In closing this section on technology strategic planning one can ask is we did in the beginning is it really worth the trouble. This was studied by the Industrial Research Institute’s Research-On-Research Committee’s Subcommittee. This group studying technology and business integration checked for the dimensions for achieving alignment of the company’s technology portfolio to its business strategy. What they found was that looking at strategic planning from 10 different dimensions was critical to success. These are not dimensions of the plan itself but rather the organizations’ processes for carrying out strategic planning.
The first dimension was the size and nature of future business goals broken down by markets. What they found was it was important that the business and technology expectations of future market opportunities (size, growth, new technologies and new applications) were reflected in technology portfolio. They also found that business and technology personnel jointly plan the portfolio using ongoing validated and documented forecasting of markets.
The second dimension they found important was that people were careful with their use of time. Here the critical question was do the business and technology personnel agree on a realistic timeline that with create market success. It was found that timelines needed to be created by a validated rigorous process and mutually agreed upon between business and technology personnel everyone was committed to meet well-defined objectives.
The third dimension related to the return on existing assets. The key question was whether the return on existing assets was improved by the technology portfolio. This requires inputs from people in technology, manufacturing, and marketing who possess knowledge of core technical competencies, manufacturing equipment, working capital, intellectual property, brand-name, and information technology. Important to account for in the strategic plan were changes in all asset classes during the strategic planning process.
The fourth dimension was the investment in new assets. The same considerations as mentioned for the return on existing assets apply. It is also important to document whether this investment is consistent with the future needs of the business. The technology portfolio should meet or exceed corporate standards for ROI. Not surprisingly this is easiest done for incremental projects, more difficult for next-generation, and extremely difficult for breakthrough innovation programs. This is the logic for breaking the three types of assets apart by project type or technology for planning purposes and review by senior management.
The fifth dimension was to make sure the portfolio was aligned with a balance of business objectives. This comes back to the comment about incremental, next-generation, and breakthrough technology development. The question is: does the business and technology have an integrated plan for the balance of line extension, new products, and exploratory products vis-à-vis products and service system solutions. Important is that the business has a written plan which fully delineates the intended balance of line extensions versus new products versus exploratory or breakthrough products concepts. The technology strategic plan and portfolio has to be planned and funded to be consistent with the overall strategic document. Benchmarking in large US corporations consistently showed that the overall strategic plan required to bring next-generation and breakthrough technology to market underfunded the longer term projects. Oftentimes it was incremental projects that were getting the lion’s share of funding in mature businesses. This can lead to nothing but failure.
The sixth dimension was the “new sales ratio” goal. It’s important that a corporation’s business units have defined goals for sales of new products as a percentage of total sales. The technology portfolio has to be planned and funded so it produces results and sustainable long term viability. The technology portfolio usually contained a weakness with underfunding of technology groups and therefore the demise of the corporation’s performance. It was found that the business had to have written goals aligned with strategic intent for the sales of new products as a percentage of its total sales. Failure to plan for this led to uncertain internal expectations and an inability to communicate wisely with external market analysts whose recommendations affect company stock performance. It is a challenge but the technology portfolio has to created and funded to produce business results and sustainable long term business performance.
Within this dimension is the need to create new business or market areas versus existing business areas. This weighs heavily on the fourth-generation R&D planning concept described above. A company has to determine which new business verses technology areas it wants to participate in. It has to establish the value proposition for each new business area and think carefully about the architectural design of what that new business will look like. Found important in the benchmarking studies was that a company has to define the new business areas it wants to participate in first, then it has to establish adequately resourced key business and technical competencies needed to become a player in that new area.
The seventh dimension of success was to balance work in very new and improved products with that work associated with cost reduction. In times of economic turmoil it is not surprising that many executive teams look to R&D to focus on reduction of costs as a way to reduce their business risk and improve financial performance versus taking on new products and service offerings. Key to successful technology strategic planning is that the company has to have both specific goals to reduce costs by certain amount each year and to have a percentage of sales from new products and services integrated into its business plans. A clear technology strategic plan should be well integrated with the business plan to achieve both the cost reduction and the increase in new products and services offerings.
The eighth dimension of success was alignment with the business’ risk tolerance. This element is commonly addressed in the risk versus reward matrix described in the technology strategic plan above. However when one looks at it at the technology portfolio the question is: Is that portfolio match the risk tolerance of the business? Again benchmarking at the Industrial Research Institute often showed that the technology portfolio took on a risk adjusted performance larger than what the corporation actually had a tolerance for. This is because a few key in executives wanted to take the chance that R&D could generate a significant return where the general managers, being more tightly relate to the operations of the corporation, wanted a more conservative portfolio overall. This is often seen in the tension between a CEO and COO of the corporation. The CEO wants to take the higher risk and reward associated with innovative new products and services, where as a COO is always an individual usually more focused on oh less risky approach to improving operations. Where the CEO and COO of a corporation are not perfectly aligned it is very difficult to come up with an appropriate technology strategic plan.
The last dimension in looking at technology strategic planning is the organizational commitment to the plan. The key question is to think about the goals and reward system of the individuals involved in strategic planning. Often they really don’t drive technology and business integration as an outcome. They do not possess shared goals and objectives. Ideally there is agreement between technology and business management on what constitutes success in developing and executing the technology portfolio. When success is achieved all contributors share in the rewards.