Modeling Information Systems for Technology Strategy Formulation

By
Gour Chandra Saha
1
Lecturer
Department of General Management
Assumption University
Bangkok, Thailand.
E-mail : smp78380@ait.ac.th , bbagsh@au.ac.th

Nazrul Islam1
Assistant Professor
Business Administration Discipline
Khulna University, Khulna, Bangladesh.
E-mail: smp88432@ait.ac.th

Abstract

In today’s business scenario, strategic decisions rely to a very large extent upon critical and precise information needs. However, this information itself is plagued in its divergence and often overlapping. As such, this study attempts to sort out relevant information in formulating technology strategy from a system point of view. It seeks to explain present information systems in business organizations and identifies information needs in different decision areas in technology strategy formulation. Furthermore, it looks into technology strategy dimensions and their

interdependence that provide a premise for modeling information systems of an enterprise. A context diagram has been developed based on dimensions of technology strategy formulation for better discernment of information. Finally, the study suggests a comprehensive model of information systems for technology strategy formulation consisting of info-input, info-process, and info-output.

Keywords: Information Systems, Technology Strategy Formulation, Technology Acquisition, Technology Fit, Competitive Positioning, Organizational Settings, Technology Content Addition

1. Introduction

The rapid pace of technological, economic, social, and regional developments open up new opportunities for businesses to outperform their competitors in a free market situation. To obtain such opportunities, technology plays a critical role for companies as a strategic variable for their success. The formulation of technology strategy is an essential task for the organizations in this regard. Company strategists need as much information as is required to clarify significant aspects of the technology strategy. But the question is how to devise an appropriate technology strategy that would serve their strategic objectives. The best probable answer could be modeling of information systems based on various technology strategy formulation dimensions. As such, the identification of various dimensions of technology strategy formula-tion, and recognition of information relevant to each dimension and their interdependence are very important. It is also essential to systematize diverse information into a model that would impart a complete view of information systems to the business practitioners.

2. Information Systems in Organization

Information system is very important to formulate strategy in business organization. It is linked with technology strategy in a way where information is business driven (Hamalainen 1990). The use of information in business shows two main trends (Van der Pijl, G. J., 1994). First, the amount of information needed in organizations has been growing tremendously due to the growing size and complexity of businesses that makes it impossible to control all information by one’s own observation. Second, the way in which organizations use information systems has been changing in a rapid manner. Initially, information was primarily used for specific labor-intensive types of information processing like financial administration, and subsequently attention shifted towards controlling business processes. The recent development is that information is used for strategic purposes that enables businesses in achieving competitive advantage (Porter, 1980, 1985; Wiseman, 1985; Parker and Benson, 1988). But there is a considerable divergence and overlapping observed in information gathered for businesses that hinder organizations to formulate technology strategy. Therefore, the changing ways in which information systems are used in organizations have to be applied as a strategic means and a new tool that requires systematized information for organizing the business processes (Nolan et al., 1989).

3. Decision Areas in Technology Strategy Formulation and Information Requirements

Usually, technology strategy formulation covers a series of decisions in acquiring and modifying technology of a firm. These are closely related to the technology needs and future plans of the firms depending on their technology status. Study (Sharif, 1994) suggests four types of technology status such as, extender, exploiter, follower, and leader which progressively increases its technology intensity. The technology strategists may reach a higher stage either by catching-up or by leapfrogging, depending on primarily, their internal technological strengths and future opportunities.

Technology strategy formulation essentially includes three areas of decisions. These are:

  • how an older technology is substituted by a newer one;
  • how to decide whether to make or buy technology; and
  • how to allocate money between product and process R & D.

The information required for the above decision areas varies from technology extender to technology leader (Figure 1). The maximum information emphasis of technology extender is on technology transfer, followed by technology exploiter, follower and leader, while it is reverse in the case of R & D. The extent of information requirements follow their strategic needs in this regard.

4. Dimensions of Technology Strategy Formulation

A summary of different dimensions of technology strategy has been presented in the study of Saha and Islam (1998). In analyzing the contents of each dimension with respect to the above mentioned decision areas, this study considers the following areas as significant issues or dimensions in formulating technology strategy.

