we will do same last topic which is Google Glass.As you did last time …Goal: Review of the state of your technology with respect to
both organizational capabilities (to the extent that you can) and of evaluation
of the innovation or technology.
Please add this content to the growing body of your homework
assignments, making updates to the preceding elements as needed, and maintaining
the reference list at the end of the combined document. Continue the conversion
into a coherent analysis document, and not a collection of homework items, if
you haven’t already done that.
Topics to be addressed relative to your technology for this
week include:

The
impact of this innovation in relation to Porter’s Five-Forces model.
Consider using a diagrammatic form to show this impact. Look at http://www.mindtools.com/pages/article/newTMC_08.htm
as one source for a drawing tool that allows you to fill in explanatory
text for your thoughts on impacts of the innovation on the various forces.
What
core competencies will be required to make each player in the market
successful? Include both the primary creator of the technology, as well as
references to creators or makers of complementary technologies or
capabilities. For those various players, what core rigidities might impede
them?
Project
selection considerations – imagine you are presenting this innovation for
consideration by the primary market player as to whether they should enter
(or remain in) this market. Choose one of the evaluation methods outlined
in Chapter 7 and work through it. Most likely, since we don’t have access
to much quantitative information, the Screening Questions model laid out
in Chapter 7 will be most appropriate. Use a reasonable selection of the
Screening Questions, if you use that model.

This should add 2-3 pages (single-spaced, about 800-1300
words) to your document to cover all the topics requested.
References should, again, include pointers to any source you
referenced (whether you quoted it or just used its ideas). Be consistent with
your citation style.
** I attached Chapter 6-7 as ppt it will help you .Thanks
chap6_7___cn.ppt

Unformatted Attachment Preview

Chapter 6
DEFINING THE
ORGANIZATION’S
STRATEGIC
DIRECTION
McGraw-Hill/Irwin
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Genzyme’s Focus on
“Orphan Drugs”
• Genzyme was founded in 1981 by scientists studying
genetically inherited enzyme diseases
• Adopted a very unusual strategy of developing drugs for
rare diseases rather than “blockbuster” drugs.
– Smaller markets, but fewer competitors
– Requires less advertising, smaller sales force
• In 1983, the FDA established the “Orphan Drug Act,”
giving seven years market exclusivity to developers of
drugs for rare (<200,000 patients) diseases. • Also chose unusual strategy of doing its own manufacturing and sales rather than licensing to a pharmaceutical company. • Diversified into side businesses to fund its R&D. • By 2006, was the world’s third largest biotech company. 6-2 Genzyme’s Focus on “Orphan Drugs” Discussion Questions: 1. How does Genzyme’s focus on orphan drugs affect the degree of competition it faces? How does it affect the bargaining power of customers? 2. How does focusing on orphan drugs affect the types of resources and capabilities a biotech firm needs to be successful? 3. Does Genzyme’s focus on orphan drugs make sense? Do you think Genzyme has a long-term strategic intent? 4. Why do you think Genzyme has diversified into other areas of medicine? What are the advantages and disadvantages of this? 5. What recommendations would you offer Genzyme for the 6-3 Overview • Technological innovation strategy should – Leverage existing competitive position and – Provide direction for future development • Formulating strategy requires: –Appraising firm’s environment, –Appraising firm’s strengths, weaknesses, competitive advantages, and core competencies, –Articulating ambitious strategic intent 6-4 Assessing the Firm’s Current Position – External Analysis • Porter’s Five-Force Model Complements Source: Baltzan & Phillips 6-5 Five Forces Model Complements Must consider: a) Importance of complements in industry b) Whether complements are differentially available for rivals’ products c) Who captures value offered by complements 6-6 Assessing the Firm’s Current Position • Five-Force Model 6-7 External Analysis: Stakeholder Analysis 1. Who are stakeholders? 2. What does each stakeholder want? 3. What resources do they contribute? 4. What demands are they likely to make? 6-8 Assessing the Firm’s Current Position – Internal Analysis 1. Identify firm’s strengths and weaknesses. Helpful to consider each element of value chain. 