The most important strategic planning that needs to be done is from a business standpoint. Technology strategic planning is merely supportive of the business plan. Illustrating this assertion are results adapted from “Upside Down Marketing, Turning you’re Ex-Customers into Your Best Customers”, by George Walther on why customers slip away from a company. The results were: 1% dies, 3% move away, 5% find other suppliers, 9% switch for competitive reasons such as prices, 14% are dissatisfied with the product offerings and the results of your innovation management, and lastly, the largest group of 68% takes their business elsewhere because they sense that the seller is indifferent towards them. So strategic planning for incremental and next-generation innovation from a technology standpoint isn’t that critical in the scheme of things. Business strategic planning has to come first.
One way to determine when technology strategic planning is going to be important for your corporation is to consider the following: Does the organization have access to new funding (i.e. venture capital input)? Has your organization a new product introduction or new services offering that is significant? Have there been key hires or changes in senior management? Has there been a location move? Has there been a recent merger or acquisition? Has the company acquired a significant new customer? A change in any of these areas typically means that the technology strategic plan needs revamping.
The source of innovation also affects when technology strategic planning is important. If technology comes from Merger and Acquisition activity, then only light-weight loosely-coupled technology strategic plans are required. This is because most of the technology is being acquired through the merger and acquisition versus internal activity. James River Corporation, when it existed in the 1970s through 1990s, grew almost entirely by merger and acquisition efforts. As such it was business strategic planning that drove the technology strategy of the corporation and not the other way around. Cisco is another example from the early 2000s.
Yet another driving element to look at is the rate of new products introduced in the last five years as a percentage of the total sales for the past year. This metric is an indication of the degree to which the company is relying on new products or services to attract and maintain its existing customer base. The higher this number, the more important a technology strategy is to the short and long-term well-being of a corporation. The “Strategic Planning Value to a Management Team” figure shows this in graphic form. The Magic quadrant for technology strategic planning is in companies that have high new product introductions and low M&A activity.
Another guide for companies to use to determine how much energy to put into a technology strategic plan is to consider how the new technology will be leveraged. If the business is mature, the leverage obtained from investing in technology will be minimal. This is shown in the “Technology Leverage and Business Impact Based on Maturity “S” Curve” figure.
It stands to reason that as technology matures continuous investment only results in incremental change. In contrast, technology that is starting-up the steep portion of its maturity curve changes dramatically in its performance and contribution to business results with a little incremental investment. This is because enough of the fundamental research has been done to allow scientists with only little additional effort to make big improvements in next-generation offerings. Technology maturity curve also show why an investment in embryonic technology more often than not leads to frustrating business returns. The best approach in this case (we’ll talk more about this in the open innovation section later on in the book), is to partner especially with universities and research institutes to reduce risk and frustration. The reason for mentioning technology leverage curves here is to point out that many companies as they start to approach the mature phase of their technology continue to pour significant investment into R&D only to be frustrated with the result. This is because when they were on higher portions of the growth curve they experienced generous returns in performance that they’re able to pass along through new products and services offerings to their customers. When technology matures such returns dwindle. Thus, as reported in Research Technology Management, September October 2004, page 18, it’s important at the outset for R&D and business management teams to have a good understanding of where they are on a technology maturity curve before they undertake technology strategic planning.