Co-OPerative Technology Roadmapping

Co-operative Technology Roadmapping
CO-OPERATIVE TECHNOLOGY ROADMAPPING
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June 1st, 2003
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preface An integral part of the master course xxxxxxxxxxxxxxxx is to individually explore a subject relevant to contemporary developments in the particular field of interest. The findings of the exploration are to be summarized in a thesis. This thesis focuses on the subject of Co-operative Technology Roadmapping. In brief, this subject entails the collaborative use of the technology planning tool for making investment decisions. I first got acquainted with Technology Roadmapping during a presentation of Mr. G. Muller for the Capita Selecta course. Because I was interested a lot in it and in search for a subject to do my literature thesis, I began reading other literature on Technology Roadmapping. A student project group assignment at the NorthWestern University gave me the idea of combining co-operation with Technology Roadmapping. I learned that roadmapping is receiving a lot of attention the last couple of years and not only for technology purposes, because also organizations involved in environmental issues are seen to profit by this technique. Moreover, at the moment of writing the leaders of Israel and Palestina seem to make more progress than ever in the peace process, thanks to the Roadmap to Peace introduced by U.S. officials. The Abstract provides a concise overview of the research of this thesis. However, readers that are interested in the specifics of Technology Roadmapping or the use of the TAO model are recommended to read respectively chapter 2 or 4. More detailed information about Real Options theory is provided in paragraph 5.2. I would like to thank xxxxxxxx, my coach, for guiding me in my research and for taking time to discuss my subject with other academics and specialists in the field. He provided useful insights especially on the use of the TAO model and Real Options theory. Furthermore, I would like to mention that the relative large size of this thesis is due to the inclusion of the case examples and the many pictures needed to visualize both TRM and TAO. I enjoyed working on this thesis a lot, because I was free to invent and design my own research subject. And I hope it will enhance the understanding of the inter-organizational use of Technology Roadmapping.
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TABLE OF CONTENTS
PREFACE.................................................................................................................................................... I TABLE OF CONTENTS......................................................................................................................... III TABLE OF FIGURES..............................................................................................................................VI GLOSSARY............................................................................................................................................. VII ABSTRACT...............................................................................................................................................IX 1 INTRODUCTION............................................................................................................................... 1 1.1 1.2 2 OBJECTIVE AND METHODOLOGY .................................................................................................... 2 STRUCTURE OF THE THESIS ............................................................................................................ 2
TECHNOLOGY ROADMAPPING .................................................................................................. 5 2.1 2.2 2.3 2.4 2.5 TECHNOLOGY MANAGEMENT ........................................................................................................ 5 WHAT IS ROADMAPPING / A ROADMAP? ......................................................................................... 7 WHY ROADMAPPING? .................................................................................................................. 12 CREATING A TECHNOLOGY ROADMAP ......................................................................................... 14 NEGATIVE ASPECTS ...................................................................................................................... 16
CO-OPERATION ............................................................................................................................. 17 3.1 3.2 3.3 3.4 WHAT IS CO-OPERATION? ............................................................................................................ 17 SEQUENTIAL CO-OPERATION ........................................................................................................ 20 PARALLEL CO-OPERATION ........................................................................................................... 21 REASONS, RISKS AND SUCCESS FACTORS TO CO-OPERATING AND PARTNERING .......................... 22
ANALYSIS WITH THE TAO MODEL ......................................................................................... 25 4.1 4.2 4.3 4.4 EXPLANATION OF THE TAO MODEL ............................................................................................. 25 VALUE CREATION ........................................................................................................................ 28 CO-OPERATION AND THE TAO MODEL......................................................................................... 29 TRM PLACED IN THE TAO MODEL .............................................................................................. 32
THEORETICAL APPROACH........................................................................................................ 37 5.1 MOTIVATION FOR CO-OPERATIVE TRM ....................................................................................... 37
5.1.1 Sequential co-operation ............................................................................................................. 38
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5.1.2 Parallel co-operation ................................................................................................................. 41 5.1.3 General Drivers ......................................................................................................................... 42 5.2 VALUE CREATION THROUGH CO-OPERATIVE TECHNOLOGY ROADMAPPING ................................ 43 5.2.1 Real Options Theory .................................................................................................................. 44 5.2.2 Real Options and Emerging Technologies ................................................................................. 45 5.2.3 Real Options and Co-operative Technology Roadmapping ....................................................... 47 5.3 WAYS AND RISKS OF CO-OPERATIVE TECHNOLOGY ROADMAPPING ............................................ 51 5.3.1 Introducing co-operative Technology Roadmapping ................................................................. 51 5.3.2 Structure of the co-operative roadmap(ping process)................................................................ 52 5.3.3 Potential risks and problems...................................................................................................... 53 6 SITUATIONS IN PRACTICE......................................................................................................... 55 6.1 EXAMPLES OF SEQUENTIAL CO-OPERATION IN TRM.................................................................... 55
6.1.1 Motorola..................................................................................................................................... 55 6.1.2 Philips ........................................................................................................................................ 58 6.1.3 Supplier Integration for Product Development.......................................................................... 59 6.1.4 AT&T.......................................................................................................................................... 61 6.2 EXAMPLES OF PARALLEL CO-OPERATION IN TRM ....................................................................... 62 6.2.1 SIA.............................................................................................................................................. 62 6.2.2 IMTR .......................................................................................................................................... 63 6.2.3 MATI .......................................................................................................................................... 66 6.2.4 Vision2020 ................................................................................................................................. 67 6.3 CONCLUSIONS OUT OF PRACTICE ................................................................................................. 68 6.3.1 Sequential relationships ............................................................................................................. 68 6.3.2 Parallel relationships................................................................................................................. 69 7 CONCLUSION.................................................................................................................................. 72 7.1 7.2 7.3 EVALUATION OF THEORY AND PRACTICE ..................................................................................... 72 CONCLUSION ............................................................................................................................... 74 RECOMMENDATIONS .................................................................................................................... 76
REFERENCES.......................................................................................................................................... 78
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APPENDIX A: THE "ROAD MAP" METAPHOR..I
APPENDIX B: ROADMAPPING PROCESS.III APPENDIX C: REAL OPTIONS EXAMPLE..V APPENDIX D: MOORE'S LAW..VI
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TABLE OF FIGURES
