Role of technology in strategic management

Engineering Management International, 4 ( 1987) 307-3 18 Elsevier Science Publishers

B.V., Amsterdam

-

307

Printed in The Netherlands

Ted G. Eschenbach School of Engineering,

University

of Alaska, Anchorage,.

AK 99508

(U.S. A .)

and George A. Geistauts School of Business and Public Affairs,

University of Alaska, Anchorage,

AK 99508

(U.S. A.)

ABSTRACT The accelerating pace of technological change has made technology a major strategic factor for many organizations. Some firms respond defensively, seeing technology as a problem, while others through strategic use of technology gain permanent advantage. The engineering function typically contains the bulk of the firm’s technological expertise, yet engineers and engineering managers are seldom directly involved in strategic analysis. Strategy typically trickles down to engineering in the form of technological problems demanding solutions. This weak linkage between engineering activi_ ties and strategic thinking is far from optimal, and in the current turbulent technological environment it can even endanger the firm’s survival.

The linkage can be strengthened, but it requires beh.avioral an,d managerial changes at th.e top of the firm and at the engineering level. First, both levels must understand the concepts of strategic management and commit to implementing them. Then the strategic nature of technology must be understood, including the limitations and potential traps of technology-based strategies. Final&, creative opportunities for cons:‘dering technology strategically must be made available at the engineering level, and both. design engineers and engineering managers must be rewarded’ for their strategic contributions.

business firms and other ol*ganizat.ions must overcome. Today, the pace of technological innovation is accelerating, new technologies are challenging established on es, technological leadership is shifting across national boundaries, and whole industries are being restructured or even disappearing. High- and low-technology products are increasingly being designed and manufactured with computer assistance, with robotics, and with newiy Ixgineered materials. Banking, not

INTRODUCTION Setting the stage In recent years global competition has become the norm, and technologica! change has increased the environmental turbulence that *An earlier version of this paper was presented at the First International Conference on Engineering &Management, Washington, DC, September 22-24,1986.

0 167-54 19/88/$03.50

0 1988 Elsevier Science Publishers

B.V.

usually considered a high-tech industry, has been changed by automatic teller machines and communications technology; similar technological impacts are spreading throughout the service sector. Genetic engineering is already changing such established industries as agriculture and pharmaceuticals - even though its technological life cycle is only beginning. To cope with this dynamic environment management must anticipate rather than react, and more emphasis must be placed on strategic management, defined by Ansoff (1984) as a process for managing an organization’s relationship with its environment. Effective strategy forlnulation has always been needed, but in the past relatively slow rates of environmental change and localized markets allowed strategy to be based on extrapolations of present conditions. Now, the rapid pace of technological change offers evolutionary and revolutionary opportunities for strategic success or fa.ilure in a global arena. Technology can be formally defined as “the ability to create a reproducible way for generating improved products, processes and services” (Frior and Horwitch, 1986). Thus the technology of a firm, an industry, or a society consists of knowledge, of skills, and of capital equipment - the results of “applied science” and creativity. While the inevitable changes in technology can be viewed either as problems or as opportunities, we believe that success will come to those technological& oriented firms ( TOF’s) that consciously seek to use technology, and thus engineering design, as a major strategic weapon (Foster, 1986b; Geistauts and Eschenbath, 1988). The aggressive TOF may gain strategic advantage by offering unique or superior products or services, by significantly lowering production costs, or by substantive improvements in its management process, But to accomplish this, engineering managers must add strategic thinking to their responsibilities,

and strategists technology. Strategic

must become more aware of

management

approach for gaining long-term advantage ouer both qompetitors and environment, strategy explicitly considers an,d tries to control the impact of uncertainty.

