ENTRP 300 Midterm

the five forces: the degree of existing rivalry

- the number and relative size of competitors will shape the nature of rivalry. In general, the more firms competing that are of comparable size, the more competitive the industry will be. - by the degree to which competitors are differentiated from each other. - When demand is increasing, there are more revenues to go around and firms will experience less competitive pressure. - In declining industries, high exit barriers (fixed capital investments, emotional attachment to the industry, etc.) can also intensify rivalry by making firms reluctant to abandon the industry.

Prahalad and Hamel offer the following tests to identify the firm's core competencies:

1. Is it a significant source of competitive differentiation? Does it provide a unique signature to the organization? Does it make a significant contribution to the value a customer perceives in the end product? For example, Sony's skills in miniaturization have an immediate impact on the utility customers reap from its portable products. 2. Does it transcend a single business? Does it cover a range of businesses, both current and new? For example, Honda's core competence in engines enables the company to be successful in businesses as diverse as automobiles, motorcycles, lawn mowers, and generators. 3. Is it hard for competitors to imitate? In general, competencies that arise from the complex harmonization of multiple technologies will be difficult to imitate. The competence may have taken years (or decades) to build. This combination of resources and embedded skills will be difficult for other firms to acquire or duplicate.

To qualify for a patent, an invention must usually meet the following criteria

1. It must be useful (i.e., it must produce a desirable result, solve a problem, improve on or propose a new use for an existing development or show potential of doing so). 2. It must be novel (i.e., it must not already be patented or described in public literature, or be in public use for more than a year). 3. It must not be obvious (i.e., a person with experience or skill in the particular art of the patent would not be expected to achieve the same invention with a normal amount of effort). Printed materials are not typically patentable, but it may be possible to protect them by copyright, as discussed in the next section. the time from filing to grant is between two and five years in the United States,

real option

A call option on a stock enables an investor to purchase the right to buy the stock at a specified price (the exercise price) in the future. If, in the future, the stock is worth more than the exercise price, the holder of the option will typically exercise the option by buying the stock. If the stock is worth more than the exercise price plus the price paid for the original option, the option holder makes money on the deal. If the stock is worth less than the exercise price, the option holder will typically choose not to exercise the option, allowing it to expire. In this case, the option holder loses the amount of money paid for the initial option. If, at the time the option is exercised, the stock is worth more than the exercise price the assets underlying the value of the option are nonfinancial resources.

Porter's Five Forces Model

A model for analyzing the competitive forces within the environment in which a company operates, to assess the potential for profitability in an industry. "What factors in the firm's external environment create threats and opportunities for the firm?"

trade secrets

A trade secret is information that belongs to a business that is generally unknown to others. Trade secrets need not meet many of the stringent requirements of patent law, enabling a broader class of assets and activities to be protectable. Information is typically considered to be a trade secret only if it (a) offers a distinctive advantage to the company in the form of economic rents, and (b) remains valuable only as long as the information remains private.

trademark

An indicator used to distinguish the source of a good. protects words or symbols intended to distinguish the source of a good.

Incentives for Architectural Control

Architectural control over the evolution of a technology is always valuable; however, it becomes particularly valuable if a firm is a significant producer of complements to the technology in question. A firm with architectural control can typically design the technology to be compatible with its own complements and incompatible with those of competitors. If the technology is chosen as the dominant design, this architectural control allows the firm to ensure that it reaps the lion's share of the rewards in complements production. Furthermore, by making the technology selectively compatible with some competitors and not others, the firm can exert great influence over the competitive field. Architectural control can also enable the firm to direct the development efforts put into the technology so that it exploits the firm's core competencies.

QUALITATIVE METHODS FOR CHOOSING PROJECTS: screening questions

As a starting point, a management team is likely to discuss the potential costs and benefits of a project, and the team may create a list of screening questions that are used to structure this discussion.

Patent Strategies

Both large and small inventors, across all major technology fields exhibited this preference for early disclosure, presumably because it allows them to publicize their invention's quality and scope to competitors, external investors, and potential licensees. Disclosure via patent application also establishes the date from which patentees can enjoy provisional patent rights patent trolling: A pejorative term for when an individual or firm misuses patents against other individuals or firms in attempt to extract money from them. troll's primary purpose in owning patents is to extort money from other firms. patent thickets: A dense web of overlapping patents that can make it difficult for firms to compete or innovate. thickets" can make it very difficult for firms to compete without falling prey to patent suits by other firms in that technology domain. This can seriously stifle innovation and has resulted in the rather peculiar strategy of firms buying bundles of patents to create war chests that they hope will deter the patent attacks of others.