Figure 1: Technology management framework ............................................................................................ 6 Figure 2: The Roadmap integrates five views............................................................................................... 8 Figure 3: Generic Roadmap .......................................................................................................................... 9 Figure 4: Hypothetical Technology Roadmap ............................................................................................ 10 Figure 5: Multi-Scenario Roadmap............................................................................................................. 10 Figure 6: Roadmapping Taxonomy ............................................................................................................ 11 Figure 7: Roadmap Planning in four steps .................................................................................................. 15 Figure 8: Possible alliance partners along the Supply Chain ...................................................................... 18 Figure 9: The growth of newly established R&D partnerships (1960-1998) .............................................. 19 Figure 10: The share (%) of high-tech, medium-tech, and low-tech industries in all newly established R&D partnerships ............................................................................................................................... 19 Figure 11: The Base Model...25 Figure 12: The TAO model......................................................................................................................... 26 Figure 13: Value creation in the TAO model.............................................................................................. 28 Figure 14: Extended value chain in TAOs .................................................................................................. 30 Figure 15: Satisfaction at Technology level................................................................................................ 30 Figure 16: Sequential co-operation in the TAO-model............................................................................... 31 Figure 17: Parallel co-operation, stacks of TAOs ....................................................................................... 32 Figure 18: Time scale in the TAO-model. .................................................................................................. 33 Knowledge cycles with different bandwidths ............................................................................................. 33 Figure 20: Value stream towards customer................................................................................................. 34 Figure 21: The location of TRM in TAO.................................................................................................... 35 Figure 22: TRM in TAO ............................................................................................................................. 36 Figure 23: Dynamic Real Options Framework ........................................................................................... 46 Figure 24: Real Options in the TAO-model................................................................................................ 49 Figure 25: Information exchange in sequential co-operative TRM ............................................................ 52 Figure 26: Information exchange in parallel co-operative TRM................................................................. 52 Figure 27: External Roadmap Injection ...................................................................................................... 56 Figure 28: Roadmap Integration Process .................................................................................................... 57 Figure 29: Future Lithography Technology Alternatives............................................................................ 63 Figure 30: IMTR Roadmapping Methodology. .......................................................................................... 65
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GLOSSARY
AMB ODM OEM PCS R&D RO SCM S&T TAO TRM Arbitration, Matching and Balancing Original Design Manufacturer Original Equipment Manufacturer Personal Communications Sector Research & Development Real Options Supply Chain Management Science & Technology Technology Application Organization (model) Technology Roadmapping
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ABSTRACT
Firms today are expected to be more responsive to technological change and to manage their technology assets more strategically. Meanwhile, technology decisions have shifted to people unfamiliar with the pacing and dynamics of technology in the lab or in the marketplace. Technology integration and reuse suffer without coordinating structure or cross-business planning forums. The solution, according to some, is a methodical approach to integrated technology planning called Technology Roadmapping, which has gained wider interest in the past decade. Also, with accelerated time-to-market demands in technology markets firms may want to gain first-mover advantage. However, it may not always be realistic for a firm to develop or acquire the capability on their own, because of the rising investment costs and increasing uncertainty. Co-operation with other firms gives a company the ability to get such capabilities more quickly and is also seen to be a global trend. The subject of this thesis is the combination of these two trends, which both are focused on developing and using technologies to be more competitive. And the key question is whether co-operation on Technology Roadmapping creates value for the companies involved. To answer this question further exploration of both subjects is needed before they can be linked. Technology Roadmapping is a technique for supporting technology management and planning. It helps identify product needs, map them into technology alternatives, and develop project plans to ensure that the required technologies will be available when needed. Technology Roadmapping helps presenting the critical information to make the appropriate technology investment decisions and to leverage those investments. A roadmap is a visualization of the future integrating the business aspects market, products and technology/resources, and revealing the time dimension of technological progress. Multiple future scenarios can be displayed in a roadmap and it can have various purposes, like industry understanding or product development. Next to providing information to help make better technology investment decisions, a benefit of Technology Roadmapping is the enhancement cross-organizational communication and alignment of objectives. A roadmap generally is created through a series of meetings between crossfunctional stakeholders and updating the contents is supposed to be a dynamic process. Collaboration is co-operation with another unconnected group to achieve a common goal. It involves human interaction and communication of information. Companies can co-operate sequentially as well as parallel. Sequential co-operation is done with companies in the same supply chain, such as suppliers and customers. The common goal is creating customer value for the same product. Parallel co-operation is done with companies in other supply chains, like complementors and competitors. Here, the customer
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value is created by each company individually in its own value chain. The main reasons to co-operate at technological level are gaining cost efficiencies and speeding time-to-market of new products. Also, access to another companys resources and skills as well as access to new markets are advantages of partnering. Sufficient commitment and mutual trust lead to the success of an alliance. The TAO model is a good tool for linking Technology Roadmapping and co-operation between companies. It consists of the columns Technology, Organization and Application, which are split up into decision-making boxes with different time horizons at five vertical levels. The time dimension of a Technology Roadmap coincides with the time scale in the TAO model and the business aspects technology/resources, product and market conveniently correspond with the columns Technology, Organization and Application respectively. With Technology Roadmapping placed in the TAO model, sequential and parallel co-operation can respectively be modeled by linking TAOs in chains and by representing them as stacks. The actual value is generated at the bottom (operational) level at the application side, where the cash flow is created. From a theoretical approach, the most important motives for co-operative Technology Roadmapping are: access to the partners knowledge, technologies and resources; risk/uncertainty reduction; long-term alignment of technology strategies; and enhancing trust through better communication. The value creation with Technology Roadmapping can be explained with Real Options theory. This technology investment valuation method is based on the belief that the flexibility of the management to react external and internal developments is extremely valuable. Therefore, the possibility to exercise, abandon or defer an option is taking into account making the financial feasibility calculation. In theory, the key question is answered affirmatively, because co-operative Technology Roadmapping will provide sufficient high quality options at the right time and at low cost. From case examples can be concluded that most of the motives thought of in theory are also experienced in practice. The most important inconsistency between theory and practice is the assumed trust enhancement, which is identified as a problem in the practical situations. The actual use of Real Options theory was not identified in any of the case examples, but there exist resemblances implicitly supporting this theory. The conclusion of this thesis is that co-operation between companies on Technology Roadmapping does create value for the companies involved. This answer is supported by the conclusions that through cooperative Technology Roadmapping companies are better able to recognize, to create and to exercise (technology) options. Whether co-operative Technology Roadmapping improves the valuation of the options depends on the method used.
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INTRODUCTION
Firms today are expected to be more responsive to technological change and to manage their technology assets more strategically. Meanwhile, organizational diffusion of technology planning, like to business units and product managers, has shifted the bulk of technology decisions to many people unfamiliar with the pacing and dynamics of technology in the lab or in the marketplace. Technology integration and reuse suffer without coordinating structure or cross-business planning forums. The solution, according to some, is a methodical approach to integrated technology planning called Technology Roadmapping (TRM). [1] In the new product development process, shorter product life cycles and increasing consumer demands for product customization make time-to-market critical, especially for technology based products. Although the firm may want to gain first-mover advantage, with accelerated time-to-market demands in technology markets, it may not always be realistic for a firm to develop the capability on their own, and actual acquisition can be costly in rapidly evolving high-technology industries. Alliances give a firm the ability to get capabilities more quickly. [2] Co-operations between companies in networks and integration of companies along the supply chain are widely acknowledged phenomena nowadays. Also, statistics show an acceleration of newly established R&D partnerships in the last two decades. [3] In the first article about Technology Roadmapping, published by Motorola in 1987, the focus of roadmaps and roadmapping is implied to be on the individual company and for internal use. Their roadmaps even comprise data on patents and on competitors who are active in the same areas as Motorola and who may have established a proprietary position. [4] This early vision on TRM justly shows that roadmaps can have a significant strategic content for a hightech company and are not desired to become public, let alone to be shared with competitors. However, as the use of Technology Roadmapping has gained broader interest and it is adopted in a larger gamma of firms, alternative applications of roadmaps are more often researched by the persons concerned. At the Northwestern University students are assigned to research supply chain integration of Technology Roadmapping. [5] This area of interest is also indicated by Albright [6], who points out that roadmaps can be used to coordinate with suppliers and align with customers. He identifies the possibility to extend to joint roadmaps with customers and suppliers as one of the learnings from roadmapping experiences. Furthermore, the Technology Roadmap of the Semiconductor Industry Association (SIA), which is widely acknowledged throughout the literature as a model roadmap, involves a broad network of participating companies. Thus, the idea of collaboration in the roadmapping process is not new. Yet the structure and methods employed by SIA are clearly unique. [7]
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It can be questioned whether this uniqueness is justified. The fact that the semiconductor industry needs to co-operate to achieve the desired speed in development obviously has something to with it, but do not all high-tech industries have this need? In other words, can this technology planning tool be useful for collaborating firms in general? The latter questions provide the motive for doing research on the newly invented matter, which is called Co-operative Technology Roadmapping.