6-9 Assessing the Firm’s Current Position 2. Assess which strengths have potential to be sustainable competitive advantage • • • • Rare Valuable Durable Inimitable Competitive Advantage Sustainable Competitive Advantage –Resources difficult (or impossible) to imitate when they are: – – – – Tacit Path dependent Socially complex Causally ambiguous 6-10 Identifying Core Competencies and Capabilities • Core Competencies – Set of integrated and harmonized abilities that distinguish firm –Typically combine multiple kinds of abilities –Biz unit may rely on several core competencies –Several biz units may rely on same core competency –Core competencies should: • Be significant source of competitive differentiation • Cover range of businesses • Be hard for competitors to imitate 6-11 Identifying Core Competencies and Capabilities 6-12 Research Brief Identifying Firm’s Core Competencies – Module 1 -- Steering committee; program manager; communication of goals across firm – Module 2 – Inventory and categorize capabilities; assess strength, importance, and criticality – Module 3 – Organize capabilities by criticality and current expertise – Module 4 – Identify possible core competencies to focus on; reject none yet – Module 5 – Test proposed core competencies against Prahalad and Hamel's criteria. – Module 6 – Evaluate firm’s position in each core competency. Source: Gallon, Stillman and Coates 6-13 Risk of Core Rigidities • Firms can become rigidly attached to their best capabilities • New competencies may be limited in favor of current strengths –Dynamic capabilities enable firm to quickly respond to change • E.g., org structure may allow rapid creation of new product teams • May also build partnerships with key players to allow access to needed knowledge 6-14 Strategic Intent • Strategic Intent – Long-term goal that is • Ambitious - builds on core competencies - leverages all parts of org – Typically 10-20 years out, establishes clear milestones – Identify resources and capabilities needed to reach strategic intent 6-15 Theory In Action The Balanced Scorecard Effective performance measurement should incorporate: – Financial perspective – Customer perspective – Internal perspective – Innovation and learning Source: Kaplan and Norton 6-16 Discussion Questions 1. What is the difference between a strength, a competitive advantage, and a sustainable competitive advantage? 2. What makes an ability (or set of abilities) a core competency? 3. Why is it necessary to perform an external and internal analysis before the firm can identify its true core competencies? 4. Pick a company you are familiar with. Can you identify some of its core competencies? 5. How is the idea of “strategic intent” different from models of strategy that emphasize achieving a fit between the firm’s strategies and its current strengths, weaknesses, opportunities and threats (SWOT)? 6. Can a strategic intent be too ambitious? 6-17 Chapter 7 CHOOSING INNOVATION PROJECTS McGraw-Hill/Irwin Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. Boeing’s Sonic Cruiser • Boeing was developing a new midsized jet, the “Sonic Cruiser,” which would travel 15-20% faster than existing commercial jets. It was expected to cost $10 billion to develop. • However, in 2002 air ticket sales were down, several airlines faced bankruptcy, and aircraft were put into storage to reduce capacity. • Despite this, Boeing forecasted that worldwide aircraft fleet would double by 2021. Boeing also noted that developing the aircraft was necessary to renew the company’s skills and experience. 7-19 Boeing’s Sonic Cruiser Discussion Questions: 1. What factors must go into Boeing’s decision about whether to continue developing – and launching – the Sonic Cruiser? 2. What are some of the challenges with estimating the potential returns of the project? 3. What method, or combination of methods, do you think Boeing should have used to evaluate the project? 4. Should Boeing have developed the Sonic Cruiser? 7-20 Choosing Innovation Projects • Methods range from informal to highly structured • May be entirely qualitative to strictly quantitative • Variety of methods give full picture of potential (and risk) 7-21 Development Budget • Capital is not infinite! • Capital rationing: Fixed R&D budget; rank order projects –R&D budget – often percentage of prior year’s sales –Typically determined through industry or historical benchmarking 7-22 The Development Budget • R&D Intensity varies considerably across and within industries. Industry Software & Internet R&D as a Percent of Sales 12.7% Health 11.2 Computing & Electronics 7.6 Technology 4.3 Aerospace & Defense 4.1 Automotive 4.1 Industrials 2.3 Consumer Products 2.1 Telecom 1.9 Chemicals & Energy 1.5 7-23 The Development Budget • Top 20 Global R&D Spenders, 2004 Company R&D Expenditures ($billions) R&D as percent of sales Microsoft $7.8 21% Pfizer 7.7 Ford Company R&D Expenditure s ($billions) R&D as percent of sales GlzxoSmithKline 5.2 14% 15% Intel 4.8 14% 7.4 4% Volkswagen 4.7 4% DaimlerChrysler 7.0 4% Sony 4.7 7% Toyota 7.0 4% Nokia 4.6 13% General Motors 6.5 3% Honda 4.4 5% Siemens 6.2 7% Samsung Electronics 4.3 6% Matsushita Electric 5.7 7% Novartis 4.2 15% IBM 5.7 6% Roche Holding 4.1 17% Johnson & Johnson 5.2 11% Merck 4.0 18% 7-24 Theory In Action Financing New Technology Ventures – Fund innovation internally – if sufficient cash – Early stage entrepreneurs – family, friends, and credit cards. – Start-ups - government grants and loans. – Promising start-ups – “angel investors” or venture capitalists 7-25 Quantitative Methods for Choosing Projects - DCF • Discounted cash flow methods, or real options – Discounted Cash Flow (DCF), Net Present Value (NPV): • Expected cash inflows are discounted and compared to outlays. 