ADVANTAGES OF COLLABORATING : Learning from Partners

Close contact with other firms can facilitate both the transfer of knowledge between firms and the creation of new knowledge that individual firms could not have created alone. By pooling their technological resources and capabilities, firms may be able to expand their knowledge bases and do so more quickly than they could without collaboration.

projects maps

Companies that use the project map categorize all their existing projects and projects under consideration by the resources they require (e.g., engineers, time, capital, etc.) and by how they contribute to the company's product line. The company can then map the project types and identify gaps in the development strategy.17 Managers can also use the map to identify their desired mix of projects, and allocate resources accordingly. The mix of projects represented on such a map should be consistent both with the company's resources, strategic position, and with its strategic intent

screening questions: role of capabilities

Existing Capabilities ∙ Does the new project leverage the firm's core competencies or sources of sustainable competitive advantage? ∙ Will the project render some of the firm's existing competencies obsolete or cannibalize existing products? If so, does the firm have a transition strategy to handle possible cash flow implications? ∙ Does the firm have the necessary manufacturing capabilities, and if not, will those capabilities be developed in-house or acquired externally (e.g., outsourcing)? ∙ Will the firm need to hire employees with new skills? Competitors' Capabilities ∙ Do one or more competitors have better capabilities for developing this project? ∙ If the company does not develop this technology, are competitors likely to? ∙ Will the company be able to protect its intellectual property through patents, copyright, trademarks, or trade secrets? ∙ Should the firm seek to form a collaboration with a potential competitor? Future Capabilities ∙ Will the project help the firm build new capabilities that will allow it to achieve its strategic intent? ∙ What other products/markets will the new capabilities enable the firm to ∙ Is this project a platform that will lead to a family of new products?

reasons for going solo: Building and Renewing Capabilities

Firms may also choose to engage in solo development even when partnering could save time or money because they believe that development efforts are key to building and renewing their capabilities.

ADVANTAGES OF COLLABORATING : Building a Coalition around a Shared Standard

Firms may also collaborate on a development project when such a collaboration would facilitate the creation of a shared standard.

reasons for going solo: Protecting Proprietary Technologies

Firms sometimes avoid collaboration for fear of giving up proprietary technologies. Working closely with a partner might expose the company's existing proprietary technologies to the prying eyes of a would-be competitor.

original equipment manufacturers (OEMs)

Firms that assemble goods using components made by other manufacturers, also called value-added resellers (VARs). Those who purchase a license for the software can execute and bundle the software with other goods but may not augment the software.

reasons for going solo

First, the firm may perceive no need to collaborate with other organizations—it may possess all the necessary capabilities and resources for a particular development project in-house. Alternatively, the firm may prefer to obtain complementary skills or resources from a partner, but there may be no available partner that is appropriate or willing to collaborate. A firm might also choose to develop a project as a solo venture if it is concerned that collaborating would put its proprietary technologies at risk, or if it seeks to have full control over the project's development and returns.

Control over Fragmentation

For technologies in which standardization and compatibility are important, maintaining the integrity of the core product is absolutely essential, and external development can put it at risk.

Resources for Internal Development

If a firm does not have significant resources (capital, technological expertise) to invest in the technology's functionality, it may have difficulty producing a technology that has an initial performance level, and rate of improvement, that the market finds attractive. In such instances, it can be valuable to tap the external development efforts of other firms (or individuals) through utilizing a more open technology strategy.

Advantages of Protection

If a single firm is the primary beneficiary of its technology's success, it has much greater incentive to invest in further developing the technology. The profits from the technology may be directly reinvested in further improvements in the technology. multiple firms can produce a technology, losing money on the technology in the short term to promote it as a standard is highly risky because the long-term distribution of the payoffs is uncertain.

THE EFFECTIVENESS AND USE OF PROTECTION MECHANISMS

If patents provide little protection, the firm may rely more heavily on trade secrets; however, the ability to protect trade secrets also varies with the nature of the technology and the industry context. To protect a trade secret, a firm must be able to expose its product to the public without revealing the underlying technology, but in many cases, revealing the product reveals all. In industries characterized by increasing returns, firms sometimes choose to liberally diffuse their technologies to increase their likelihood of rising to the position of dominant design. firms may liberally diffuse their technologies (through, e.g., open source software or liberal licensing arrangements) to accelerate the technology's proliferation and thereby jump-start the self-reinforcing feedback effect that can lead to the technology's dominance.

Production Capabilities, Marketing Capabilities, and Capital

If the firm is unable to produce the technology at sufficient volume or quality levels (or market the technology with sufficient intensity), then protecting the technology so that the firm is its sole provider may significantly hinder its adoption. if complementary goods influence the value of the technology to users, then the firm must (a) be able to produce the complements in sufficient range and quantity, (b) sponsor their production by other firms, or (c) encourage collective production of the complements through a more open technology strategy.