4.1 Technology Acquisition

Technology acquisition is an important issue for formulating technology strategy in business organizations. It is one of the biggest challenges of present business managers. Knowing where and how to find a technology, facilitate managers to analyze the premise for technology strategy formulation. Basant (1993) identified three alternative modes of technology acquisition mentioned below that have wide consensus among various researchers.

Figure 1 Information requirements for technology strategists

  • knowledge generated by the firm through its own R&D efforts, and translated into innovation;
  • knowledge purchased by the firm. This could be disembodied in the form of technology licenses, patents etc., or embodied in the inputs the firm purchases. Technology licenses and inputs can be purchased either locally or from a foreign source. Thus, technology can be acquired through domestic or foreign inputs.
  • technology spilovers created by knowledge generated by other organizations. It can be created from knowledge generated from domestic agencies such as firms, government, private research institutions, individual researchers, and knowledge generated abroad.

Different studies analyzed the sources of technology from various perspectives. Roberts (1995) differentiated the research side of the firm from development activities in looking for new technologies. Essentially, research is generating an idea, either market pull or knowledge push, at the laboratory level. The development, on the other hand, is associated with engineering and marketing. Hence, research deals with basic science and discovery where academic laboratories outperform the industrial laboratories, while the development activities which are more applied in nature are increasingly depending on joint ventures and strategic alliances. A global survey of 95 firms of Robert’s study found the rank ordered importance of technology sources (table 1).

table 1 shows that the central corporate research is the primary source of technological information for research side followed by R&D, carried out within the divisions of the firm. Overall across all regions, it is reported that large corporations find sponsored research at universities to be primary contributor to their research knowledge acquisition. Despite the rapid growth in external sourcing, the study proves that the principal source of technology acquisition for development is, the company’s own internal divisional R&D. However, joint venture and strategic alliances with other companies and institutions play an important role in technology development and its transfer as well.

Cutler (1991) emphasizes on where and how to meet technology outside. He considers that sourcing technology externally is the most critical. He attributes it as being the main reason behind the success of the Japanese companies in their ability to monitor and utilize foreign technology.

Table 1 Rank ordered importance of sources.

Sources for research work

Sources for development work

  1. Central corporate research
  2. Internal R&D within divisions
  3. Sponsored university research
  4. Recruiting students
  5. University liaison programs
  6. Consultants/contract R&D
  7. Continuing education
  8. Joint ventures/alliances
  1. Internal R&D within divisions
  2. Joint ventures/ alliances
  3. Central corporate research
  4. Incorporating supplier technology
  5. Licensing
  6. Acquisition of external technologies
  7. Acquisition of products
  8. Consultants/contract R&D

Source: Roberts (1995)

Among the numerous and readily-available sources of external technology are: university research laboratories (particularly the National Science Foundation-Sponsored Engineering Research Centers and the Industry/University Co-operative Research Centers), research institutes-both local and foreign, government laboratories, foreign industrial laboratories, research consortia, vendor (supplier) laboratories, industry trade shows, scientific conferences, technology brokers, personal networking.

Rubenstein (1989) also lists some common modes of technology acquisition from outside sources. His list includes: licensing, joint ventures, limited R&D partnership, minority interests in firms with R&D programs, contracts for R&D with other companies and research institutes, university contracts - grants - consortia, bilateral cooperative technology arrange-ments, hiring individual specialist, stepping up technical intelligence activities, buying technology, increasing pressure on suppliers to innovate, persuading customers to share or suggest innovation, and acquiring small high technology companies.

Ford (1988) identifies five technology acquisition methods that include internal R & D, joint venture, contracted - out R & D, license - in, and buying the final products. These methods are affected by the degree of company’s relative standing, urgency of acquisition, financial commitment, techno-logy life cycle position, and types of technology.

Chatterji (1993, 1996) identified the technology acquisition modes by determining relationship between technology to be acquired and markets to be targeted by the company. For a very familiar market, for example, R & D contract mode is appropriate for acquisition of unfamiliar technology. It is also suitable for acquisition of familiar technology for unfamiliar market. His framework for technology acquisition plan is shown in table 2.