7-26 Quantitative Methods for Choosing Projects - DCF –Internal Rate of Return (IRR): Discount rate that makes investment’s NPF = 0 – Calculators and computers perform by trial and error. – Potential for multiple IRR if cash flows vary –Strengths and Weaknesses of DCF Methods: • Strengths – Concrete financial estimates – Timing of investments/returns, and time value of money both considered explicitly • Weaknesses – May be deceptive; GIGO! – May fail to capture strategic importance of project 7-27 Quantitative Methods for Choosing Projects – Real Options –Real Options: Applies stock option model to nonfinancial resource investments • Call Price: Cost of R&D program • Exercise Price: Cost of future investment required to capitalize on R&D program – E.g., cost of commercializing a new technology • Returns to R&D investment analogous to value of stock purchased with call option 7-28 Quantitative Methods for Choosing Projects –Examples of real call options 7-29 Quantitative Methods for Choosing Projects • Options valuable in uncertainty • Real options models have limitations: – Innovation projects don’t follow same capital market assumptions as options • May not be able to acquire option at small price: may require full investment before its known whether technology will be successful. • Value of stock option is independent of call holder’s behavior, but value of R&D investment is shaped by the firm’s capabilities, complementary assets, and strategies. 7-30 Qualitative Methods of Choosing Projects • Decision factors may be difficult or misleading to quantify. • Qualitative methods also used, e.g., – Screening Questions • Role of customer (market, use, compatibility and ease of use, distribution and pricing) • Role of capabilities (existing capabilities, competitors’ capabilities, future capabilities) • Project timing and cost 7-31 Qualitative Methods of Choosing Projects – Aggregate Project Planning Framework • R&D projects mapped by levels of risk, resource commitment and timing of cash flows 7-32 Qualitative Methods of Choosing Projects - Categories – Advanced R&D Projects: cutting-edge technologies; often no immediate commercial application. – Breakthrough Projects: revolutionary new technologies in commercial application. – Platform Projects: not revolutionary; fundamental improvements over preceding generations – Derivative Projects: incremental improvements and variety in design features. – Compare actual balance of projects with desired balance. Derivative projects Fast Payoff Positive cash flow Advanced R&D Indefinite Payoff Tech Leadership 7-33 Qualitative Methods of Choosing Projects –Q-Sort - simple method for ranking ideas on different dimensions. • Ideas put on cards. • Cards stacked in order of their performance on specific dimension. • Re-sorting for different dimensions used to achieve consensus about projects 7-34 Combining Quantitative and Qualitative Information • Often multiple methods in combination. • May convert qualitative information into quantitative form – Similar risks as discussed with quantitative methods) – Conjoint Analysis – estimates relative value individuals place on attributes of a choice. • Individuals given card with products (or projects) with different features and prices. • Individuals rate each in terms of desirability or rank them. • Multiple regression used to assess the degree to which an attribute influences rating. • Weights quantify trade-offs of providing different features. 7-35 Theory In Action Courtyard by Marriot – Used conjoint analysis to help it develop a midprice hotel line – Used focus groups to identify customer segments and attributes they cared about in a hotel. – Then created potential multiple hotel profiles; asked participants to rate profiles. – Regression identified most-valued features – Result: Courtyard concept • • • • • • Relatively small hotels Limited amenities Small restaurants and meeting rooms Courtyards High security Low rates 7-36 Combining Quantitative and Qualitative Information - DEA – Data Envelopment Analysis - linear programming combines measures of projects into efficiency frontier. • Projects ranked by assessing distance from frontier • DEA results only as good as data utilized • Choice and accuracy of measures important Source: prodtools.com 7-37 Discussion Questions 1. What are the advantages and disadvantages of discounted cash flow methods such as NPV and IRR? 2. For what kind of development projects might a real options approach be appropriate? For what kind of projects would it be inappropriate? 3. What are some of the reasons that a firm might use both qualitative and quantitative assessments of a project? 4. Identify a particular development project you are familiar with. What kinds of methods do you believe were used to assess the project? What kinds of methods do you believe should have been used to assess the project? 5. Will different methods of evaluating a project typically yield the same conclusions about whether to fund its development? Why or why not? 7-38 ... Purchase answer to see full attachment