1.1
Objective and methodology
The objective of this thesis is primarily to identify what Co-operative Technology Roadmapping entails and what its advantages could be for the companies involved, in theory and in practice. To guide and delimit the research for this literature thesis a clear key question has been posed: Does cooperation between companies on Technology Roadmapping create value for the companies involved? To find an answer to this question some essential sub-questions are answered throughout this thesis. What, in fact, is Technology Roadmapping and what is its purpose? How do companies co-operate, especially at technology level? The TAO model is used to link co-operation and Technology Roadmapping, along with value creation. After explaining what this model entails, the mentioned subjects are modeled with TAO separately, with the objective to become aware of their relative positions. This awareness enhances the theoretical approach for answering the key question. Next to identifying the drivers for Co-operative Technology Roadmapping, in this approach also the theory of Real Options is used to explain how value could be created through co-operation on Technology Roadmapping. Finally, to validate this freshly generated theory, a number of case examples of co-operation on Technology Roadmapping is discussed. This provides a possibility to evaluate theory and practice, before coming to the final conclusion: the answer to the key question. The information sources used for this research primarily consist of literature available in books, journals and conference papers. Occasionally, information was gathered from company and university websites.
1.2
Structure of the thesis
The structure of the report is the following. In the first place, the phenomenon Technology Roadmapping is dealt with in chapter 2 and more about co-operation between companies is explained in chapter 3. In both chapters the benefits and uses of the subjects are discussed, along with some risks to applying them.
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After these separate overviews of Technology Roadmapping and co-operation, chapter 4 explains what the TAO model is and where value is created in this model. And, it identifies where co-operation and TRM can be placed in the TAO model. Chapter 5 provides the theoretical approach to key question. The possible motives for co-operative Technology Roadmapping are presented and the issue of value creation is argued by means of Real Options theory. Also, this chapter provides a quick view on the way to perform Co-operative Technology Roadmapping best and the risks of doing so. Then, a number of case examples is given in chapter 6 and a practical approach to the key question is provided. The evaluation of theory and practice is provided by chapter 7 as well as the final conclusions of this thesis. Based on these conclusions the key question is answered and some recommendations for further research are given.
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TECHNOLOGY ROADMAPPING
All companies have a vision or a mission statement. Such a vision tells the internal and external stakeholders or anyone interested what the company wants to be for them. Mostly it is stated rather vaguely and maybe even utopian. The company activities, however, to which the employees have to commit themselves and on which customers can base their expectations have to be concrete. Roadmapping can be of help coming from a vision to a concrete plan for the activities and Technology Roadmapping (TRM), in particular, is a tool for technology planning, which can help companies to better position themselves and their products. This chapter provides an insight on what Technology Roadmapping is and why it is practiced. Also the way to create a roadmap is discussed along with the pitfalls for doing so. But first, a framework for technology management is given.
2.1
Technology Management
To give a better understanding of Technology Roadmapping, first, the more general matter of technology management is discussed and the meaning of technology must be defined. Technology can be considered as a specific type of knowledge, distinguishing itself from more general knowledge types with the key characteristic that it is applied, focusing on the know-how of the organization. While technology usually is associated with science and engineering (hard technology), the processes which enable its effective application are also important for example new product development and innovation processes, together with organizational structures and supporting knowledge networks (soft aspects of technology). [8] Almost a similar definition is given by Hkansson: Technology is the application of knowledge to useful objectives. It is usually built on previous technology by adding new technology inputs or scientific knowledge. Technology may even involve little or no science, as scientists define the term. For new technology is also created through the combination of two or more technologies without much true scientific intervention the portable transistor radio, which combined the technologies of the radio, the battery and the transistor, broke no new scientific ground. [9] Technological knowledge generally comprises both explicit and tacit knowledge. Explicit knowledge is that which has been articulated (e.g. in a report, procedure or user guide), together with the physical manifestations of technology (equipment). Tacit knowledge is that which cannot easily be articulated, and which relies on training and experience (such as welding or design skills). [8] Like for technology, there are many definitions of technology management in the literature. The European Institute of Technology Management proposes the following definition [8]:
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Technology management addresses the effective identification, selection, acquisition, development, exploitation and protection of technologies needed to maintain a market position and business performance in accordance with the companys objectives. This definition highlights two important management themes [8]: Establishing and maintaining the linkages between technological resources and company objectives is of vital importance and represents a continuing challenge for many firms. This requires effective communication and knowledge management, supported by appropriate tools and processes. Of particular importance is the dialogue and understanding that needs to be established between the commercial and technological functions in the business. Effective technology management requires a number of management processes: Identification, Selection, Acquisition, Exploitation, and Protection of technology. These processes are not always very visible in firms, and are typically distributed within other business processes, such as strategy, innovation and operations.
Figure 1: Technology management framework [8] Technology management addresses the processes neede to maintain a stream of products and services to the market. It deals with all aspects of integrating technological issues into business decion making, and is directly relevant to a number of business processes, including strategy development, innovation, and operations management. Healthy technology management requires establishing appropriate knowledge flows between commercial and technological perspectives in the firm, to achieve a balance between market pull and technology push. The nature of these knowledge flows depend on both the internal and 6
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external factors, such as business aims, market dynamics, organizational culture, etc. These concepts are illustrated in Figure 1. Technology Roadmapping represents a powerful technique for supporting technology management and planning in the firm. [8]
2.2
What is roadmapping / a roadmap?
Generically, a road map is a layout of paths or routes that exist (or could exist) in some particular geographical space. In everyday life, road maps are used by travelers to decide among alternative routes toward a physical destination. Thus, a road map serves as a traveler's tool that provides essential understanding, proximity, direction, and some degree of certainty in travel planning. The single word, "roadmap" has surfaced as a popular metaphor for planning science and technology resources. See for an explanation of this metaphor Appendix A. The process of "roadmapping," a new verb that describes the social mechanisms involved in constructing a roadmap, is both a learning experience as well as a communication tool for roadmap participants. [7] Technology Roadmapping is an effective technology planning tool to help identify product needs, map them into technology alternatives, and develop project plans to ensure that the required technologies will be available when needed. It helps develop a framework for organizing and presenting the critical information to make the appropriate technology investment decisions and to leverage those investments. Roadmaps reveal the time dimension of technological progress and roadmapping is, amid the many tools and techniques of managing technology, itself a trend, while it seeks to exploit the trends underlying technology. [10] Technology Roadmapping differs from other methods of technology planning and forecasting due in large part to its inherent practical nature. A roadmap is not a prediction of future breakthroughs in science or technology, but rather an articulation of requirements to support future technical needs. A roadmap assumes a given future and provides a framework toward realizing it. [7] A framework for roadmapping is given in Figure 2. It indicates that the market is a driver for the product, the technology, the process and the people. Vice versa, these people, the processes and the technology enable the products and support the needs of the market. [11] Technology Roadmapping can be seen as bridging two extremes, namely market pull and technology push. Market pull is about the question how to reach a goal and involves planning with a market focus. It has a deterministic and convergent character and is customer driven. Technology push, on the other hand, obviously has a technology focus, is looking for opportunities and is open-ended and divergent. [12] The elements of this framework are also called the know-why, know-what and know-how factors. [13]
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Figure 2: The Roadmap integrates five views. [11] A roadmap is a visualization of the future integrating the business aspects of Figure 2. It is based on the generic vision and mission of the company and makes the strategy much more specific in time as well as in contents. The roadmap should provide an immediate insight in the most relevant developments on the business aspects for approximately the next five years. It shows the relation in time between the five issues and should be considered as a shared snapshot of the future and not as a committal plan. The roadmap itself does not contain hard decisions but it is used as an input to create a committal plan with a shorter time span (e.g. a year). [11] As in the case of ordinary highway maps, a technology roadmap can be viewed as consisting conceptually (if not always physically) of nodes and links. These roadmap nodes and links can have, in the most general case, quantitative and qualitative attributes. A link in a roadmap could represent the qualitative attribute of the degree of impact a science program could potentially have on a technology program, and / or the quantitative attribute of the time estimated to proceed from the science program to the technology program to useful application. [7] The generic Technology Roadmap consists of spatial and temporal dimensions (see for example Figure 3). The spatial dimension reflects the relationship among science and technology programs, product projects and the market developments at a given point in time, while the time dimension accounts for the evolution and metamorphosis of the same layers and relationships. As in the highway map, the roadmap nodes and links are also vectors that need both magnitude and direction for full description. [7] With the know-why, know-what and know-how factors identified, the roadmap then: establishes their relative priorities, extends them using forecasts to set targets, and links them, which justifies R&D investments and coordinates the efforts of responsible groups. [10]
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Figure 3: Generic Roadmap [12] An example of how a Technology Roadmap can look like is given in Figure 4 on the next page. A certain future market M2 is pictured and is addressed to by product (concept) P2, which can be realized by the application of technology T2. This technology has evolved out of a parent technology T1, which in turn is a result out of a Research & Development program RD1. Just like this path from RD1 to M2, there are other paths imaginable using other technologies developed in other R&D programs, and addressing the market with another product concept. It is a product concept because at present time the exact design is still unknown, only a few functional properties delivered by specific technologies are forecasted. With this forecast in mind, or rather made explicit on paper, the availability of resources needed to execute the various paths is planned at the bottom. Figure 5 on the following page gives a clearer presentation of how multiple scenarios can be displayed and used in a Technology Roadmap. In the central scenario there are moments in time when a decision about the further path has to be made. These are called the critical decision points and are represented by the diamond shapes. These moments are preceded by a period in which a potential switch to scenario B can be prepared. Whether or not this switch will be made depends on the key external developments and the internal situation. By forecasting both scenarios like this, the company can organize its resources in a way compatible to both.