Types of Collaborative Arrangements: Collective Research Organizations

In some industries, multiple organizations have established cooperative research and development organizations such as the Semiconductor Research Corporation or the American Iron and Steel Institute.40 Collective research organizations may take a number of forms, including trade associations, university-based centers, or private research corporations. Many of these organizations are formed through government or industry association initiatives. Other collective research organizations have been formed solely through the initiative of private companies.

cost of filing a patent

In the United States, the entire patenting process for a "small entity" (e.g., an independent inventor, a small business, or a nonprofit organization) costs around $1500 in filing fees (and roughly double that for large entities), and $5000-$10,000 in attorney fees. In most countries, patent protection lasts for 20 years.

Aggregate Project Planning Framework

Many companies find it valuable to map their R&D portfolio according to levels of risk, resource commitment, and timing of cash flows. Managers can use this map to compare their desired balance of projects with their actual balance of projects.15 It can also help them to identify capacity constraints and better allocate resources.16 Companies may use a project map (similar to that depicted in Figure 7.5) to aid this process. Four types of development projects commonly appear on this map—advanced R&D, breakthrough, platform, and derivative projects. Over time, a particular technology may migrate through these different types of projects. Advanced R&D projects are the precursor to commercial development projects and are necessary to develop cutting-edge strategic technologies. Breakthrough projects involve development of products that incorporate revolutionary new product and process technologies.

ADVANTAGES OF COLLABORATING : Increasing Flexibility

Obtaining some of the necessary capabilities or resources from a partner rather than building them in-house can help a firm reduce its asset commitment and enhance its flexibility. They may choose to become more narrowly specialized and to use linkages with other specialized firms to access resources they do not possess in-house

Types of Collaborative Arrangements: outsourcing

One common form of outsourcing is the use of contract manufacturers. Contract manufacturing allows firms to meet the scale of market demand without committing to long-term capital investments or an increase in the labor force, thus giving the firm greater flexibility.32 It also enables firms to specialize in those activities central to their competitive advantage while other firms provide necessary support and specialized resources the firm does not possess. Contract manufacturing further enables a firm to tap the greater economies of scale and faster response time of a dedicated manufacturer, thereby reducing costs and increasing organizational responsiveness to the environment. Other activities, such as product design, process design, marketing, information technology, or distribution can also be outsourced from external providers. Outsourcing can also impose significant transaction costs for a firm.38 Contract manufacturing, for example, requires a well-specified contract: Product design, cost, and quantity requirements must be clearly communicated and generally specified up front.

tacit resources

Resources of an intangible nature (such as knowledge) that cannot be readily codified.

socially complex resources

Resources or activities that emerge through the interaction of multiple individuals.

CHOOSING A MODE OF COLLABORATION

Solo internal development is, on average, a relatively slow and expensive way of developing a technology. The firm bears all the costs and risks, and may spend considerable time learning about the new technology, refining its designs, and developing production or service processes to implement the new technology. However, a firm that engages in solo internal development retains total control over how the technology is developed and used. Solo internal development also offers great potential for the firm to leverage its existing competencies and to develop new competencies, but offers little to no potential for accessing another firm's competencies. Some strategic alliances may enable a firm to relatively quickly and cheaply gain access to another firm's technology, but give the firm a low level of control over that technology. Other strategic alliances might be aimed at utilizing the firm's own technology in a broader range of markets, which can be fast and cost-effective, and still enable the firm to retain a considerable amount of control. Most alliances offer opportunities for leveraging existing competencies or developing new competencies. Strategic alliances may or may not offer potential for accessing another firm's competencies, depending on the alliance's purpose and structure a joint venture is much more structured. While a joint venture typically involves developing a new technology and can take almost as long as solo internal development, it may be slightly faster due to the combination of the capabilities of multiple firms. Joint ventures enable partners to share the cost of the development effort, but they must also share control. Licensing in technology offers a fast way to access a new technology that is typically lower in cost than developing it internally. The firm typically has limited discretion over what it can do with the technology, however, and thus has a low degree of control. Depending on the firm's capability mix and the nature of what it has licensed, licensing can sometimes offer the potential of leveraging a firm's existing competencies, developing new competencies, and accessing another organization's competencies. When a firm outsources design, production, or distribution of its technology, it is intentionally giving up a moderate amount of control to rapidly gain access to another firm's expertise and/or lower cost structure. Participation in a collective research organization is typically a long-term commitment rather than an effort to rapidly access capabilities or technology. As with strategic alliances, the nature of a firm's participation in a collective research organization can take many forms; thus, cost and control can vary significantly.

reasons for going solo: Controlling Technology Development and Use

Sometimes firms choose not to collaborate because they desire to have complete control over their development processes and the use of any resulting new technologies.

