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Technology Strategy: A New Arena to Lock in Competitiveness

A recent survey of corporate America [Innovation’s New Performance Standard, Neely and Dehoff, Strategy-Business Mar 2004] showed that executives have aggressive performance goals of 20-30% improvement in innovation over the next two years. However, there is dissatisfaction with current organizational structures for innovation because they are not delivering up to their potential and new innovation-improvement initiatives are called for.

The movement to global standards, abundant and free flow of information, the mobility of knowledge-workers and open markets for technology are driving traditional innovation processes to a commodity status. Recognizing opportunity and speed to market are the new competitive weapons together with the requirement for new tools, structures and strategies to create value. Technology remains an important strategic component for any business, but more than ever a unique strategy for its management and exploitation is required.

Within an industry sector, many companies do similar things. If everyone is doing the same thing, how can any one company achieve a sustained competitive advantage? It’s a rat race where only some rats survive! Identifying a winning strategy is about establishing differences, creating new strategic positions and making trade-offs. Strategic positioning means performing different activities from rivals’ or performing similar activities in different ways. Dell, Southwest Airlines, Ikea and Starbucks are well-known examples of successful strategic positioning in commodity business arenas.

A technology strategy is constructed to support key strategic focuses, critical issues and ambitions that are embodied in the business strategy of the enterprise. At this point it should be mentioned that “Achieving operational effectiveness, while necessary, is not a strategy,” pointed out Michael Porter [Harvard Business School]. Strategy elements are the building blocks for a technology strategy; they are based on key success factors, technology trends or scenarios, competitive intelligence, market needs, practices of industry leaders and of course, the prevailing business strategy. The innovation in strategy development is centered on identifying unique strategic initiatives or positions that are different from those of competitors for each strategy element. Unique initiatives are frequently found by newcomers. Newcomers are more flexible because they face no trade-offs with an existing culture and can more easily perceive new opportunities. Trade-offs are important for any strategy development; they create the need for choice and purposely limit what an organization chooses to do. Trade-offs mean taking different positions with tailored offerings that require different configurations, skills and technology. It is choosing not to be all things to all people. Starbucks chose not to sell cheap coffee or to give refills. Southwest Airlines chose not to offer baggage transfers or service at major airport hubs.

The final step in defining an overall strategy is concerned with finding a consistent fit for the various strategic initiatives and combining them to form a strong network. This strategic fit creates a chain that is as strong as its strongest link. It may be envisaged as finding the unique combination of initiatives that locks-in a successful competitive strategy [see “What is Strategy?” by Michael Porter, Harvard Business Review, Nov-Dec 1996]

Why is this important?

The “best in class” examples of successful strategy in well-trodden sectors are illustrated by the examples above. They are difficult to copy because competitors cannot or will not make the necessary trade-offs; (witness the many failed attempts by full-service air carriers to duplicate low-cost carriers like Southwest Airlines). For many companies in the well-trodden forest products sector, the identification of a unique technology strategy is a potential path forward to finding competitive advantage in a world of commodity products and open access technology. With this approach, attention is now focused on novel ways to access and exploit innovation, on the skills for implementing technology and on the insightful management of a technology and innovation system. This is a departure from past practices for innovation, in which many organizations emphasized internal R&D, process optimization, benchmarking, technology push, herd instinct, large capital projects and an uncoordinated approach to technology. Critical questions in thinking of your own organization’s technology strategy:

Do we have a model for innovation or novel ways to create value with technology?

How do we link innovation and technology functions with prevailing business strategy?

How is our technology strategy different and how do we exploit our differences?

Are these differences linked throughout the organization?

Are we continually building and evolving in the area of technology strategy?

Alan Procter is an international consultant helping organizations find new areas for competitiveness in technology strategy. He can be reached through www.alanprocter.com