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Figure 4: Hypothetical Technology Roadmap [14]
Figure 5: Multi-Scenario Roadmap. [15]
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Roadmapping (the activity) can be done for different purposes, while roadmaps (the documents) can address different aspects of a planning problem. Figure 6 presents a taxonomy of roadmapping that attempts to give some clarity in the definitional confusion.
Figure 6: Roadmapping Taxonomy [10] The industry roadmap has an industrial context and typically articulates a technical thrust and the competitive landscape. The need for an inter-company agenda, a complex supply chain, and large capital investment drive the need for industry roadmaps. When specific product plans are combined with marketplace and technology trends the resulting product-technology roadmaps highlight the links between product generations and successive technology generations. Product roadmaps articulate a direction and schedule for product evolution to communicate with customers and internal audiences. These different levels of roadmapping require different commitments in terms of time, cost, level of effort and complexity. [10] At the application level, a product-technology roadmap is a disciplined, focused, multiyear, business planning methodology. For the product manager, a roadmap's implementability is as important as its strategic value. Obviously, there is no single definition that satisfies all the uses of roadmaps. In fact, the metaphor "road map" can and has been used in just about any planning context. [7] Roadmapping enables a team to plan and execute a path to achieve their objectives, just as a roadmap enables a traveler to decide among alternative routes to reach a destination. Roadmaps link strategy to future actions and explicitly incorporate a plan for needed capabilities and technologies to be in place at the right times. Product-Technology Roadmaps link market and competitive strategy to product plans to technology strategy with quantitative targets and plans for achieving objectives. Industry Roadmaps provide a shared industry vision and the path for the industry to achieve that vision. Science and
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Technology Roadmaps enable teams to link applications, technical challenges, and technology development for science-driven technologies. [16] Additionally, a hierarchy of roadmaps for science, technology, product, and some combination of these becomes increasingly evident in the literature. From the industry roadmaps can be traced related technology, product, and even component product roadmaps. [7] In this survey the focus will be on corporate Technology Roadmapping, which comprises ProductTechnology Roadmaps and Product Roadmaps, but obviously having linkages to the other roadmapping areas. This focal area will be referred to as Technology Roadmapping in the rest of the report, unless explicitly mentioned otherwise.
2.3
Why roadmapping?
The main function of roadmapping is to provide a shared insight and overview of the business in time. With this insight and overview better management of the elements mentioned in Figure 2 can be achieved. Roadmapping has an anticipating value, which is especially important for long lead-time processes, such as technology, people and process. Businesses without roadmapping activities are seen to suffer from the following effects [11]: Frequent changes in product policy caused by lack of time perspective. Late start up of long lead activities, such as people recruitment and process change. Diverging activities of teams. Missed market opportunities.
The three major uses of Technology Roadmapping are [1]: It can help develop a consensus about a set of needs and the technologies required to satisfy those needs. It provides a mechanism to help experts forecast technology developments in targeted areas. It can provide a framework to help plan and coordinate technology developments in both within a company or an entire industry. The main benefit of Technology Roadmapping is that it provides information to help make better technology investment decisions. It does this by [1]: Identifying critical technologies or technology gaps that must be filled to meet product performance targets. Identifying ways to leverage R&D investments through coordinating research activities either within a single company or among alliance members.
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Other related benefits of establishing a formal roadmapping process, accepted by the enterprise, are: effective knowledge management practice; focus on critical business objectives, issues and strategies; increased capacity for continuous innovation; focus on vision and core competencies. [17] Kappel [10] argues further that the roadmapping process not only produces more informed individual decisions, but brings with it better alignment of organizational decision making. One example of this type of synergistic effect has occurred at Lucent Technologies in the form of uncovering common technology needs through cross-roadmap reviews. Through a top-level review of multiple wireless communications product-technology roadmaps, it was discovered that all the individual roadmaps addressed the need for gating battery and antenna technologies. With this information, the corporate technology strategy office was able to recommend sharing and consolidation of R&D, supply-line, and other common resources [6]. Technology roadmapping is critical when the technology investment is not straightforward. This occurs when it is not clear which alternative to pursue (e.g. enhance an existing technology or replace it with a new technology), how quickly the technology is needed, or when there is a need to coordinate the development of multiple technologies. [8] Many of the benefits of roadmapping are derived from the roadmapping process, rather than the roadmap itself. The process brings together people from different parts of the business, providing an opportunity for sharing information and perspectives. The main benefit of the first roadmap that is developed is likely to be the communication that is associated with the process, and a common framework for thinking about strategic planning in the business. Several iterations may be required before the full benefits of the approach are achieved, with the roadmap having the potential to drive the strategic planning process. [8] To conclude, the ten reasons to roadmap indicated by Albright are [16]: 1. Roadmapping is just good planning, for all the areas that contribute to a successful product line. The roadmapping process leads a cross-functional planning team to fully examine potential competitive strategies and ways to implement those strategies. Technology decisions are made as an integral part of the plan, not just an afterthought. 2. Roadmaps incorporate an explicit element of time. Roadmapping helps the team make sure that they will have the technologies and capabilities at the time they will be needed to carry out their strategy. 3. Roadmaps link business strategy and market data with product and technology decisions. Roadmapping prompts a team to be specific with respect to planned features or performance in terms of value for customers. 4. Roadmaps reveal gaps in product and technology plans. Areas where plans are needed to achieve objectives become immediately apparent, and can be filled before they become problems.
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5.
Roadmaps prioritize investments based on drivers. At every stage of the roadmapping process, the focus is on the few most important things: customer needs, product drivers or technology investments. The team is prompted to identify, implement, develop, or acquire the most important things first, spending time and resources in the best way. Also, with a set of roadmaps in a common format, portfolio decision makers are better equipped to make the tradeoffs and choices that meet the corporations objectives.
6.
Roadmapping helps set more competitive and realistic targets. Product performance targets are set in terms of the industry competitive landscape. For example, experience curves are an especially useful tool for establishing industry-based targets. Recognizing that a winning product strategy usually cannot be all things to all people, the team sets objectives to lead, maintain parity, or lag competitors in specific areas.
7.
Roadmaps provide a guide to the team, allowing the team to recognize and act on events that require a change in direction. Part of the process of developing a roadmap is to create a risk roadmap, identifying those events or changes in conditions that signal a need to reevaluate and revisit the plan during the development journey.