The analysis on the acquisition modes of technologies from different perspectives provides an insight for the required information as inputs in formulating technology strategy for business organiza-tions.

Table 2. Mode of technology acquisition with respect to technology and market relationships

 

Familiar Market

Somewhat-familiar Market

Unfamiliar Market

Unfamiliar

Technology

R&D contract

Option for future license

 

Somewhat familiar technology

Joint Development Agreement

Minority Equity position

Exploratory research Funding

Familiar technology

Outright acquisition/Exclusive licensing

Joint Venture Agreement

R&D Contract

Source: Chatterjee 1996

3.2 Technology Fit

The second important issue in formulating technology strategy is techno-logy fit. It refers to the matching of the technology to be chosen, internally developed or externally sourced, with the existing technological height of the company. This means that companies should look for a technology that are suitable for them. This effort has been coined as a choice of ‘appropriate technology’ (Morawetz, 1974). Ramanathan (1994) remarked that technolo-gical appropriateness is not an intrinsic quality of any technology, but is derived from the operating domain in which it is to be utilized and also from the objective function used for evaluation. He identifies three broad criteria for appropriate techno-logy selection in electricity sector that are useful for technology fit in a company (table 3).

Table 3 Criteria for appropriate technology selection

Criteria

Evaluation Attributes

Techno-economic compatibility criteria

Technological complexities

Quality characteristics

Energy intensity

Ecological stability

Waste recycling

Cost

Profitability

Utility adjusted price ratio

Productivity

Demonstrated usefulness

Degree of ease of use

Degree of contribution towards the improvement of quality of output

Degree of energy saving

Degree of environmental friendliness

Degree of usage of waste and facilitation of pollution prevention

Size of investment required

Degree of enhancement of profitability

Comparison with other alternative technologies

Extent of productivity increase

Number of firms already using the technology

Organizational capability compatibility criteria

Scale of operation

Labor intensity

Durability

Ease of operation

state-of-the-art

Interaction

Suitability for the use of small and medium firms

Degree of use of available labor and skills

Degree of ease of maintenance

Degree of ease of operation

State-of-the-art of the technology in comparison to technology existing in the firm

The type of interaction that the technology will have with other concurrent technologies currently being used by the organization - independent, complementary, contingent, or substitute.

Operating domain compatibility criteria

Supplier actions

Government actions

 

Sectoral effectiveness

Raw material requirements

Import substitution

Rural orientation

Delocalisation

Income disparity reduction

Socio-cultural stabilization

local ownership

Degree of facilitation by supplier in terms of market selection, segmentation etc.

Degree of facilitation by the government in terms of infrastructure development

Degree of contribution to other economic sectors

Degree of use of locally available raw materials

Degree of conservation of foreign exchange

Suitability of use in a rural setting

Capability of being diffused into many localities

Degree of contribution towards reducing income disparity

Degree of non-adverse impact on socio-cultural conditions

Degree of facilitation of local ownership

Source: Ramanathan (1994)

Adopting a new technology in a firm requires both internal and external considerations. Rieck (1993) views that the first practical task in determining technology availability is to identify what technologies are available to the firm, both externally and internally, and how these relate to the technology position of the firm. This urges firms to determining their positions with regard to both base and core technologies through technology audit. Technology audit (Ford, 1988) includes five steps for formulating technology strategies which are: identifying relevant technologies, determining distinctive technological compe-tencies, assessing a firm’s relative position, selecting technology strategy, and aligning technology goals with other corporate goals. These provide help in selecting appropriate technology and fit it to the company.