Industry Opposition against Sole-Source Technology

Sometimes other industry members are able to exert strong pressure against the adoption of a technology that would give one (or a few) producer(s) undue control and power, causing a technology that is restricted to such production to be rejected or more hotly contested than a more open technology.

The risk of core rigidities

Sometimes the very things that a firm excels at can enslave it, making the firm rigid and overly committed to inappropriate skills and resources.

stake holder analysis

Stakeholder models are often used for both strategic and normative purposes. A strategic stakeholder analysis emphasizes the stakeholder management issues that are likely to impact the firm's financial performance, while a normative stakeholder analysis emphasizes the stakeholder management issues the firm ought to attend to due to their ethical or moral implications.

appropriability

The degree to which a firm is able to capture the rents from its innovation. determined by how easily or quickly competitors can imitate the innovation. The ease with which competitors can imitate the innovation is, in turn, a function of both the nature of the technology itself and the strength of the mechanisms used to protect the innovation. If this knowledge base is tacit (i.e., it cannot be readily codified into documents or procedures) or socially complex (i.e., it arises through complex interactions between people), competitors will typically find it very difficult to duplicate. Individuals and firms often employ legal mechanisms to attempt to protect their innovations. Most countries offer legal protection for intellectual property in the form of patent, trademark, copyright, and trade secret laws.

Yves Doz and Gary Hamel two detention theory

The first dimension is the degree to which alliances practice - capability complementation: Combining ("pooling") the capabilities and other resources of partner firms, but not necessarily transferring those resources between the partners. - capability transfer: Exchange of capabilities across firms in such a manner that partners can internalize the capabilities and use them independently of the particular development The second dimension is whether the firm manages each alliance individually or manages a collective network of alliances In quadrant A are firms that forge an individual alliance to combine complementary technologies or skills needed for a project. In quadrant B are firms that use a network of alliances to combine complementary skills and resources. In quadrant C are firms that use individual alliances to transfer capabilities between them. In quadrant D are firms that use a network of alliances to exchange capabilities and jointly develop new capabilities.

The opportunities and flexibility that can be gained through using alliances can come at a cost

The potential for opportunism and self-interest exists for all parties of an alliance due to limited levels of mutual commitment.24 Studies suggests that between 30 percent and 70 percent of alliances fail by neither meeting the goals of the partners nor delivering the operational or strategic benefits for which they were intended.25 Firms need to be constantly on guard to ensure that the alliance does not inadvertently result in giving too much away to a potential competitor.

Advantages of Diffusion

The primary argument for diffusing a technology instead of protecting it is that open technologies may accrue more rapid adoptions. a liberal diffusion strategy can stimulate the growth of the installed base and availability of complementary goods. External development, however, poses some costs and risks. First, external development efforts typically lack the coordination of internal development. External developers may have very diverse objectives for the technology; rather than work together toward some unified vision of what the technology could achieve in the future, they might work in different, possibly even conflicting, directions.23 Much of their effort may be redundant, as different external developers work on solving the same problems without communicating with each other. Finally, whether and how these improvements get incorporated into the technology and disseminated to other users of the technology can prove very problematic. UNIX provides a stark example of this.

PATENTS, TRADEMARKS, AND COPYRIGHTS

The purpose of intellectual property protection is to provide recognition and incentive for creative work. Patents and copyrights, for example, provide a legal means for individuals to protect their creative work and earn rewards from it, in exchange for making the knowledge underlying their work public.

causal ambiguity

The relationship between a resource and the outcome it produces is poorly understood (the causal mechanism is ambiguous).

assessing the firms current position: external analysis

The two most commonly used tools for analyzing the external environment of the firm include Porter's five-force model and stakeholder analysis.