Defined

as the fundamental

This has been the focus of a substantial general literature, but there are also many contributions focused on the overall relationship between strategy, technology, and innovation (Brandt, 1981; Iyer and Ramaprasad, 1984; Maidique and Hayes, 1984; Rosenbloom, 1985; Horwitch, 1986; Sen and Chakrabarti, 1986). For example, Abel1 (1980) modified the traditional market and product answer to the central question “What business are we in?” Particularly valuable for TOF’s, Abell’s framework uses three dirba?nsions: customer groups (who is served). customer functions (what needs are met), and alternative technologies (how the needs are met). These technologies need not be high-tech, as both pencils and computers represent word processing technologies. Top management clearly has the responsibility for strategic direction (Burgelman, 1983). However, the firm’s technology managers often possess unique knowledge, and are tasked with conflicting strategic and operational responsibilities. Not only must engineering maximize the performance of existing and emerging products and processes, but it may also have the only evaluation capability for potential new technologies. At the same time technologists are often expected to understand the strategic implications of existing and potential markets. The current strategies of most organizations extend or modify past approaches. This is particularly likely if the environment is stable, the firm has done well, and management is administratively rather than entrepreneurially oriented. This is not necessarily bad; most. TOF’s are well prepared - psychologically, economi-

309

tally, and technically - for opportunities “close” to present strategies. However, as discussed later, successful strategic thrusts may focus on specific kinds of market or technology expansion. More entrepreneurial TOF’s, however, deliberately stimulate innovation through their organizational culture. Management attitudes, hiring practices, reward systems, and communication patterns cZ.1 support “intrapreneurship” throughout the organization, as exemplified by the 3M Corporation. Other organizations set up special units focused on innovation - for example, AT&T’s I3elI Labs. The attitude engineering/top managers take toward encouraging creative solutions and their tolerance for a reasonable number of Iaboratory/market failures can become critical strategic factors. Whether a strategy is innovative or not, evaluation of its reaIism and desirability must consider technology focused questions (Eschenbach and Geistauts, 1987) such as the following: Is strategy and technology integrated in the plan? Does the strategy fit the firm’s technology profile? Does it build on the firm’s distinctive technological competencies? Answering these questions requires both evaluation of the current situation and the use of environmental scanning and technological forecasting (Linstone and Sahal, 1976; Martino, 1983; Eschenbach and Geistauts, 1988). Even with shorter design and life cycles, a technology may require lo-15 years to enter the market and remain profitable even longer. Clearly the long-range strategic view depends on an equally long-range view of technology. Poor technological scanning can give the lead to competitors, inefficient engineering design may leave the firm without viable products to support the strategic thrust, and poor process planning/design may lock the firm into inefficient or inflexible production processes. Thus engineering management must be strategically aware and must participate in strategy formulation.

STRATEGIES AND STRATEGIC POSTURES FOR TOF’S The influence of technology

Most of the literature focuses on the development of technology to achieve strategic success. However, in many cases the value of the iechnological improvement is better measured at the next stage in the market chain. The innovator gains sales, cuts costs, and increases market share as a reward for R&D. However, the indirect R&D reflected in capital good inputs is often a better measure of the intrinsic value of the technology than the direct. R&D of the firm (Dutton and Thomas, 1985). Thus the strategic use of technology must also consider the purchase of technological inputs. Another misunderstanding of technology’s strategic nature is exemplified by a manager who believes that using robots is strategy. Strategic analysis considers technology in an environmental context of market characteristics, competitive response, and economic trends. Most of all, strategy encompasses planned anticipation of the future. To illustrate the distinction between strategy and technology, consider Texas Instruments (TI) and HewlettPackard (HP) who are successful competitors, exploiting essentially the same technology with differing strategies. TI emphasizes its long-run cost position through high volumes of standardized products, while HP specializes in smaller market segments with unique, highvalue products (Wheelwright, 1984). Firms can choose to use technology incidentally, defensively, or offensively. Incidental users simply use it when appropriate or convenient, expecting primarily operating rather than strategic benefits. Defensive users adopt it as reaction to competitor moves - either actual or anticipated, hoping to preserve the strategic status quo. This is exemplified by a manufacturer who continuously upgrades the design of an automobile - simply to keep pace with technological advances.