8.
Sharing roadmaps allows strategic use of technology across product lines. Cross-roadmap reviews look across the plans of several product lines to find common needs, capabilities that can be leveraged, or development costs that can be shared. Roadmaps can also support a common corporate database of available or needed technologies.
9.
Roadmapping communicates business, technology and product plans to team members, management, customers, and suppliers. With a roadmap, a team can clearly explain to customers and suppliers where they are going. A roadmap gives customers information they can use in their own planning, and can be used to solicit their reaction and guidance. With suppliers, a roadmap is a framework for partnership and directions setting. The roadmap also tells the larger development team, corporate management, and other development teams where the product line is headed.
10. Finally, roadmapping builds the development team. The roadmapping process builds a common understanding and shared ownership of the plan, incorporating ideas and insights from team members representing the many functions involved in a successful development process.
2.4
Creating a Technology Roadmap
Technology roadmapping, as a practice, emerged from industry as a practical method of planning for new technology and product requirements. Therefore its adoption rate is much greater than its more academic cousins such as technological forecasting and technology foresight. And, basically, construction of a roadmap requires identifying the nodes, specifying the node attributes, connecting the nodes with links, and specifying the link attributes. [7]
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A roadmap is joint effort of all stakeholders, which can be for instance in a typical high-tech company the business manager, the marketing manager, the people and technology manager the operational manager and the architect (who creates a bridge between technology and product). [11] Muller indicates that the roadmap creation process can exist of three phases, all ending with a large collective meeting in which explicit business decisions are made. First, all who are involved take time to prepare the first meeting. The target of this first meeting is a shared vision on the market, on the possible products as an answer to the market and share technology status, as starting point for technology roadmap, then to explore people and technology status. After some days/weeks to digest the first meetings result and to prepare the second meeting there is another collective meeting. The target for the outcome of the second meeting is obtaining a shared vision on the desired technology roadmap, sharing the people and process issues required for the products defined in the first iteration, and analyzing a few scenarios for products, technologies, people, and process. Again some time should be taken before the third and final meeting, in which a shared roadmap is created. [11] Garcia and Bray [1] mention an extra phase in the process, the follow-up activity. For this phase all key decision makers involved in the first phase are to critique, validate and accept the roadmap. An implementation plan has to be developed. This plan has to be routinely reviewed and updated. In fact, Technology Roadmapping should be seen as a continuous process. Appendix B provides an example of a five-step Technology Roadmapping process.
Figure 7: Roadmap Planning in four steps [13]
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The essential questions to be asked at what time are shown in Figure 7. The push-pull mechanism is also indicated for the know-why, know-what and know-how levels. At every level important information has to be gathered and decisions have to be made. Finally, all this data has to lead to a ToDo summary and action plan.
2.5
Negative aspects
Next to some success factors of a Technology Roadmapping initiative, such as management commitment and the disciplinary breadth of the participants, there also exist some deficiencies and limitations of Technology Roadmaps. [7] The following negative aspects or pitfalls can be identified: Roadmaps are both forecasts of what is possible or likely to happen, as well as plans that articulate a course of action. Roadmapping is not an objective but usually a subjective exercise that balances possible futures with likely and advantageous futures. [10] Roadmapping enjoys more success in the presence of a recognized external threat. Needing to respond to a competitive threat gives a motive for decision makers to getting involved. [10] Limits on Inclusion. One major weakness of most Technology Roadmaps is that criteria for inclusion or exclusion of Science&Technology (S&T) programs are rarely specified. How similar do S&T programs have to be to the central theme of the roadmap to be included? [7] Linearity or the tendency toward linear thinking. That is, the structured (and linear) design of some roadmaps limits the field of alternative paths, often based simply upon extrapolating past performance of a single scenario into the future. [7] One-Time, Static Exercise. Often, technology roadmaps do not have a sufficiently flexible structure to incorporate dynamic changes. Further, there is an important distinction between a roadmap (product) and roadmapping (process). Some incorrectly confuse the two and thus see a roadmap as simply a 'book' and fail to realize the full potential available from a dynamic process of roadmapping. [7] Isolated Decision Aids and "De-Coupling". To be most effective, roadmapping and other management decision aids need to be fully integrated into the strategic planning and business operations of the organization. Employment of roadmaps in a band-aid or afterthought mode will result in a fragmented product with limited potential for organizational implementation. An interrelated problem is referred to as "de-coupling," occurring when an organization attempts to formalize roadmapping, but in fact its apparent adoption is only a paper exercise, not truly linked (coupled) to any broader strategy. [7] Being aware of these pitfalls helps avoiding them, which is essential for the roadmapping success. Succesful Technology Roadmapping has a lot of advantages for an individual company, whether these hold for a co-operative approach is to be investigated in the following chapters.
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CO-OPERATION
In the new product development process, shorter product life cycles and increasing consumer demands for product customization make time-to-market critical, especially for technology based products. To find new skills and capabilities a firm has three choices: develop the capability, acquire a firm that has the capability or skill, or form an alliance or partnership with a firm that is currently using the capability. Although the firm may want to gain first-mover advantage, with accelerated time-to-market demands in technology markets, it may not always be realistic for a firm to develop the capability on their own, and actual acquisition can be costly in rapidly evolving high-technology industries. Firms that are operating in such industries, where technological change may be discontinuous, often use forms of governance other than ownership to gain access to the capabilities they need. Alliances give a firm the ability to get capabilities more quickly. [2] In this chapter the second element of the key question, namely co-operation, is discussed.
3.1
What is co-operation?
This chapter will discuss co-operation between companies, also called collaboration or referred to as partnerships or alliances between companies. In particular, the focus in this survey is on collaboration at strategic and technological level rather than at operational level. Collaboration in general is [18]: Co-operative interaction to achieve a common goal Co-operating with another group with which one is not immediately connected Great potential for: communicating information analyzing data to a greater depth formulating more precise decisions
A distinction is made between two general kinds of co-operation between companies, namely sequential and parallel co-operation. One speaks of sequential co-operation when the interaction takes place between companies that are positioned in the same value chain and therefore have a customer-supplier relationship. Collaboration can take place with the supplier, the distributor, or the customer. The common goal is creating maximum value for the end-user at minimum cost through adapting one companys activities to the other. Parallel co-operation is practiced when two or more companies at the same level in the value chain are interacting. This could mean forming an alliance with a company making a complementary product for the same market. These companies are referred to as complementors. Another form of parallel co-operation is with competitors. This is also called co-opetition, and it implies that some companies are interacting and sharing at one level and are competing at another level, mostly at product level for market share.
