Lecture 3

TECHNOLOGY ACQUISITION

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 LEARNING OBJECTIVES

• Differentiate the two types of technology sources :

internal and external acquisition
• Identify the advantages and the disadvantages of
each type
• Observe the link between internal and external
acquisition

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 ACQUISITION

• Acquisition relates to how the company obtain

the technologies needed for its business.
• Two types of acquisition
– Internal acquisition through internal R&D capability
– External acquisition through collaboration with
external partners or purchasing from external
developers.

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 INTERNAL ACQUISITION: R&D

• R&D is a set of processes for creating firms

technologies in-house
• Two main goals of R&D
– Doing research to generate new knowledge and technical
ideas aim at developing new and enhanced product and
manufacturing services and processes
– Developing activities where ides are transformed into
working prototypes and embodies into new product and
services

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R&D SPENDING 2017

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INTERNAL ACQUISITION: R&D

R&D strategy

Corporate Technology R&D

strategy strategy Department

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 R&D PROCESSES

R&D PORTFOLIO NEW PRODUCT AND

MANAGEMENT SERVICE
DEVELOPMENT

NEW PROCESS
DEVELOPMENT

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 R&D PROCESSES (1)

Optimizing
resources

R&D Portfolio
Management

Finding balance
Budget and Short term vs long
perfoemance term
Risk vs return

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 R&D PROCESSES (2)

NEW PRODUCT AND SERVICE DEVELOPMENT

• Capture and exploit the knowledge generated

by R&D activities
• Can be represented by the NPD FUNNEL

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The New-Product Development Process

Ne w-Pro duc t S trate g y

Ide a Ge ne ratio n
Ide a S c re e ning
Bus ine s s Analys is
De ve lo pme nt
Te s t Marke ting
Co mme rc ializatio n
Ne w Pro duc t

109
Copyright 2012 by Cengage Learning Inc. All Rights Reserved
Categories of New Products
Ne w-to -the -Wo rld

Ne w Pro duc t Line s

Pro duc t Line Additio ns

Impro ve me nts o r Re vis io ns

Re po s itio ne d Pro duc ts

Lo we r-Pric e d Pro duc ts

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Copyright 2012 by Cengage Learning Inc. All Rights Reserved
 R&D PROCESSES (3)

NEW PROCESS DEVELOPMENT

• History of process development

– Craft Production
– Process Of Manufacturing Without The Aid Of
Tools
– Example Job Production – Making Canoe, Pottery

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 R&D PROCESSES (3)

Mass Production
• Manufacturing large quantity of standardized
products
• Example : Cars( Ford Motor), Coca Cola, Newsweek
( Magazine)

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 R&D PROCESSES (3)

Mass customization
It is a the process in which the different departments of the
organization such as marketing or manufacturing make the
procedures flexible enough to made the end products in a
way that customer wants
Mass production + customization
“made to order”
Example : self serve design (shoes), self customization
( bicycle )

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 EXTERNAL TECHNOLOGY ACQUISITION

REASON BEHIND TECHNOLOGY ACQUISITION

• Limited internal resources
• Time pressure
• Lack of Complementary assets
• Protecting image
• Diversification
• Supporting internal technologies
• Avoid development risks
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 EXTERNAL TECHNOLOGY ACQUISITION
PROCESSES
• Goal setting
• Finding technology suppliers
• Choosing acquisition method
• Contract preparation and negotiation
• Technology transfer
• Managing long term collaboration

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 TYPES OF EXTERNAL TECHNOLOGY
ACQUISITION(1)
1. COLLABORATION
Dimensions of collaboration
• Degree of control
• Duration of commitment

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 TYPES OF EXTERNAL TECHNOLOGY
ACQUISITION(2)
Categories of collaboration
• Purchasing/ arms-length transaction
– One off,
• Subcontracting/contracted-out R&D
– Firm uses the service of research organization to develop new
product/process
• Licensing
– License for the use of technology on a franchise basis
• Alliances
– Ad hoc, joint venture, consortium
• M&A
– Acquire and integrate a foreign entity in the company

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 ACQUISITION CHANNELS(1)

• Sponsoring university research

• External R&D centers
• Consultants
• Licensing agreements
• Vendors/ suppliers
• Acquiring machinery or the firm

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 MAKE OR BUY OR COLLABORATE DECISION
DEPENDS ON: (CHIESA And MANZINI, 1998)
1) strength of the organization’s own capabilities
(relative costs)
2) respective transaction and governance costs
– contract price, cost of information, monitoring
performance, committing specific assets, handling
complexity in reaching agreements
3) dynamic transaction costs
– costs of persuading, negotiating, coordinating, and
teaching outside suppliers

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 Expected resulting impacts of technology
acquisition
• productivity
• quality
• product development cycle
• labor-management relations
• accuracy of the information flows
• production costs
• flexibility (volume, machine, process,..)
• maintenance costs
• service performance
• sales
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 Open Innovation
Research Development Commercialisation

IP in-licensing
Products in-sourced
(e.g. Co-branding)

Company
Boundaries

Core Market Focus

Technology
Spin-outs

IP out-licensing

Ideas &
Technologies

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What are the issues when managing
external suppliers and alliance
partners?

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 Issues in network design:

• Aim
• Partners
• Duration
• Contract
• Management
• Investment / Re-engineering
• Division of labour
• Strategy
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How to decide on the type of network?

• The objective of the collaboration

• The content of the collaboration
• The typology of partners involved

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The content of the collaboration (Chiesa and
Manzini, 1998):

1) Definition of the content

2) Firm’s familiarity
3) Relevance for the firm’s competitive adv.
4) Technology life cycle
5) Level of risk
6) Appropriability of the innovation
7) Phase of the innovation process
8) Level of assets specialization
9) Divisibility of assets
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 P&G Case (1)
Collaborations: Open Innovation (Sakkab, 2002)

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 P&G Case (2)
• P&G is a technology-rich company: 27000
patents, 4000 unique titles and 3000 new
patents each year.
• It invests $1.8 billion annually on R&D.
• Even though P&G use less than 10 per cent of
its own technologies in company products

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 P&G Case (3)
• Internal website, 18000 innovators across R&D, Engineering,
Market Research, Purchasing, and Patent Divisions.
• 600 websites for Global Project Teams
• Individual problem-solving and connection-making websites for
20 Communities of Practice.
• Nearly 9 million documents on line, growing daily.
• Automation and artificial intelligence
• the latest in webcasting and satellite technology to create an
internal Innovation News Network
• Conducting a deal-making/technology trading expo
– over 2200 ideas for new products and important new uses of P&G and
external technologies

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 Identification
Selection
Business
strategy
Acquisition

Internal acquisition:
R&D External acquisition

Collaborative R&D
New product
dev.
Purchase
New process
dev.
M&A
Other projects

new product / service equipment / solutions Outputs

Protection Learning
Exploitation

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