3.3 Competitive Positioning of Technology

Technological competitive positioning puts firms into an industrial context that provides a broad direction in the long term. It is the company’s relative standing in an industry that can be assessed by using the following measures (Hampson and Tatum, 1997): (a) emphasis of technology in overall business strategy, (b) command of key technologies in industry (c) command of unique technological position, (d) ability to be key technology leader, and (5) monitoring of competitor technologies. An assessment of the competitive positioning provides threefold benefits. First, it helps companies the possibility of moving into a new or related industry (Porter, 1980). Technolo-gical superiority is usually used as a competitive weapon to enter into a new industry and the technological positioning locates the comparative standing of the company. Second, it helps companies in selecting particular technology acquisition mode(s). A high relative standing, for instance, reflects the company’s high R&D strengths and hence, it is more sensible to develop any new technology internally. And third, it determines investment commitment for a long or short term technological considerations. Both R&D and technology transfer are possible either in long-term or in short-term. R&D is associated with longer term projects that deals with determining strategic value. It is related to shorter term when it involves yielding a direct return on investment through efficient and effective use of technology for the firm (Rousel et. al. 1991). In long term consideration, technology transfer can be made through strategic alliances while in short term, it is acquired directly through buying.

3.4 Organizational Settings - Support Activities

Developing a successful technology strategy requires a substantial attention to the organizational supports that make the acquisition, development, and exploitation of technology possible. These supports are obtained in the forms of work convention (e.g., corporate culture like “Mottanai” - the fundamental idea for controlling waste and ensuring quality in Japan), work organization (e.g., role of workers in enterprise), work facilitation (e.g., supportive measures like communication, information sharing, skill development, incentives, rules, etc.), work evaluation (e.g., verification and controlling activities), and work modification (e.g., Quality Circle) (Ramanathan 1994). These forms translate the intent of a firm’s technological thrust and objectives into concrete action plans and help implementing competitive strategies for customer satisfaction. An effective business plan and its implementation depends on adequate organizational supports and operative capabilities of the company. Sharif (1994) identifies a very mutually exclusive business action plans (i.e., price, quality, feature, and image) in this regard. He argued that porter’s (1985) business strategies such as, price, differentiation, and focus are overlapping., Differentiation strategy, for instance, can be possible to achieve by setting price strategy as well. As such, differentiation strategy alone seems to be adequate to explain business strategies of price, quality, feature, and image along with technology strategy that require enough organizational supports.

3.5 Technology Content Addition - Value Addition

Technology content addition refers to the value addition process in flow of materials from natural resources through to customer applications. The eventual objective of firm’s activities is to add value and hence technology content addition works as a resultant dimension of technology acquisition, technology fit, technology positioning, and organizational settings. Since technology is embodied in every value activity and is involved in achieving linkages among business activities, it can have a powerful effect on business strategies. A mathematical model on Technology Content Added (TCA) is developed by Technology Atlas Team in this regard. It is the multiplicative function of Technology Contribution Co-efficient (TCC) and Economic Value Added (EVA). TCC of a firm refers to the technology contribution of the total transformation operation of Technoware1 , Humanware2 , Orgaware3 and Inforware4 , towards the output (Technology Atlas Project 1989).

Porter (1985) adds that value of a product is not only the value of the raw material it contains, but also the content of technology it takes on in each phase of its transformation. Firm’s inbound logistics such as, materials, components, supplies, and energy are acquired from the market environment. Through the production operations, these logistics are transformed into the products of the firm. The outputs of the transformation are distributed to customers from inventory and finally after sales service takes place. This transformational sequence connects the firm with its customers in adding economic value with input resources. Above this transformational chain, several other supporting activities (i.e., firm’s infrastruc-ture, human resources, and technology development) are also required.

Apparently, there is a distinct convergence between Porter and the Technology Atlas Team on TCA. However, Porter’s view does not identify the technological contribution explicitly. The idea of the value chain can be translated into a need for forward or backward integration for a smoother production and distribution.

4. A context diagram of information systems for technology strategy formulation

A context diagram has been developed based on dimensions of technology strategy formulation for better discernment of information required (Figure 2). The diagram consists of five parts representing the dimensions of technology strategy formulation. The core of the diagram is the formulation of technology strategy of a firm. Information systems gather information from the five dimensions by analyzing internal and external technological issues. For instance, technology acquisition is made by collating companies R&D capabilities (Internal) with technology transfer arrange-ments (External).

A matrix relationship has been developed to explain the interdependence among the dimensions of technology strategy formulation (table 4). The results of interdependence refer to the information related to technology to be gathered by the company for desired settings. Technology acquisition, for example, is contemplated with a view to technology fit of the business organization that requires relevance, synergy, and completeness of the technology acquired. On the contrary, obsolescence, refit, and facility expansion need to be examined for acquiring technology that fits with the company.