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Figure 8 sketches these various relations between companies along the supply chain. Complementors
Suppliers
FOCAL FIRM
Distributors
Customers
Competitors Figure 8: Possible alliance partners along the Supply Chain [19] There can be identified three basic levels of technological collaboration: pure technology transfer; development-related technology transfer; and joint development. Pure technology transfer entails transferring and applying technological knowledge that is not developed or processed any further. Development-related technology transfer is concerned with the creation of new technologies, as in the case of R&D co-operation. In some cases, the transferred technology is adapted or further developed by the receiving company before putting it into use if the new technology has to be integrated with internal technologies. In other cases, the development related technology transfer is combined with product transfer. Finally, joint development means that both parties actually bring together their R&D resources (or divide the work-load) and together develop a new product or technology. [20] Hagedoorn [3] refers to R&D partnerships as the specific set of different modes of inter-firm collaboration where two or more firms, that remain independent economic agents and organizations, share some of their R&D activities. These R&D partnerships are examples of inter-firm collaboration or strategic partnering, a topic that has recently attracted attention in both the academic literature and the popular press. A probable reason for this is that joint R&D by companies is considered by many observers as one of the, until recently, least expected activities that companies would be willing to share with others. However, there is a clear pattern of growth in the newly made R&D partnerships if one looks at the historical data since 1960. In the early years of these four decades, there is a steady growth pattern with an acceleration since the 1980s as shown in Figure 9. The explanation for the overall growth pattern of newly made R&D partnerships is generally related to the motives that force companies to collaborate on R&D. Major factors mentioned in that context are related to important industrial and technological changes in the 1980s and 1990s that have led to increased complexity of scientific and technological development, higher uncertainty surrounding R&D, increasing costs of R&D projects, and shortened innovation cycles that favour collaboration. [3]
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Figure 9: The growth of newly established R&D partnerships (1960-1998). [3] R&D partnerships are primarily related to two categories, i.e. contractual partnerships and equity-based joint ventures. Recent studies have established that contractual forms of R&D partnerships, have become very important modes of inter-firm collaboration as their numbers and share in the total of partnerships has far exceeded that of joint ventures. Compared to joint ventures, the organizational dependence between companies in an R&D partnership is smaller and the time-horizon of the actual project-based partnerships is almost by definition shorter. [3]
Figure 10: The share (%) of high-tech, medium-tech, and low-tech industries in all newly established R&D partnerships. [3] Inter-firm partnerships are associated with so-called high-tech sectors and other sectors, where learning and flexibility are important features of the competitive landscape. These partnerships enable companies to learn from a variety of sources (partners) in a flexible setting of (temporary) alliances for various
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company activities across the value chain. [3] The expected dominance of R&D partnering by high-tech industries is also demonstrated in Figure 10.
3.2
Sequential co-operation
Supplier relationships During the last decade, there has been an increasing interest in the development of co-operative supplier relationships. The collaboration can be targeted towards different strategic or more operational areas; for example, improvement of logistical procedures through earlier and more efficient exchange of information, reduction and simplification of administrative and financial issues, and co-ordinating and harmonizing quality inspections and control systems. This development of closer relationships is often accompanied by a reduction of the firms total number of suppliers. This occurs because of two reasons. First, reducing the supplier base is associated with increased dependency of the manufacturer on the remaining ones. In order to prevent this dependency turning into risk, the manufacturer needs to get closer to the remaining suppliers. Secondly, collaboration takes time and effort, which are scarce resources. Therefore, the total number of collaborative ventures has to be limited and hence the number of suppliers is reduced. [20] Collaborative relationships that are built around common procedures and intensive information sharing mean that the suppliers operations can be more closely fitted to the customers needs. Moreover, early supplier involvement is also useful in developing innovations in supplies that can help differentiate the customers product in downstream markets. For example, a firm may choose to form partnerships with key suppliers whose skills and experiences complement its strength to develop next-generation technology. Chip manufacturers and computer manufacturers are working closely together to develop next-generation computers. Because chips are a supply used in computers, this is an example of supplier to OEM (original equipment manufacturer), or sequential, relationship. [19] One of the most common and important reasons for firms to develop closer relationships with suppliers is to benefit from their technological knowledge. This points to the underlying assumption that technological collaboration with suppliers is promoted by long-term relationships, as opposed to the market-based transactions with changing suppliers. The reasons of long-term relationships benefiting technological collaboration are, simply stated the reduction of the efforts and increase in returns of the collaboration. Long-term relationships facilitate information exchange, communication and understanding through shared experiences, and in that way reduce the costs and efforts involved in collaborating. Relationships also decrease the uncertainty regarding the returns on investments in the collaboration. [20]
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Distributor relationships Distributors create value for the product by making sure that the products are on the right place, at the right time, in the right amount. Interaction with the distributors is probably the first relationship that gave rise to co-operation within the supply chain. However, the process of distribution is typically executed at operational level, therefore little technological collaboration takes place. There exist technological alliances in the transportation and distribution industry but these are about technological developments on wireless communication systems, location systems, vehicle performance systems and information systems. [21] The service of distribution is an end-product of a different value chain, with different equipment suppliers and so on. In fact, the distributor can be seen as just the next company downstream in the value chain, so as a customer of the focal company. And the customer relationships are discussed below. Customer relationships A new theory getting a lot of attention at the moment is Customer Relationship Management (CRM). This approach is based on the recognition of the value of using marketing as a process of building long-term relationships with customers to keep them satisfied and to keep them coming back. [19] The basic idea is that it is more efficient to retain good loyal customers than to attract new ones through extensive marketing campaigns. Knowing your customer means a establishing a relationship with two way communication where the initiative for this communication can originate from both sides, for good and for bad. [22] In this form of Marketing the customer has a long-term time horizon, accompanied with high costs for switching to another vendor. The customer system is often integrated and the buyer focus is on the technology or vendor, rather than on the product or person. [19]
3.3
Parallel co-operation
Complementor relationships Firms that provide jointly used, complementary products can also have interaction. These relationships provide customers a product that delivers a complete, integrated solution. Such alliances are referred to as complementary alliances, and the members are referred to as complementors. This form of parallel cooperation is not necessarily between direct competitors. For example, in 1997, Hewlett-Packard and Kodak jointly decided to pursue the digital photography market. The alliance relied on Kodaks thermal dye transfer process to produce prints on HPs printers. [19] Similarly, the demand for Intel chips increases when Microsoft creates more powerful software. Microsoft software becomes more valuable when Intel produces faster chips. It is mutual success rather than mutual destruction. [23] Competitor relationships Competing firms may choose to join forces to develop next-generation technology. This can be done to define standards for new technologies, to provide market access in an area that one firm lacks, or to be a stronger force against a larger competitor. An example of defining standards for new technologies is the
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partnership of GM and Toyota in the development of alternative fuel vehicles. They have shared research in fuel cell technologies in the hopes that by their combined size they will be able to set technical standards regarding what fuel the industry will use. Just like Philips and Sony who collaborated in the development of the compact disc to make it an industry standard. Competitive collaboration between firms is also a form of parallel co-operation, because these firms typically compete at the same level of the supply chain. Another name given for this type of collaboration is co-opetition, whereby firms compete in some arenas and collaborate in others. For example, in the mid-1980s, when the U.S. semiconductor industry was in danger of losing its competitive edge to Japanese competitors, a variety of firms in the industry decided to join forces to develop a next-generation semi-conductor. [19] Business is co-operation when it comes to creating a pie and competition when it comes to dividing it up. In other words, companies providing to the same market are complementors in making markets and competitors in dividing up markets. [23]
3.4
Reasons, Risks and Success Factors to co-operating and partnering
Corporate relationships tend to open the way towards a variety of new solutions rather than tying the actors down to one or at least so it seems when technological co-operation comes into the relationships. The commitment then possesses a dynamic element, and instead of having an inhibiting effect it provides fertile soil for change. Relationships which in themselves may be seen as a tie or an obstacle may in fact represent the grounds for technological development; without them, perhaps, no change would have either necessary or feasible. [9] By partnering, firms are able to gain access to such resources and skills in a timely and cost-efficient manner. Also other reasons for partnering are mentioned by Mohr [19], given in the enumeration below. The benefits of collaboration in research and development in particular are in line with the reasons for partnering in general, with the following additional benefits mentioned by Allen and Jarman. Collaboration in manufacturing R&D reduces the financial exposure and risk of technology failure and reduces the time it takes to get new
Reasons to Partner or Co-operate: Access resources and skills Gain cost efficiencies Speed time to market Access new markets Develop innovations and new products Develop complementary products Define industry standards Gain market impact
technologies applied in a companys process. It exposes company personnel to new ideas and cultures and broadens the recognition individuals and organizations get for good work. Furthermore, collaborative R&D provides a means for developing constructive business relationships as well as a means for creating
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new businesses. Also, a very significant benefit is accelerated technology commercialization, meaning getting the new technology applied in industry and eventually the adoption in society. [24] Table 1: Barriers to supplier integration. [25]
Despite the many reasons to co-operate, starting a relationship with another company does have its problems. A research done on supplier integration resulted in defining the barriers shown in Table 1. And co-operating or partnering does not go without risks as can be read below [19]. The most important risks originate from the resistance to sharing sensitive information, which is experienced in many companies. Secrecy is an effective means for companies to get the most out of a particular technological innovation, but is very limiting in efforts to try to grow and evolve a concept. Many people have believed that the compromise of a companys base technology would jeopardize the existence of the company. In actuality, it is generally the competence of the personnel and processes in place to effectively use the technology that comprises the fundamental corporate competence. The ability of the companys personnel and processes to develop product and process technologies that complement and/or evolve the foundation technology will ensure the company stays in business. At present, collaboration is a tool most comfortable for those who are not afraid to share information even if its counter to their business culture; those who can quickly learn and grasp new concepts; those who can visualize the application of technology and the type of business it can generate. [24]
Risks to Partnering: Loss of autonomy and control Loss of trade secrets Legal issues and antitrust concerns Failure to achieve objectives
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Whatever the reason for an alliance, it is any voluntary agreement between firms that involves exchange, sharing, or co-development of products, technologies or services, and can include contributions in the form of capital, technology, or firm-based assets. Next to the success factors mentioned below [19], two variables are very important in making alliances work: commitment and trust. Commitment to the relationship is seen as an essential part for the success of long-term relationships. Substantial commitment from both parties helps to create shared trust and develop social norms. Commitment also aids in regulating long-term relational exchanges and reducing opportunism. Equally important is trust; without trust in a future business partner, creating the contract for an alliance that must specify all the potential areas where opportunism could occur is nearly impossible. Interorganizational trust is associated with increased performance, lower cost of negotiation, and decreased conflict.
