First International Conference on Engineering Management in 1986

Integrating technology into the firm's strategic objectives

1.4.4 Technology as a Resource

1.5 INTEGRATED AND HOLISTIC MODEL

1.5.1 Product Genesis

Human Resources. Human resources technologies include personal appraisal forms,

1.6.2 Operational Issues

Idea and concept generation

Minor product or process improvement

2.1 TECHNOLOGY MANAGEMENT AS AN

Technology management is rapidly emerging as a discipline combining the elements

the research and education on how to:

2.1.1 Goals and Strategies of a Firm 2.1.4 Use of Technologies

Technologies can be used as a component, module of a product, or a part of a process.

2.2.1 Definition of a Functional Step 2.3 RESEARCH-AND- TECHNOLOGY PHASE

2.3.1 Research and Development (R&D)

Scientific phenomena are precursors to technology. All technologies are based on

As many as 30 million people have been dislocated by the "restructuring" in manu-

3.3A SYSTEMS APPROACH TO TECHNOLOGY

A systems view, idealistic as it may be, is a necessity today, particularly in view of

3.4 THE "TECHNOLOGY CYCLE" AND THE

3. Adaptation phase. Virtually every enterprise ends up adapting an acquired

enterprise to operate within a TC framework. They recognize that short-term treat-

3.5.1 Value diversification is a poor substitute for MOT.

Value diversification refers to the improvement of stockholders' investments in a com-

3.5.7 Continuous education and training in a constantly changing

3.5.8 Technology gradient is a dynamic component of the technology

When Swiss watchmakers faced the introduction of digital watches by American

Of particular importance is an assessment of the management team's technical

How should the corporate board be involved in management of technology (MOT)?

"Financialsupportby the HumanSciencesResearchCouncilis gratefullyacknowledged.The Councildid

5.2 CORPORATE BOARDS TAKING MORE

5.4.2 MOT at the Strategic level

5.7.2 Defining Technology

Technology is a "set of means" created by people to facilitate human endeavor. In the

5.7.3 Choosing a Unit of Analysis

5.8.3 The Principle of Operation

Characteristics of historical development