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Offensive users seek strategic and operating &ant.ages that will re-define the “rules ofthe game”. One example is seeking out and developing a new technology with a major differential advantage, and then timing new product announcements for maximum market and competitive impact, rather than simply reflecting the timing of actual technological advances. Some computer firms for example use preemptive product announcements, which are followed some months later by the actual product. Other analysts cite the example of a major adhesives manu! _t.urer, who withheld a new product announcement for several years, thus allowing competitors t’ire time to fully invest. in plant capacity based on the obsolete technology. Aggressive use of technology within an industry generally increases the pace of change as firms seek a technological advantage. This obviously increases the risk to individual firms of falling technologically behind, and then losing market share or being driven out of business entirely. This can even happen to entire industries, e.g. slide rule and vacuum tube manufacturers. But leadership carries its own risks, as well as the costs of perfecting technology and educating the market - as exemplified by the picture phone and the video disc (Graham, 1986). Leadership can be very transitory, as exemplified by Osborne Computer Co. and its technologically innovative portable personal computer. When competitors rapidly copied the technological packaging and adopted Osborne’s marketing innovation of including substantive free software, Osborne lost its strategic product advantage. Even TOF’s which actively seek and adopt new technologies, typically find technological transitions to be difficult,. So much SO, that about 70% of the transitions seem to lead to a new market leader (Foster, 1986b). Most firms are reluctant to write off obsolete equipment, to recognize that dearly gained knowledge is now outdated, to restructure the organization, and to discontinue support for variants of nearly obsolete products. Continuing to bet on past winners is attractive. Technological diversifi-

cation and abandonment with their large risks and their resource requirements generally require direct top management intervention (Ansoff, 1984). However, as Polaroid’s experience with the instant movie camera demonstrates, when a top manager has an intense personal commitment to a given techrdology, escape from the current technology trap is doubly hard. Polaroid’s camera was a market. failure, because Polaroid failed to properly evaluate signals of environmental change, did not recognize the transition to more versatile video recorder technology, and tried to carry its instant photography strategy too far. Strategic

postures for the TOF

In an earlier paper we found it conceptually useful to define strategic postures or sets of strategies for the use of technology (Eschenbath and Geistauts, 1987). As a base for our later discussion, these definitions are repeated here. In many cases firms will adopt a mix of these strategies, but small firms in particular may be governed by a single strategic thrust. These approaches include the following: The firm develops or introduces technological innovations, for example Hewlett-Packard or 3M. The extra costs of technological development, including produ.ct and process failures, are balanced with high initial profits and a permanent increase in market share. Leadership.

Bandwagon. The firm rapidly copies, adopts, or buys technological breakthroughs. Although it does not gain the initial profit of the innovator, funds not used for R&D can be used to differentiate itself through increased marketing and customer service efforts. PC “clone” producers are prominent examples, even though their custo.mer services are often marginal.

The firm emphasizes the low prices made possible by high volume and operCost/volume.

311

ation at a lower cost point on the cumulative learning curve, for example Japanese chip manufacturers. This approach is possible because not all customers demand the latest technology.

TECHNOLOGY PORTFOLIO POSITION ICORE

is

g

The firm is the best in a narrow product or process area, thus maximizing the benefits of both superior knowledge and optimal production volume achievable for that specialty. Tektronix in oscilloscopes and Acoustic Research in speakers are examples.

EXTENSION

support

development

NEW

UNRELATED

buy

research

R&D

technology

Specialist.

The firm manages a portfolio of technologies, which are often tied to special markets, such as the Defense Department, e.g. United Technologies. Synergy may exist along the technological dimension or in marketing and finance, but it is less likely in the area of management because technological diversity complicates management. When growth and acquisitions extend beyond technology the firm becomes a true conglomerate, for example ITT. Conglomerate.

on research and development without becoming a major producer. Thus the firm can trade on its knowledge base without the risks and capital requirements inherent in production and distribution. This approach is particularly useful for maximizing multinational sales and for small firms with limited resources. Because of their smaller size, most such firms are known only in their industry; the more prominent examples are the laboratories of leading research universities, such as MIT and Stanford. R&D

package

diversify

acquisitions & joint ventures

sell technology

AVOID!

increased risk due to R & D failure increased risk due to technological obsolescence

Fig. 1. Strategies for technology-market

combinations.

concept - often by individuals workers in a larger corporation capitalize on the opportunity.