Figure 2 Context diagram of dimensions in formulating technology strategy

Table 4 Interdependencies among dimensions of technology strategy formulation

Desired

Present

Technology Acquisition

Technology Fit

Competitive Positioning

Organizational Setting

Technology Content Addition

Technology Acquisition

-

Relevance

Synergy

Completeness

Enhancement

Modification

Alignment

Redefine

Depth of Use

Technology Fit

Obsolescence

Refit

Facility Expansion

-

Stretch

Leverage

Internalization

Absorption

Depth of Use

Competitive Positioning

Advancement

Switch-over

Conformity

-

Technology audit

Innovation

Organizational Setting

Plan

Strategy

Compatibility

Restructuring

-

 

Networking

Commitment

Technology Content Addition

Technology gap

(Goal vs. Performance)

Technology orientation

Changing/ Upgrading Technology

Cooperative relationships

-

5. A Model of information systems for technology strategy formulation

The purpose of this section is to develop a model on information systems for formulating technology strategy based on available literature discussed in previous sections. Information Management System is generally defined by input, process, and output (Turban et. al., 1996). The system components are described below.

Inputs The inputs to information management as a functional system are: personnel with information management skills, information and communication technology, organization data and external databases, and systems analysis and development methods and technologies.

Processes The specialized processes of information management function include: strategic information planning, systems building and maintenance, change management, system operation, and providing information management advisory services.

Outputs The unique, specialized outputs include: a strategy for information management in the organization, information infrastructures, application systems, organi-zation process changes, services of operations of systems, and information and management advisory services.

An analogy could be drawn on various dimensions of technology strategy formula-tion in order to develop an information systems model. In that case, likely inputs to the system are level of skills, technology development inputs, organizational and external data etc. The processes would include operationalization methods of technology strategy formulation and the outputs are the technology strategy for the organization. Hence, the core objective of information systems is to build technology strategy and as such, the study of technology strategy formulation in detail from its dimensions and operationalization perspective is very important.

On the basis of the above discussion, this study suggests a model of information systems for formulating technology strategy that is presented in table 5. It shows information relating to inputs, process and output decisions for each dimension of technology strategy formulation.

Table 5 A model of information systems for formulating technology strategy

Technology Strategy Dimensions

Info-Input

Info-Process

Info-Output

Technology acquisition

Nature of Demand

Financial Ability,

Percentage of Sales for R&D,

Skills of R&D professionals,

Type of technology needed (Core/Peripheral),

Supporting industries,

Corporate mission.

Check external environment (like national policy compatibility, competitors, technology development etc.)

Do capability assessment,

Check resource availability.

Make (In-house development)/ Buy (Technology transfer) / Strategic alliance (Joint venture or licensing)

Technology fit

Available technology globally,

Size of the company,

Technology previously used,

Technology price/cost.

Reconcile available technology with company’s technology height,

Build technology roadmap.

Technology appropriateness

Competitive positioning

Market share,

Industry growth rate,

Extent of command in key, Technologies

duration of product / Technology life cycle

Determine the trends

Long-term / Short-term technology investment

Organizational setting

Organizational structure (Organic/mechanistic),

Production process,

Quality commitment,

Type of customers (sophisticated/ easy-going)

Measure customer requirements

Business plan (Emphasis on cost, quality, feature, and image)

Technology content addition (Flow of materials from natural resources through to customer applications)

No. of buyers (Large/few),

No. of suppliers (Large/few)

Determine the bargaining power of buyers and suppliers,

Study the economic value chain

Vertical integration

6. Conclusions

Decision making in present business organization is highly information dependent. But there is an information overload due to the availability of numerous information. These situations have made business managers propel towards the use of a systematic flow of information. As such, modeling information systems for technology strategy formulation will provide managers twofold opportunities. First, it will help them to improve their knowledge about the importance and its various dimensions. Second, it will provide them direction in the process of formulating technology strategy through systematizing information. Concept-ualization of the study has been drawn upon the systems view of information in formulating technology strategy. This study also depicts interdependence among the dimensions of technology strategy formu-lation. However, the current study resulting an information systems model for technology strategy formulation is based on literature review. Therefore, the model needs to be tested in real business situation.