Success Factors: Commitment Trust Interdependance Appropriate governance structures Communication Compatible cultures Integrative conflict resolution
Anticipating the matter of value creation in the key question we can conclude that not every technology in a companys portfolio has to be homegrown. In many cases, it makes more sense to acquire them externally. External technology drives value in three ways [26]: 1. 2. 3. It can add to, and diversify, the portfolio of high-value new opportunities, often quite inexpensively. It extends the technology options available to the firm. The company can bring projects to the marketplace faster and with lower risk, implicitly expanding the number of attractive opportunities.
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ANALYSIS WITH THE TAO MODEL
In the former two chapters the phenomenon Technology Roadmapping and the reasons for co-operation between companies are explained. To answer the key question of this survey those two issues have to be linked and the TAO model will be used as a tool to do this. By first explaining the TAO model and then placing TRM in it as well as defining co-operation with the model, their relative position will be determined.
4.1
Explanation of the TAO model
The model for the management of Technology, Application and Organization, or the TAO model, is developed by the Dutch Institute of Management and Innovation for the purpose of communication between partners with different backgrounds, both within and outside the organization. It not only aims at synchronizing at logistic level, but also at the level of product- and organizational innovation and strategy. It maps the innovation process, supporting communication at all levels. [27] At the basis of the TAO model lays the base model, shown in figure W. In this base model Technology is broadly defined as the sum of the competencies an organization can get to make an impact on its business. [27] The topside of the base-model concerns the matching of the technology to particular areas of use requiring (new) technology or knowledge. Both areas are relatively low in dynamics as they are both strongly related to human learning processes and routines. This is in contrast to the lower half, which concentrates on the more dynamic areas of product and production engineering, marketing, sales and distribution. Vision and development represent the creative translation of the short and the longer term both ways.
Effectivety & Efficiency
Technology
Knowledge & Experience Vision & Development
Application
Environment & Use
Appreciation & Acceptation
Organization Figure 11: The Base Model [27]
To be able to use this basis we need to build another layer on top. Working out the arbitration, matching and balancing (AMB, see 4.2) issues in more detail provides a 15 element matrix, the TAO model, as shown in figure X. In this layer the prime areas of interest are translated to the more specific decision areas and processes concerned. It provides both recognition of functional departments and the environment in which AMB decisions need to be taken.
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The layout of the TAO model consists of an overlay of two distinct dimensions. Vertically a relative timeframe, because from top to bottom the time horizon of decision-making is decreasing. Horizontally the value added, similarly to the Value Chain. The center column represents the organization with its different timeframe dependent decision planes, the classical planning process. From the top down, we find here the mission, strategy & vision, tactics and operations. The left and right columns represent the different worlds between which the organization arbitrates, at the left the inside and upstream decisions are made. And at the right the interaction with the outside, the decisions aimed at downstream impact. These worlds can represent any environment as long as arbitration takes place. It could be Technology and User, but also Author and Reader etc. Technology Organization
Science Technology man. Technology Vision Process of use Business developm. lead users Users
Application
Potential functions Design Engineering Engineering design
Product concepts
Needed functions
Product
marketing
Value perceptions
Production
logistics
Distribution
sales
Satisfaction
Industrial organization
TAO Model
Figure 12: The TAO model [28]
This arbitration, the economic basis of the organizations role and survival will take shape at all levels within the model. Its horizontal lines bridge areas that need to be considered in balance and in the same timeframe. Within its timeframe the bridges are the basis of the decisions controlling Value Streams, the building blocks of modern corporate value. The combination of these dimensions provides the most important process blocks for the organizations innovation processes. Each of these blocks interacts with all of its neighbours. At the bottom, the transactions take place, the primary process. The lower two levels represent the original Value Chain.
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For example, in the model shown in Figure 12 for a technology driven organization, Technology assessment and User scenarios influence the Vision for the organization, which provides boundary conditions for its product concepts. Also Production engineering and Value engineering (marketing) combine into the final product definition as both influence the margins to be obtained in transactions with the product. This in turn will interact with distribution. [28] From the upper to the lower echelons of the model, the timeframe of reference tends to become shorter, in other words, the upper echelons provide the boundary conditions for the lower ones. Only when a viable balance is found at all levels, the organization will thrive. This also means that all competencies involved need to be available within the organization or, through its network, to the organization. Deviation from these rules implies higher risk or lower return. The availability of competencies implies also relationships, which have their basis at any level, with different scope and time-horizon, providing support to the management of different types of alliances. Especially important are the differences within each column, i.e. between user and market and productand production technology. The former differentiates functionality from customer value, the latter product- from production technology. The possibility to explicitly make these differences and put them in a proper time perspective is one of the important advantages of the model. The model, through its columns and process-blocks provides language and context for many multidisciplinary decisions. Focus on relevant issues is also provided by the mentioned aggregation level option for scalability. The complexity of reality is buried in a number of layers and elements, to be addressed when needed for a particular purpose, but only then. In addition, the time-axis relation with the vertical axis of the model gives the chance to focus on a specific period relevant for the decision involved. [28] The TAO-model is used by organizations to identify the competence & relationships necessary for successful innovation. It supports both the strategic and the operational planning of product development without cluttering the overall view with details. Through the different roles in the process and their communication patterns, the issues in inter- and intra-company cooperation can be identified. The prime use of the model is communication of intent and decision. (The discussion about boundary conditions is the inverse of learning. In this respect, the model identifies in the vertical relations the areas at which learning processes should be supported. Due to its scalability, individual, departmental and corporate learning can be made explicit.) Recently the model has been used in research networks to identify value streams and support evaluation of the relative value of knowledge transfers. [28]
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4.2
Value creation
To be able to address basic decision-making we need to start by defining basis economic value creation. For the purpose here we concentrate on a particular set of economic processes for value creation [27]: 1. Arbitration(A). Bringing together supply and demand. The separation can be in time, in place or in function. Straightforward examples are storage, distribution and product development but in reality often a combination provides the optimal value creation. Arbitration provides a channel or value stream. 2. 3. Matching(M). Closely related to the first process and an important process for any organization, matching is the process of tuning a set of competencies and assets to a set of requirements. Balancing(B). Balancing assets and investments in the short and the long term to provide an efficient use of these assets is both a requirement of competitiveness and continuity. These three principles (AMB) are not independent, but are concentric around a companys core competence and assets. Arbitration defines an outer layer of interaction with the external, matching is the process of tuning the value exchange, balancing is part of basic entrepreneurial optimization of the use of assets and competencies. The organizations AMB decision-making is represented in the TAO model by the middle column. [27]
Science
Business develop.
