Design and Implementation of Technology Strategy

What is the difference between a firm’s core competence and the firm’s strategic capabilities?

            Core competence refers to the collective learning within a firm, involving knowledge of how to coordinate operations, production skills, and the integration of technologies. Core competence can be defined as a firm’s specific skills and traits that are directed towards the achievement of the maximum levels of consumer satisfaction (Klemm & Sanderson, 2005). Core competencies are a set of problem-defining and problem-solving techniques that foster the development of a firm’s strategic growth alternatives. An organization’s core competence is the organization’s capacity to use its resources and achieve the desired outcome. 

            Strategic capabilities are the abilities that a firm has that can enable it to successfully take actions that are intended to influence long-term growth and development (Klemm & Sanderson, 2005). Strategic capability is a firm’s ability to establish processes and structures that can influence the people within the firm to establish firm-specific competencies to enable the firm to adapt to changing strategic and customer needs. Capabilities are derived from an organization’s capacity to deploy its resources using processes that enable it to achieve the desired outcome. A firm’s strategic capability is the use of competencies to accomplish its goals.

How do capabilities encompass the entire value chain?

            A firm’s strategic capabilities involve the development of strategies for increasing revenue (Joyce & Slocum, 2012). In order to come up with such strategies, a firm has to look at all the processes that affect production and operations and come up with ways of adding value. Value is added by transforming inputs into output through the optimization of the value chain with the aim of increasing profits. To develop a competitive strategy, a firm has to know how to optimize its processes within the value chain and understand how to improve production efficiency overall. A study of the entire value chain is necessary for the development and identification of a firm’s strategic capabilities.

            Capabilities are used in the identification of the activities that are most valuable to a company. They are also used in the process of taking action on activities that need to be improved, within the entire value chain, to achieve competitive advantage. A direct relationship exists between competitive advantage and sales (product performance in the market). By determining a firm’s strategic competencies and evaluating the value chain, a firm can identify ways by which competitive advantage can be acquired.

What are the four dimensions of technology strategy? State the characteristics of each dimension.

1. “Whether to be a technological leader or follower” (Christensen, 1999): Involves the determination of the most appropriate strategy for an organization in terms of technology introduction and adoption. This dimension involves the choice of being the first in an industry to adopt new technology or waiting to see how new technology adopted by other firms performs before adopting it. Being a technological leader has its advantages, such as the acquisition of a competitive edge over competitors and acquiring market leadership as a result of reduced production costs. However, it involves a higher level of risk compared to being a technological follower.
2. “Whether to seek improvement through breakthrough technology or incremental, steady improvement to established technology” (Christensen, 1999): This dimension involves the selection of the type of technology that is to be adopted by an organization. Continuous improvement, which is the target or the desire of most firms, can be achieved through either the introduction of breakthrough technology or the introduction of incremental technology to the already existing technology. The choice of the type of technology to be adopted depends on various factors such as costs, efficiency, and access to technology.
3. “Whether to outsource development or create internal capability” (Christensen, 1999): An organization may either create internal capabilities to facilitate technological development and innovation or outsource technological innovations and developments. The choice of the source of technological innovation and development will depend on the core competencies and strategic capabilities of an organization, as well as the quality of the workforce that an organization has.
4. “How to capture returns from investments in research” (Christensen, 1999): After the introduction of technology in the operations of a firm, it is necessary to determine how the organization will capture returns or economic benefit from the investment in research. This may be through an increase in sales as a result of the achievement of competitive advantage. To ensure that an organization reaps benefits from investment in technological research and development, technology has to cut down production costs or enable an organization to produce better products, so as to achieve a competitive advantage and enjoy increased sales.

Regarding competitive strategy, how can technology be used defensively versus offensively?