CHOOSING AND MONITORING PARTNERS: Partner Monitoring and Governance

There are three main types of governance mechanisms organizations use to manage their collaborative relationships: alliance contracts, equity ownership, and relational governance. Alliance contracts are legally binding contractual arrangements to ensure that partners (a) are fully aware of their rights and obligations in the collaboration and (b) have legal remedies available if a partner should violate the agreement. Many alliances involve shared equity ownership, that is, each partner contributes capital and owns a share of the equity in the alliance. Equity ownership helps to align the incentives of the partners (because the returns to their equity stake are a function of the success of the alliance) and provides a sense of ownership and commitment to the project that can facilitate supervision and monitoring of the alliance. Finally, many alliances also rely on relational governance. Relational governance is the self-enforcing governance based on the goodwill, trust, and reputation of the partners that is built over time through shared experiences of repeatedly working together.

the Patent Cooperation Treaty, or PCT

This treaty facilitates the application for a patent in multiple countries. An inventor can apply for a patent to a single PCT governmental receiving office, and that application reserves the inventor's right to file for patent protection in 152 countries for up to two-and-half years. Filing a single PCT application offers numerous advantages. First, applying for the PCT patent buys the inventor the option to apply to multiple nations later without committing the inventor to the expense of those multiple applications. Another advantage of the PCT process is that it helps make the results of patent applications more uniform. Though individual countries are not required to grant a patent to those inventions that are granted a patent by the PCT governing office, the granting of the patent by the PCT provides persuasive evidence in favor of granting the patent in the individual national offices. As of August 2015, there were 148 member states of the Patent Cooperation Treaty. Patent Strategies It is typical to assume that an inventor

screening questions: project timing and cost

Timing ∙ How long will the project take to complete? ∙ Is the firm likely to be first to market? Is pioneering the technology a desirable strategy? ∙ Is the market ready for the product? (For example: Are enabling and complementary technologies well developed? Will customers perceive the value of the technology?) ∙ If the firm misses its target deadlines, what impact will this have on the potential value of the project? ∙ Are there already appropriate suppliers and distribution channels? Cost Factors ∙ How much will the project cost? What is the potential variability in these costs? ∙ What will the manufacturing costs be? At what rate are these costs expected to decline with experience? ∙ Will the firm need to bear other costs related to customer adoption (e.g., production of complements, installation, technical support, etc.)?

Major International Trademark Treaties

To eliminate the need to register separately in each country (or region), the World Intellectual Property Organization administers a System of International Registration of Marks governed by two treaties: the Madrid Agreement Concerning the International Registration of Marks and the Madrid Protocol. Countries that adhere to either (or both) the Madrid Agreement or Madrid Protocol are part of the Madrid Union. Any individual that lives in, is a citizen of, or maintains an establishment in a Madrid Union country can register with the trademark office of that country and obtain an international registration that provides protection in as many other Madrid Union countries as the applicant chooses.

Trademarks and Service Marks

Trademarks and service marks can be embodied in any indicator that can be perceived through one of the five senses. Trademark rights may be used to prevent others from using a mark that is similar enough to be confusing, but they may not be used to prevent others from producing or selling the same goods or services under a clearly different mark. In most countries, the rights to a trademark or service mark are established in the legitimate use of the mark and do not require registration; however, registration provides several advantages. First, registering the mark provides public notice of the registrant's claim of ownership over the mark. Second, marks must be registered before a suit can be brought in federal court against an infringement of the mark. Third, registration can be used to establish international rights over the trademark, as when the U.S. registration is used to establish registration in other countries, and to protect the mark against infringement from imported products.

the development budget

Under capital rationing, the firm sets a fixed research and development budget (often some percentage of the previous year's sales), and then uses a rank ordering of possible projects to determine which will be funded.

reasons for going solo: availability of capabilities

Whether a firm chooses to partner on a project is largely determined by the degree to which it possesses all of the necessary capabilities in-house and the degree to which one or more potential partners have necessary capabilities. If a firm has all of the necessary capabilities for a project, it may have little need to collaborate with others and may opt to go it alone.

ADVANTAGES OF COLLABORATING : Acquiring Capabilities and Resources Quickly

a company may be able to gain rapid access to important complementary assets by entering into strategic alliances or licensing arrangements.

Five Forces: Bargaining power of buyers

a measure of the influence that customers have on a firm's prices - If the firm's product is highly differentiated, buyers will typically experience less bargaining power, and if the firm's product is undifferentiated, buyers will typically experience greater bargaining power. - If buyers face switching costs, this is likely to lower their bargaining power, and if the firm faces switching costs to work with other buyers, this will increase the buyer's bargaining power. - if the buyers can threaten to backward vertically integrate, this will increase their bargaining power, and if the firm can threaten to forward vertically integrate, it will lower customer bargaining power.

Five Forces: Bargaining Power of Suppliers

a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs - If the firm faces switching costs that make it difficult or expensive to change suppliers, this will also increase the supplier's bargaining power. - if the firm can backward vertically integrate (i.e., produce its own supplies), this will lessen supplier bargaining power, and if the supplier can threaten to forward vertically integrate into the firm's business, this will increase the supplier's bargaining power.

Data Envelopment Analysis

a method of assessing a potential project (or other decision) using multiple criteria that may have different kinds of measurement units.