who were cothat failed to

licenser. The firm concentrates

Entrepreneur. The firm develops a technological concept to the point that the firm can be sold. This is a common new venture approach, which maximizes the value of the founding entrepreneur’s innovative abilities, and minimizes the problem of shifting internally from entrepreneurial to professional management. Many examples can be found in the small companies formed to develop a specific product or

Interaction strategy

of technology and market

The strategic pcstures outlined in the previous sub-section focus on the firm’s approach to the use of technology; further refinements are possible with a dimension added for the market being served (Roberts and Berry, 1985;Radnor, 1986). When compared with current oper(ations both technologies and markets can be cla.ssified as core, extensions, new, or unrelated. 7%~ when these are considered in their various combinations, they represent different strategic responses - summarized in Fig. 1. As these categories really are part of a continuum, the boundaries for the suggested strategies are somewhat flexible.

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While the entire figure will not be reviewed here, several examples illustrate its use. Process R&D emphasizing the purchase and use of robotics by General Motors clearly supports GM’s core technology and market, while R&D on rotary or electric engines would extend the technological base for GM’s current market. To sell its books in compact-disc format, an encyclopedia publisher could acquire an unrelated technology. Finally, 3M was clearly intrapreneuring when it developed and marketed the “Post-It” note pads. The success of strategic choices along these two dimensions will often depend on the strategic posture of the firm. For example, the exploratory work of Meyer and Roberts (1986) suggests that entrepreneurial TOF’s will be more successful at technological than market extensions. This seems to result from the emphasis on technological skills which underlies the initial innovation and development. It seems reasonable to suggest that R&D licensers and specialist firms might exhibit similar behavior. On the other hand, conglomerate firms and cost/volume firms seem more likely to emphasize a market rather than a technology orientation. Thus they might fare better with extensions in t.he marketing dimension. Paradoxically, this might also result in an emphasis on new technology to serve existing markets through joint ventures or acquisitions. Leadership and bandwagon strategic postures are harder to classify because these represent a more balanced orientation between the marketing and technolqgy dimensions. When evaluating the more “adventurous’7 combinations, a multiple stage process seems appropriate (Roberts and Berry, 1985; Hamilton, 1986). Rather than viewing these as traditional bottom-line opportunities, perhaps they are more wisely approached as familiarization with new markets and/or new technologies. Thus a venture capital minority investment or educational acquisition might open a “window”. These smaller-scale investments codsi well be followed by option-increas-

ing strategies, and then finally more traditional positioning strategies.

CYCLE ANALYSIS Demand, cycles

technology

and market life

Three interrelated life cycles determine strategic planning horizons and key decision points (Ansoff, 1984). The demand life cycle describes the need for a product/service category, the technology life cycle describes the technolo,gy used to meet that need, and the individual product/service life cycle describes the introduction, growth, maturity, and decline of a specific organization’s product or service offering. For example, the demand for U.S. passenger air travel is close to mature, this need has been met by technologies ranging from propellers to jets, and each new plane, such as a Boeing 757, has its own introduction, growth, and replacement curve. Although these curves are often plotted against time, they appear to be more accurate when plotted against cumulative effort (as is the analogous learning curve) (Foster, 1986b). The relationship between these life cycles is hierarchical, as a customer need is required to support the development of technologies and products, and as particular products fit within the envelope of a technology curve. But there are also powerful feedback effects, where the existence of a technology triggers the perceived need and demand for products - for example, the perceived need for copies and the increasing availability of copiers. Turning points in each of these life cycles are critical events from the strategic perspective of a TOF involved with the customer, the technology, or the product. The prediction of these turning points often involves the argument over the relative roles of market pull and technology push. This also illustrates the difference in viewpoint between top and engineering management. At least for “breakthrough innovations” it seems that the

