4. Explain the concept of ‘linkages’? Also explain why they are essential for an organization having Technology Management Group?
Answer :Collaboration is used for different purposes, including manufacturing, services, marketing, or technology-based objectives. Collaboration can enable a firm to obtain necessary skills or resources more quickly than developing them in-house. It is not unusual for a company to lack some of the complementary assets required to transform a body of technological knowledge into a commercial product. For example, when Apple was developing its Laser Writer, a high-resolution laser printer, it did not possess the technological expertise to produce the printer’s engine, and developing such capabilities in-house would have taken a long time. Apple persuaded Canon, the market leader in printer engines, to collaborate on the project. With Canon’s help, Apple was able to bring the high-quality printer to market quickly.
Instead of building the technology in-house, the organisation can obtain some of the necessary capabilities or resources from a partner in order to reduce its asset commitment and enhance its flexibility. This can be particularly important in markets characterized by rapid technological change. High-speed technological change cause product markets to rapidly transform. Product life cycles shorten, and innovation becomes the primary driver of competition. When technology is progressing rapidly, firms may seek to avoid committing themselves to fixed assets that may rapidly become obsolete. 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.
The collaboration with partners can be an important source of learning for the firm. 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. One primary reason firms collaborate on a development project is to share the costs and risks of the project. This can be particularly important when a project is very expensive or its outcome highly uncertain. Firms may also collaborate on a development project when such collaboration would facilitate the creation of a shared standard. Collaboration at the development stage can be an important way of ensuring cooperation in the commercialization stage of a technology, and such cooperation may be crucial for technologies in which compatibility and complementary goods are important. Firms frequently face difficult decisions about the scope of activities to perform in house, and whether to perform them alone as a solo venture or to perform them collaboratively with one or more partners. A significant portion of innovation arises not from any single individual or organisation, but instead from the collaborative efforts of multiple individuals or organizations. Collaboration can often enable firms to achieve more, at a faster rate, and with less cost or risk than they can achieve alone. However, collaboration also often entails relinquishing some degree of control over development and some share of the expected rewards of innovation, plus it can expose the firm to risk of malfeasance by its partner(s). Collaborating on development projects can offer a firm a number of advantages.
The following are some of the Collaborative arrangements:
- Strategic Alliances
- Joint Ventures
- Consortia
- Outsourcing
· Collective Research Organisations
Strategic Alliances
Firms may use strategic alliances to access a critical capability that is not possessed in-house or to more fully exploit their own capabilities by leveraging them in another firm’s development efforts. Firms with different capabilities necessary for developing a new technology or penetrating a new market might form alliances to pool their resources so that collectively they can develop the product or market faster or less expensively. Even firms that have similar capabilities may collaborate in their development activities in order to share the risk of a venture or to speed up market development and penetration. Large firms might form alliances with small firms in order to take a limited stake in the smaller firm’s development efforts, while small firms might form alliances with large firms to tap the larger firm’s greater capital resources, distribution and marketing capabilities, or creditability. For example, many large pharmaceutical firms have allied with small biotechnology firms for their mutual benefit. The pharmaceutical firms gain access to the drug discoveries of the biotechnology companies, and the biotechnology companies gain access to the capital resources, manufacturing, and distribution capabilities of the pharmaceutical firms.
Joint Ventures
Joint venture is a partnership between two or more firms involving a significant equity stake by the partners and often resulting in the creation of a new business entity. Joint Ventures are a particular type of strategic alliance that entails significant structure and commitment. While a strategic alliance can be any type of formal or informal relationship between two or more firms, a joint venture involves 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. In 1992, IBM , Apple and Hewlett-Packard formed a joint venture called Taligent to jointly develop and promote an operating system that could overthrow Microsoft’s Window as the dominant standard in personal computing operating systems. After spending 3 years and $50 million developing and promoting the new operating system standard, the venture had failed to meet expectations and was ultimately dissolved.
Consortia
Consortia, defined as multi-firm collaborations, consists of a number of organizations, working together on a relatively well-specified project. The rationale for joining a research consortium includes sharing the cost and risk of research, pooling scarce expertise and equipment, performing pre-competitive research and setting of standards. They may take many different forms, the most centralized being pooled investment in a common research facility or new venture, and the least centralized being coordinated research collocated in the various member forms.
Outsourcing
Firms that develop new technological innovations do not always possess the competencies, facilities, or scale to perform all the value-chain activities for the new innovation effectively or efficiently. 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 labour force, thus giving the firm greater flexibility. 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 respond time of a dedicated manufacturer, thereby reducing costs and increasing organizational responsiveness to the environment.
Activities such as product design, process design, marketing, information technology, or distribution can be outsourced from external providers. For example, companies such as IBM or Siemens provide a company a complete information technology solution. Outsourcing can also impose significant transaction costs for a firm. Contract manufacturing, for example, requires a well-specified contract: Product design, cost, and quantity requirements must be clearly communicated and generally specified up front. The contracting firm may also have to go to great lengths to protect itself from having any proprietary technology expropriated by the contract manufacturer. In addition, the contract manufacturer may bear significant costs in ramping up production for a particular firm, and must therefore specify the contract to avoid being held up by the contracting firm after the manufacturer has made investments specific to the contract.
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