References

  1. Basant, R., (1993), “R&D, Foreign Technology Purchase and Technology Spilover in Indian Industry: Some Explorations”. In: Ilori, M.O. & Irefin, I.A., (1997), Technology Decision Making in Organizations, Technovation, Vol. 17, No. 3, p. 156
  2. Chatterji, D., (1996), “Accessing External Sources of Technology”, Research - Technology Management, March-April, pp. 48-56.
  3. Chatterji, D., and Manual, T. A., (1993), “Benefiting from External Sources of Technology”, Research-Technology Management, Vol. 36, No. 6, pp. 21-26.
  4. Cutler, G. W., (1991), “Acquiring Technology From Outside”, Research-Technology Management, May-June, Vol. 34, No. 3 pp. 11-17
  5. Ford, D., (1988), “ Develop Your Technology Strategy”, Long Range Plan-ning, Vol. 21, No. 5, pp. 85-95.
  6. Hamalainen, P., (1990), Niche Products for the Manager, Information Quality: Definitions and Dimensions, Edited by Irene Wormell, Published by Taylor Graham, London, p. 37
  7. Hampson, K. And Tatum, C.B., (1997), Technology Strategy and Competitive Performance in Bridge Construction, Journal of Construction Engineering and Management, Vol. 123, No. 2, June, pp. 153-161.
  8. Morawetz, D., (1974), “ Employment Implications of Industrialization in Developing Countries” Economic Jour-nal, Vol. 84.
  9. Nolan. R. L., Pollock, A J and Ware, J. P, (1989), Toward the Design of Network Organizations’ Stage by Stage, Vol. 9, No. 1, pp. 1-12.
  10. Parker, M. M., and Benson, R J, (1988), Information Economics: Linking Business Performance to Information Technology, Prentice Hall, Englewood Cliffs, NJ.
  11. Porter, M. E., (1980), Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press, New York.
  12. Porter, M. E., (1985), Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York.
  13. Ramanathan, K., (1994), “ Technology Choice: An Integrated Approach for the Choice of Appropriate Technology”, Science and Public Policy, Vol. 21, No. 4, pp. 221-232.
  14. Roberts, E. B., (1995), “ Benchmarking the Strategic Management of Technology - I”, Research-Technology Management, January-February, Vol. 38, No. 1 pp. 44-56.
  15. Rieck, R. M., and K. E. Dickson, (1993), “Practitioners’ Forum: A Model of Tech-nology Strategy, Technology Analysis & Strategic Management, Vol. 5, No. 4, pp. 397-412.
  16. Roussel. P, K. Saad & T. Erickson, (1991), “Third Generation R&D”, Cambridge, MA, Harvard Business School.
  17. Rubenstein, A.H., (1989), Managing Technology in the Decentralized Firm, Wiley, New York, USA.
  18. Saha, G. And Islam, N., (1998), Technological Information for Techno-logy Strategy Management, International Journal of the Computer, the Internet and Management., Vol. 6, No. 3, pp. 28-41.
  19. Sharif. N., (1994), “Integrating Business and Technology Strategies in Developing Countries”, Technological Forecasting and Social Change, Vol. 45, pp. 151-167.
  20. Technology Atlas Team, (1989), A Framework for Technology-Based Development: Technology Content Assessment, ESCAP, United Nations, Vol. 2, p. 57
  21. Turban, E., Ephraim M., and James W. (1996), ‘Information Technology for Management: Improving Quality and Productivity’ John Wiley & Sons, Inc.
  22. Van der Pijl, G.J, (1994), “Measuring the Strategic Dimensions of the Quality of Information”, Journal of Strategic Information Systems, Vol. 3, No. 3, pp. 179-190.
  23. Wiseman, C, (1985), Strategy and Computers: Information Systems as Competitive Weapons, Dow Jones-Irwin, Homewood, IL.

Assumption University of Thailand
Huamark, Bangkok 10240 , Thailand
For comment, Please contact WebMaster