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technological push usually comes first. However, only those products where a market pull can be identified are carried to fruition ( Nayak and Ketteringham, 1986). However, for the much larger number of incremental technological innovations, the pull of the market is clearly very important. The life cycles typical of products, markets, and technologies have always been useful in strategic planning, but their importance has increased due to today’s rapid rate of tecllnological change. Now a TOP examining the strategic use of technology must recognize that a fiveyear planning horizon may encompass the conception, birth, growth, and de!cline of one or more new products. Within the life cycle curve for a basic need, there may be a number of different technology curves as each is replaced by a new advance. Ansoff (1984) has classed the potential technological states as stable, fertile, #andturbulent. The demand for r.Xuiomobiles, tv’s, and washing machines has grown along the life cycle curve, but the advances have generally been evolutionary or stable, not revolutionary. 0n the other hand, the computer industry represents a fertile technology with nearly continuous advances, so that the leadership of any new approach is relatively short, and new product development is crucial. Then there is the electronics industry which has initiated many advances in stable and fertile technologies, but which is best classified a;5 turbdent. Even though the demand for signal amplification and processing is still growing relatively rapidly, there have already been four different technologies with radically different knowledge and manufacturing bases: tubes, transistors, miniaturized circuits, and very large scale integrated chips. Particularly for firms operating in the area of fertile or turbulent technology and for firms facing turning points in stable technologies the comparison of defending and emerging technologies is critical. As described by Foster (1986b) each competitor attacking with new technology faces significant disadvantages. However, the complacency and orgar’zational

inertia of the defender are even more signifi cant disadvantages when facing an array of challengers with multiple new technologies and new products. Clearly the strategic handling of product development must consider the life cycle of the basic need being served. R&D for better mechanical linkages for typewriters is wrong strategically, just as basic research into genetic engineering can be correct strategically. But the status of the technology may be even more important, and it is here that the categorization of stable, fertile, and turbulent technologies is most useful. Stable technologies offer few opportunities for competitive advantage, but fertile technologies require the strategic use of technology. Without strategic direction the new product advances will not be focused on attractive, available market niches. With turbulent technologies, the firm’s strategies must focus on flexibility and must include options for obtaining recent technological breakthroughs - by purchasing the technology, by joint venturing, and by corporate acquisitions. Profits and life cycles

The strategies of firms intensively involved in R&D are generally based on two fundamental facts. First, as displayed in Fig. 2, the cost of initial production is often high, but premium prices or skimming are “cheap” to those with high value applications. Then over time competition reduces the marginal profit faster than the cost of production declines. For example, many e,- gineers rushed to pay $395 for an HP35 when these calculators were first introduced, but today more powerful calculators are only $20. Hewlet-Packard’s first “consumer” product is estimated to have generated about $120 million in sales the first year. Second, as exemplified by xerox copies and formica countertops, the early entrants int.0 a market may so dominat,e it that they become common names, But along with this, comes a large market share which translates into a solid base for marketing of later innovations and

314

continuing profits. AS IBM’s late moveinto the personal computer market dem-

substantial

onstrates, this market dominance can even allow a firm to trail technologically and strategically without losing its substantial cornpetitive advantage. On the other hand, as products approach technological limits the cost of further imncornes increasingly expensive. provements bbbv Thus market leadership will often shift at technological transitions, as market leaders futilely attempt to maintain the current technology, rather than exploiting the emerging technology with its much lower cost of improvement ( FOSter, 198613). Thus, for TOF’s the concept of technological potential (the difference between the limits of a technology and its current status) (Foster, 1986a) suggests normative guidelines for shifting to a new technology and leaving their competitors pushing at the unproductive margins of the old technology. The more expensive the technology is to imitate, the more enduring are these early advantages. If extensive, long-lead time capital facilities or training are required, or if key steps can be protected by patent, or if “cornering” a material input is possible (for example, by buying the supplier of a critical component), then the cost of developing the technology may be a good risk. However, if a technology is expensive to develop, but cheap to imitate (e.g. computer software), then there is little strategic advantage to balance the substantial development risks. In another example, a U.S. firm licensed a glass production process from offshore, but two years of development were required before the process worked. As contractually required, the details were supplied to the offshore source, who then licensed the revised process to another U.S. firm. If demand for a product virtually disappears when a replacement product enters the market, then there is substantial risk in relying on the large cumulative volume of a long product life cycle to justify the initial development and market entry costs. Here the strategic ques-