Types of Collaborative Arrangements: joint ventures

a significant equity investment from each partner and often results in establishment of a new separate entity. The capital and other resources to be committed by each partner are usually specified in carefully constructed contractual arrangements, as is the division of any profits earned by the venture.

The Paris Convention for the Protection of Industrial Property

an international intellectual property treaty adhered to by 177 countries as of March 2018. Under the Paris Convention, a citizen of any member country may patent an invention in any of the member countries and enjoy the same benefits of patent protection as if the inventor were a citizen of those countries. with the priority rights established under the Paris Convention, an inventor who patents an invention in one of the member countries can then publicly disclose information about that invention without losing the right to patent the invention in the other countries—each patent application will be treated as if it were applied for at the same time as the first application, and thus as if it were applied for before public disclosure.

core competencies

arises from a firm's ability to combine and harmonize multiple primary abilities in which the firm excels into a few key building blocks of specialized expertise.

CHOOSING AND MONITORING PARTNERS: partner selection

chosen. A number of factors can influence how well suited partners are to each other, including their relative size and strength, the complementarity of their resources, the alignment of their objectives, and the similarity of their values and culture.46 These factors can be boiled down to two dimensions: resource fit and strategic fit. Resource fit refers to the degree to which potential partners have resources that can be effectively integrated into a strategy that creates value.48 Such resources may be either complementary or supplementary. Strategic fit refers to the degree to which partners have compatible objectives and styles. The objectives of the partners need not be the same as long as the objectives can be achieved without harming the alliance or the partners.

DISADVANTAGES OF QUANTITATIVE METHODS

discounted cash flow estimates are only as accurate as the original estimates of the profits from the technology, and in many situations, it is extremely difficult to anticipate the returns of the technology. such methods discriminate heavily against projects that are long term or risky, and the methods may fail to capture the strategic importance of the investment decision. Technology development projects play a crucial role in building and leveraging firm capabilities and creating options for the future. Investments in new core technologies are investments in the organization's capabilities and learning, and they create opportunities for the firm that might otherwise be unavailable.

Mapping the company's R&D portfolio

encourages the firm to consider both short-term cash flow needs and long-term strategic momentum in its budgeting and planning.

strategic intent

focuses organizational energies on achieving a compelling goal - This entails more than just improving operations or cutting costs; it means leveraging corporate resources to create more performance for customers, more well-being for employees, and more returns for shareholders. Once the strategic intent has been articulated, the company should be able to identify the resources and capabilities required to close the gap between the strategic intent and the current position

Major International Patent Treaties

if international patent protection will eventually be sought, inventors must uphold the stricter standard of applying for patent before publishing information about the patent, even if they plan to first patent the invention in the United States. Many countries also require that the invention be manufactured in the country in which a patent was granted within a certain time frame (often three years) from the time the patent is granted. This is called the "working requirement," and it effectively prevents inventors from patenting inventions in countries in which they have no intention of setting up production.

derivative projects

involve incremental changes in products and/or processes. - represent modifications of the basic platform design to appeal to different niches within that core group.

Types of Collaborative Arrangements: licensing

is a contractual arrangement whereby one organization or individual (the licensee) obtains the rights to use the proprietary technology (or trademark, copyright, etc.) of another organization or individual (the licensor). Licensing enables a firm to rapidly acquire a technology (or other resource or capability) it does not possess.

Conjoint Analysis

is a family of techniques (including discrete choice, choice modeling, hierarchical choice, trade-off matrices, and pairwise comparisons) used to estimate the specific value individuals place on some attribute of a choice, such as the relative value of features of a product or the relative importance of different outcomes of a development project.

Types of Collaborative Arrangements: Strategic Alliances

is a temporary relationship that can take many forms. It can be formalized in a contract or an informal agreement. It can be a short-term agreement or a long-term agreement, and it can include an equity investment made by the partners in each other (termed equity alliances, discussed later in the chapter). Most alliances (with the exception of joint ventures that establish a new legal subsidiary) are considered temporary agreements, and thus offer a good way for firms to flexibly combine their efforts and resources. Through an alliance, firms can establish a limited stake in a venture while maintaining the flexibility to either increase their commitment later or shift these resources to another opportunity.14 Firms can use alliances to gain an early window on emerging opportunities that they may want to commit to more fully in the future. Alliances also enable a firm to rapidly adjust the type and scale of capabilities the firm can access, which can be very valuable in rapidly changing markets.

the five forces: threat of potential entrants

is influenced by both the degree to which the industry is likely to attract new entrants (e.g., is it profitable, growing, or otherwise alluring?) and the height of entry barriers. Entry barriers can include such factors as large start-up costs, brand loyalty, difficulty in gaining access to suppliers or distributors, government regulation, threat of retaliation by existing competitors, and many others.