            Competitive strategies used by companies are either offensive or defensive (Woolley, 2011). Offensive strategies involve companies directly targeting their competitors to capture their market share. Offensive strategies consist of an organization actively trying to pursue industry changes. Offensive strategies require heavy investment in technology and R&D in order to stay ahead of the competition. Defensive strategies of competition, on the other hand, are strategies used by companies to counteract offensive strategies. An organization can use technology offensively by developing and introducing new technologies that other organizations do not have access to (Yannopoulos, 2011). By doing this, an organization can cut its production costs or introduce new products in the market, acquiring a larger market share by gaining a competitive advantage. By being the first to introduce technology or product in a market, an organization can gain a position from which competitors cannot remove it. An organization can also use technology to develop new methods of advertising and marketing.

            Technology can also be used defensively to counteract the offensive competitive strategies of competitors. An organization may outsource technology through an exclusive contract that prevents competitors from accessing new technology. An organization may also match the price cuts introduced by competitors. This can be achieved by adopting new technology that can reduce production costs. New features introduced by competitors on their products can also be matched by other organizations by adopting new technology or investing in technological development.

Why is innovative technology insulation and an inward-looking orientation a poor competitive strategy stance? Define the characteristics of a proactive competitive strategy stance.

            Innovative technology insulation and an inward-looking orientation are a poor competitive strategy since an organization using this strategy adopts technological innovation late only after existing technology and operations have failed. Being outward-looking ensures that an organization keeps itself updated on current trends and developments, ensuring that competitors do not achieve a competitive advantage without the knowledge of the company. A proactive competition strategy is an approach that continuously seeks to come up with great ideas and support existing ideas (Dobni, 2010). Through a proactive innovation and competitive strategy, a firm constantly defines new challenges and opportunities using ideas that are generated to develop new products and services. A proactive competition strategy assists an organization to obtain a significant position in the market, relative to the competition. Anticipating the strategic stamps or positions of competitors is not enough to achieve a competitive advantage. It is important to build and evolve a firm’s innovative potential to ensure that competitiveness is guaranteed.

What determines the size of a firm’s R&D Department?

            The size of an organization’s R&D Department is determined by the amount of investment that the owners or the management of the organization allocate to research and department (Becker, 2013). The level of investment in research and development is determined by various factors, including firm and industry characteristics, the level of competition, and government R&D policies. The government may promote investment in R&D by providing incentives. A high level of competition within the market may either increase investment in R&D or reduce it, directly determining the size of R&D departments. A company may increase investment in R&D to cope with increasing competition by coming up with new technologies and innovative products. Dominant companies may reduce investment in R&D with an increase in competition because they are less likely to extract rents from innovation that is derived from the R&D.

Individual firm and industry characteristics also affect investment in R&D. A firm’s sales and internal finances determine the resources available for investment in R&D (Becker, 2013). An industry such as the technology industry or the telecommunications industry may necessitate heavy investment in R&D, while the catering industry may not require a substantial investment in R&D.

Explain how experience determines capabilities and technological strategy.

            Experience plays a huge role in the determination of an organization’s technological strategy. It also determines an organization’s strategic capabilities. An organization that has been in operation for many years, and that has introduced new technology and learned from its mistakes, is likely to utilize a more complex technological strategy than one that is new and has no experience in technological innovation and strategy. Experience provides exposure to firms and knowledge of which innovation strategies are effective. In addition, an experienced organization has broader strategic capabilities, including an experienced workforce. New organizations will have lesser strategic capabilities as a result of the lack of industry and business experience.

References

Becker, B. (2013). The determinants of R&D investment: a survey of the empirical research. Loughborough University Economics Discussion Paper Series, 9.

Christensen, C. M. (1999). Dimensions of Technology Strategy: Managing Innovation: Overview Teaching Note for Module 5.

Dobni, C. B. (2010). The relationship between an innovation orientation and competitive strategy. International Journal of Innovation Management, 14(02), 331-357.

Joyce, W. F., & Slocum, J. W. (2012). Top management talent, strategic capabilities, and firm performance. Organizational Dynamics, 41(3), 183-193.

Klemm, M., & Sanderson, S. (2005). Strategic capabilities and core competencies.

Woolley, A. W. (2011). Playing offense vs. defense: The effects of team strategic orientation on team process in competitive environments. Organization Science, 22(6), 1384-1398.

Yannopoulos, P. (2011). Defensive and offensive strategies for market success. International Journal of Business and Social Science, 2(13).