IFig. 2. Characteristic

average

se1 1 ing price

\

product life cycle.

tions focus on the rate and probability of new product introductions, probable market sizes and shares, and the opportunities for significant reductions in production costs. The focus of innovation During the life cycle of a product t or a line of products based on a commr;?? technology), there is a predictable shift in the pattern of innovation and where it is focused, As depicted in Fig. 2, the fundamental genesis of a new product is often a scientific breakthrough or a technological breakthrough in another area. Then the initial stage of product development is characterized by concentration on product enhancement, which at some point is “frozen” as the design. Once the product is introduced the primary stage for innovation shifts to improvements in the production process, and then finally innovation concentrates on mechanization of the production process - if the life cycle continues long enough. One consequence of the increasing rate of technological change is that the time available for amortizing design, manufacturing, and

mechanization costs has shortened dramatically. Another consequence is that more fixed costs must be shared by products, which requires new emphases in the accounting for these assets. A key strategic question is the extent to which computer-integrated manufacturing can shorten response and product introduction times and reduce design and manufacturing costs. Although numerous benefits of this process technology have been identified, three stand out (NRC, 1984). Engineering productivity, product quality, and capital equipment operating time were shown respectively to increase 2-35 times, 2-5 times, and 2-3 times. These new technology-intensive processes substitute the economies ofscope for the traditional ecortomies of scale ( Goldhar and Jelinek, 1983, 1985). Under the economies-of-scale framework, learning-curve effects and the spreading of fixed costs over more units favored large production runs of the same product. Under economies of scope, costs are reduced as greater varieties of products can be produced on highly automated yet flexible equipment. For example, in the U.S. mini-mill steel plants are highly competitive and profitable, and in Japan the economic lot size in some robotized factories is one unit. Economies of scope favor large varieties of products, and stress the linkage between operational manufacturing decisions and strategic advantage ( IIaas, i987 j . Similarly, the increasing complexity of many products and processes is requiring that “manufacturability” or “serviceability” enter the design process at a much earlier stage. While many organizational and team approaches focus on this goal, current and potential improvements in computer-aided design offer the most potential for a better and faster design process. Only with centralized computer databases can designers truly have access to “all” of a design simultaneously, rather than relying on the sequential review prccesses associated with manual drafting ( ASEE, 1987). Among other innovations the use of “group manufacturing technology” eases the transition from the pro-

SALES PER UNIT TIME

_qRc!ZD

fd;-;OjROWT"""TURIT'

1 DECLINE:

LEADERSHIP BANDWAGON COST/VOLUME SPECIALIST CONGLOMERATE l-

I&:

L __I

Typical entry 4 Typical withdrawa) Strong presence/activity Possible presence or weak activity

Fig. 3. Strategic entry and exit points.

totype design to the manufactured item. Tactical decisions on the use of existing subassemblies may dramatically shorten the time required for product design and introduction, although they also clearly place constraints on the feasible design envelope. However, the rate of new product introductions and of product major strategic remain enhance.ments questions. Strategic entry/exit points The product life cycle can be analyzed with respect to the strategic alternatives proposed earlier - leadership, bandwagon, cost/volume, specialist, conglomerate, R&W licenser, and entrepreneur. In particular, Fig. 3 shows a typical single-product life cycle (including life cycle extending product variations), and the most likely entry/exit points and participation zones for each technological strategy (Burstein, 1984; Eschenbach and Geistauts, 1987). The le&ersh@ firm activelyc pursues R&D,

316

initially develops the product, and replaces it with a better product. The bandwagon firm enters the market after recognizing the product’s viability and copies the product concept; because it misses the initial high profit margins, it will have to participate further into maturity/decline. Specialist firms typically aim for a market niche where they offer superior prodvariations; ucts - including custom-designed thus they participate profitably throughout the product life cycle and its extensions. Conglomerates will have divisions at different stages of many product life cycles. The R&D licenser participates only long enough to establish the product concept, and then focuses on further innovation, while the entrepreneur must continue until it establishes a “growth’‘-firm image.