The most common use of conjoint analysis

is to assess the relative importance to customers of different product attributes—these values can then be used in development and pricing decisions. For example, potential customers might be given a series of cards describing different models of a camera with different features and prices. The individuals are then asked to rate each in terms of its desirability or asked to order the models in terms of which they would most likely buy.

the value of a call stock option

is zero as long as the price of the stock remains less than the exercise price. If the value of the stock rises above the exercise price, however, the value of the call rises with the value of the stock, dollar for dollar (thus the value of the call rises at a 45-degree angle) Options are valuable when there is uncertainty, and because technology trajectories are uncertain, an options approach may be useful.

Net Present Value

managers first estimate the costs of the project and the cash flows the project will yield (often under a number of different "what if" scenarios). Costs and cash flows that occur in the future must be discounted back to the current period to account for risk and the time value of money. The present value of cash inflows can then be compared to the present value of cash outflows: NPV = Present value of cash inflow − Present value of cash outflows If this value is greater than 0, then the project generates wealth, given the assumptions made in calculating its costs and cash inflows. To find the present value of cash inflow .

building an alliance portfolio

managers should think carefully about competitive effects, complementing effects, and network structure effects. First, if multiple alliances are serving the same strategic needs, there is a risk of redundant resources investment, or competitive conflict between partners. The costs and benefits of this should be carefully weighed as alliance partners could become adversaries. Second, complementary alliances can be super-additive if carefully managed. For example, a pharmaceutical firm might be using an alliance to develop a drug target with one partner, and another alliance to develop a delivery method for that same drug, enabling it to bring the product to market faster.22 In this situation, the benefits of each alliance are accentuated by the benefits of the other. Finally, managers should consider how their portfolio of alliances positions them in the web of relationships that connects their firm, their partners, and their partners' partners.23 Such networks can be very influential in the diffusion of information and other resources, and being positioned well in an alliance network can confer significant advantages

screening questions: role of customers

market: ∙ Who are the most likely customers of the new product? ∙ How big is this market? Are there other likely markets for the product? ∙ What type of marketing will be required to create customer awareness? Use ∙ How will customers use the product? ∙ What new benefits will the product provide the customer? ∙ What other products are customers likely to consider as substitutes for this product? Compatibility and Ease of Use ∙ Will the product be compatible with the customer's existing complements? ∙ Will the product require significant new learning on the part of the customer? ∙ How will the customer perceive the product's ease of use? ∙ Will the product require the customer to bear other costs? Distribution and Pricing ∙ Where will the customer buy the product? ∙ Will the product require installation or assembly? ∙ How much are customers likely to be willing to pay for the product?

Copyright Protection around the World

most countries do offer copyright protection to both domestic and foreign works, and there are international copyright treaties for simplifying the process of securing such protection. One of the most significant is the Berne Union for the Protection of Literary and Artistic Property (known as the Berne Convention). The Berne Convention specifies a minimum level of copyright protection for all member countries, and it requires member countries to offer the same protection to both its own citizens and foreign nationals.

Internal Analysis: value chain

primary activities: include inbound logistics (all activities required to receive, store, and disseminate inputs), operations (activities involved in the transformation of inputs into outputs), outbound logistics (activities required to collect, store, and distribute outputs), marketing and sales (activities to inform buyers about products and services and to induce their purchase), and service (after-sales activities required to keep the product or service working effectively). Support activities include procurement (the acquisition of inputs, but not their physical transfer, as that would be covered in inbound logistics), human resource management (activities such as recruiting, hiring, training, and compensating personnel), technology development (activities involved in developing and managing equipment, hardware, software, procedures, and knowledge necessary to transform inputs into outputs), and infrastructure (functions such as accounting, legal counsel, finance, planning, public affairs, government relations, quality assurance, and general management necessary to ensure smooth functioning of the firm).

complements

products or services that increase purchases of other products - For example, software is an important complement for computers, and gasoline is an important complement for automobiles. - The availability, quality, and price of complements will influence the threats and opportunities posed by industry (1) how important complements are in the industry, (2) whether complements are differentially available for the products of various rivals (impacting the attractiveness of their goods), and (3) who captures the value offered by the complements.

Copyright

protects an original artistic or literary work. the owner of the copyright has the exclusive right to do (or authorize others to do) the following: ∙ Reproduce the work in copies or phonorecords. ∙ Prepare derivative works based upon the work. ∙ Distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending. ∙ Perform the work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works. ∙ Display the copyrighted work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work. ∙ Perform the work publicly by means of a digital audio transmission (in the case of sound recordings). There are, however, copyright protection is secured automatically when an eligible work is created and fixed in a copy or phonorecord for the first time.