USING TECHNOLOGY The role of engineering

STRATEGICALLY management

The strategic use of technology requires that engineering, R&D, project, and process managers in the TOF fulfill a unique and difficult strategic responsibility. They must get the most out of the currently employed technologies, while being prepared to advocate a technological transition - even though the shift may endanger their accumulated expertise and organizational positions. These forces focus the engineering manager on th;z current technology, when the strategic requirement is to focus on future technological alternatives. In order to fulfill this strategic responsibility, management of the firm - both at the top and in engineering - must: View technology as a corporate resource, periodically assess the firm’s technological position, provide technology briefings for nontechnologists, and manage the firm’s technological profile. Create a climate where innovations are rewarded - both for organizational units and within the performance appraisal system for

individuals - and accept willingly the risk of failure inherent in entrepreneurship. Select technology managers based on commercial as well as technical experience, and for entrepreneurial qualities. This might include formal programs for rotating engineering managers through other functional areas (the Japanese model), and certainly includes seif-education and training efforts by individual managerial candidates. Charge engineering managers or technology teams with both management of internal technologies and responsibility for monitoring the external environment - particularly substitute and emerging technologies. Develop throughout management a basic understanding of the firm’s technologies, involve engineering managers directly in strategic planning, and promote them into upper management. Avoid bureaucratization of engineering management, overemphasis on procedures and controls, and a focus only on short-term results. As engineers and engineering managers increase the emphasis on the strategic use of technology, some will have to shift their point of view, while others have already made the required shift. Table 1 summarizes some of the differences that we see between the traditional engineering view of technology and a strategic view of technology. We believe the most fundamental of these differences is the shift from an emphasis on the technological possibilities to an emphasis on the market possibilities for a new technology or a new product. Concluding

comment

Sadly, most organizations do not practice strategic thinking. Only a fraction of those that do think strategically fully integrate technology with strategy, and fewer yet involve engineers and engineering managers in the strategy formulation process. Too often, technology is seen only as a way to solve a problem and not as a major component of strategy. Engineers

317 TABLE 1

From traditional

To strategic engineering

Solution to a problem

Base for strategic advantage Commercialization important Start with needs Confidential to protect advantage Timing depends on progress, customer needs, and competitor actions Judged by organizational needs Break trends, shift and abandon technologies Flexibility of response

Design elegance important Start with a technology Disseminate to further progress Timing depends on rate of technological progress

Judged by professional standards Extend current trends and technologies Depth and breadth of knowledge Preserve technical knowledge Identify with discipline (cosmopolitans)

Preserve firm Identify with firm (locals)

thus are perceived, both by themselves and by others, as sophisticated technical problem solvers, but not as strategic problem solvers. Most engineers who shift into engineering management carry with them their interest in technology, as well as a highly structured pattern of problem analysis - that values technical content, continuity, and order. However, Maidique and Hayes (1984) have correctly observed that “continued success in a hightechnology environment requires periodic shllts between chaos and continuity”. This principle suggests that engineers and engineering managers also have to periodically shift between problem solution and problem identification, between extension of technologies and shifts to new ones, and between efficient design and flexible designs. In the strategy phase, engineering must allow creative, unstructured apthe in while proaches to emerge, implementation phase engineers must retu, +Ito systematic design techniques.

When contemplating the future, it is clear that computers, genetic engineering, spacebased processing, and new manufacturing concepts are among the technoIogica1 advances that will be influencing corporate strategy. ho one is better prepared than engineering managers to understand the technical possibilities and obstacles, but it is the responsibility of these engineering managers to understand how to strategically use these technologies for competitive advantage. A strategist does not simply know a lot of strategic concepts; rather as Ohmae (1982) points out, “successful business strategies result not from rigorous analysis but from a particular state of mind”. The strategist develops a strategic perspective, and then uses the concepts and techniques of strategic analysis as powerful tools. To become a good strategist, you must practice strategic thinking. To maximize the benefits that the engineering function can bring to strategic management, key engineering ‘designers and engineering managers must be regularly invol- ed in strategy formulation. This requires a change in the stereotypical view of the engineer’s talents and role, and positive action by top management and engineering management. PerkaLps it is time to establish “strategy circles” as well as quality circles!

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