QUANTITATIVE METHODS FOR CHOOSING PROJECTS: discounted cash flow

quantitative methods for assessing whether the anticipated future benefits are large enough to justify expenditure, given the risks. The two most commonly used forms of discounted cash flow analysis for evaluating investment decisions are net present value (NPV) and internal rate of return (IRR). NPV asks, "Given a particular level of expenditure, particular level(s) and rate of cash inflows, and a discount rate, what is this project worth today?" IRR asks instead, "Given a particular level of expenditure and particular level(s) and rate of cash inflows, what rate of return does this project yield?"

Q-Sort

simple method for ranking objects or ideas on a number of different dimensions. The Q-sort method has been used for purposes as diverse as identifying personality disorders to establishing scales of customer preferences. Individuals in a group are each given a stack of cards with an object or idea on each card.

Internal Rate of Return (IRR)

the discount rate that makes the NPV of an investment zero Managers can compare this rate of return to their required return to decide if the investment should be made. Calculating the IRR of a project typically must be done by trial and error, substituting progressively higher interest rates into the NPV equation until the NPV is driven down to zero. Both net present value and internal rate of return techniques provide concrete financial estimates that facilitate strategic planning and trade-off decisions. discounted cash flow estimates are only as accurate as the original estimates of the profits from the technology, and in many situations it is extremely difficult to anticipate the returns of the technology.

If the technology is chosen as a dominant design

the firm with architectural control over the technology can have great influence over the entire industry.

Protecting the technology also gives the developing firm architectural control over the technology.

the firm's ability to determine the structure and operation of the technology, and its compatibility with other goods and services. It also refers to the firm's ability to direct the future development path of the technology. Architectural control can be very valuable, especially for technologies in which compatibility with other goods and services is important. By controlling the technology's architecture, the firm can ensure that the technology is compatible with its own complements, while also restricting its compatibility with the complements produced by others.21 The firm can also control the rate at which the technology is upgraded or refined, the path it follows in its evolution, and its compatibility with previous generations.

five forces: Threat of Substitutes

the idea that products or services available from outside the given industry will come close to meeting the needs of current customers -For example, Starbucks may consider other coffeehouses as competitors, but other social destinations (such as bars or restaurants) or beverages (such as soft drinks or beer) as substitutes.

discounted payback period

the length of time required for an investment's discounted cash flows to equal its initial cost

Wholly Proprietary Systems versus Wholly Open Systems

those based on technology that is company-owned and protected through patents, copyrights, secrecy, or other mechanisms. Such technologies may be legally produced or augmented only by their developers. Proprietary systems typically provide their developers with the opportunity to appropriate rents from the technology. the technology used in a product or process is not protected by secrecy or patents; it may be based on available standards or it may be new technology that is openly diffused to other producers. Many technologies are neither wholly proprietary nor wholly open—they are partially open, utilizing varying degrees of control mechanisms to protect their technologies. It is useful to think of a control continuum that stretches from wholly proprietary to wholly open

Dynamic Capabilities

to a set of abilities that enable it to quickly reconfigure its organizational structure and routines in response to new opportunities. - enable firms to quickly adapt to emerging markets or major technological discontinuities.

few firms are likely to be leaders in more than five or six core competencies.

true

platform projects

typically offer fundamental improvements in the cost, quality, and performance of a technology over preceding generations. - designed to serve a core group of consumers,

Internal Analysis

with identifying the firm's strengths and weaknesses.

the value of call option

∙ The cost of the R&D program can be considered the price of a call option. ∙ The cost of future investment required to capitalize on the R&D program (such as the cost of commercializing a new technology that is developed) can be considered the exercise price. ∙ The returns to the R&D investment are analogous to the value of a stock purchased with a call option.4

For information to qualify as a trade secret under the Uniform Trade Secret Act, the information must meet the following three criteria:

∙ The information must not be generally known or readily ascertainable through legitimate means. ∙ The information must have economic importance that is contingent upon its secrecy. ∙ The trade secret holder must exercise reasonable measures to protect the secrecy of the information.

patent

- A property right protecting a process, machine, manufactured item (or design for manufactured item), or variety of plant. - protects an invention - In the United States, patents are categorized into different types such as a utility patent for a new and useful process, machine, manufactured item, or combination of materials; a design patent for an original and ornamental design for a manufactured item; or a plant patent for the discovery and asexual reproduction of a distinct and new variety of plant. Each country has its own patent