Users
Technology
Vision
Process of use
value
Potential functions Product Concepts Needed functions
Engineering
Product
Value perceptions
Production
Distribution
Satisfaction
value
Figure 13: Value creation in the TAO model Although arbitration takes place at all levels, eventually the actual measurable value is created at the bottom right corner element where customer satisfaction is converted into actual cash flow. So here the value is exchanged for cash. This is also represented by the Sales arrow shown in the model of Figure 12.
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Every element or process in the model may cost money, but for the company to make profit or even survive, this costly activity will have to make a contribution to the value chain at the bottom. E.g., when investments are made for technology development the value of these investments will, to make them efficient, some how stream to the bottom right element Satisfaction. This can occur in various ways, because new or better technologies can enhance both the Potential functions and the Vision, from where the value can follow many paths, see figure 13. Potential functions can transfer the value downwards enabling better or cheaper Engineering. This, in turn, results in advantages in Production, to eventually improve Satisfaction for the end-user through quality and delivery time. Customers pay for satisfaction and generate cash flow for the company. Also, technology development may change a companys Vision, thereby her ideas of new Product concepts resulting into the Product shape or functionality, and its location in time (Distribution). Other combinations of value flows between these mentioned decision frames are possible. Through a balance (B) between spending time and money in Engineering or Marketing margin can be created. Engineering might re-engineer or increase volume for lower unit cost, Marketing might increase price or volume to increase income. Part of the value perception comes out of the customer value of product or service function. This is a particular match(M) between what functionality one can supply and the functionalities required. The ability to identify proper matches in turn depend on the communication with users and understanding their processes of use. This involves both the present and the future scenarios. [27]
4.3
Co-operation and the TAO model
The TAO model is developed as an innovation roadmap from the perspective of individual companies. However, what is a product for one company may be a production means for the next. To fully understand business clusters, stacks and chains of TAOs are a more useful presentation than capturing the whole organizational cluster of a corporation or chain in just one business representation. [27] In the former chapter two ways of co-operation are defined, namely the co-operation within a supply chain, referred to as sequential co-operation, and parallel co-operation between competing companies in the same industry, also called co-opetition. This paragraph will visualize these forms of co-operation through the TAO model. First, the location of a single company in the TAO model was given by Figure 12. The two left columns Technology and Organization represent an organization or company. Application represents his users or market, which the company is providing with a product or service. When this user is another company one can easily identify a supplier-customer relation. And it is imaginable that this customer in turn is arbitrating, matching and balancing between his Technology side and the Application side. And all his
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activities are focused on creating customer value in the end. For his own production, the customer needs products or services to build on, for instance components for assembling the end product. The perceived value of these products is defined by the customers requirements on functionality, availability and price. For the satisfaction of the component is paid and the cash flow generated by satisfaction for the customer is used to finance all companys activities. This extension of the value chain is visualized in Figure 14. In this model also the location of single companies is given. In this extended value chain co-operation can take place, when the separate companies are communicating their common goals and interact to achieve these goals. The most obvious common goal is increasing customer value and thereby their own margins. Supply Chain Management is an appropriate and often heard name for this way of co-operation.
Company A
Science Technology Potential fs Engineering Production Bus devel. Vision Concepts Product Distribution Users Proc. of use Needed fs Value perc Satisfaction
Company B
Science Technology Potential fs Engineering Production Bus devel. Vision Concepts Product Distribution Users Proc. of use Needed fs Value perc Satisfaction
value
Figure 14: Extended value chain in TAOs When the service needed by the customer is in the area of engineering, e.g. consultancy, design, etc., the value is delivered by the supplying company at a higher level. The Satisfaction (and value) is created directly for Engineering, so these elements are next to each other and Engineering is paying out of his budget for Satisfaction.
Science Technology Potential fs Engineering Production Bus devel. Vision Concepts Product Distribution Users Proc. of use Needed fs Value perc Satisfaction Science Technology Bus devel. Vision Concepts Product Distribution Users Proc. of use Needed fs Value perc Satisfaction
Potential fs Engineering Production
value
Figure 15: Satisfaction at Technology level
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All levels of decision making in the same column above Production may have requirements and satisfaction in their own way. If a companys core business is doing R&D on biotechnology, then its product consists of completely developed technologies for manufacturers in that industry. Investments are made and satisfaction is given at the technology level as can be seen in Figure 15 on the previous page. Co-operation in this way of value exchange is also sequential, for the product or service of one company is a resource for the next, even though it is not immediately used at operational level. Obviously, company A and B have to co-operate to ensure satisfaction. The requirements for the developed technology need to be communicated extensively, with all feedback loops included. High-Tech companies in a supply chain are paying for the supplied products, like components, but in fact they are also paying for a certain level of technology delivered along with the product. In order to improve the customer value a company wants to have control over the technology level of the product and its components. Therefore, co-operating with suppliers on technology development can enhance this control as well as the speed at which it is implemented in the end product. This form of co-operation implies communicating and interacting between the Technology decision frames of two or more companies in the same supply chain. This is visualized in Figure 16. One can see that through interaction and communication on technology level both the value of the half product, created by the supplier, and the end product is increased.
communication & interaction Science Technology Potential fs Engineering Production Bus devel. Vision Concepts Users Proc. of use Needed fs Science Technology Potential fs Engineering Production Bus devel. Vision Concepts Product Distribution Users Proc. of use Needed fs Value perc Satisfaction
communication & interaction Product Value perc Distribution Satisfaction
value
value
Figure 16: Sequential co-operation in the TAO-model Co-operation does not always imply a customer-supplier relationship between the companies involved. A company may want to increase the customer value with an internal development but does not have enough resources to do this. Depending on which way the company intends to increase the value, it may look for other companies interested in putting time and money in this development as well. By joining resources the companies co-operate for increasing the value for their own customers. This kind of co-operation is not likely to be used for relatively small optimization investments, but for the large investments in fundamental developments with high risk involved.
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Other companies interested in the same developments are most likely to be competitors in the same industry, so co-operating there is not a straightforward decision. However, the advantages can be the increase of the total market demand, thanks to standardization. The co-operative development of the Compact Disc by Philips and Sony is a perfect example of this. Modeling this kind of co-operation with the TAO model results in a model like in Figure 17. Effort, like time and money, is put into common technology development and companies are communicating to reach their common goal. In the end these competitors are transferring the increased value of the Technology frame to their own product or service to satisfy the same customers. So the customer value is created in a parallel way, like the black arrows point out. After the technology is developed together comes the point where the co-operation stops. The competitors use and implement this technology individually for creating COMMUNICA TION &
Technology
Technology
Satisfaction
value
Technology
value
Satisfaction
value
Satisfaction
their product. Figure 17: Parallel co-operation, stacks of TAOs
4.4
TRM placed in the TAO model
For actually linking TRM and the TAO-model, first there will be looked at the dimensions of both roadmaps and the TAO-model. Then the functional areas of both concepts are discussed. In paragraph 4.1 the two axis of the TAO-model were discussed. When talking about the value creation in the TAO-model the focus was put on the horizontal axis. Before placing Technology Roadmapping in the TAO-model it is important to go into detail about the vertical axis, which represents the increasing time horizon for decision making from bottom to top. This relative time dimension is based on the insight that the process of matching supply and demand is not instantaneous. Both the understanding of possible solutions and the understanding of real requirements is hard work and take time. The speed by which both can be matched varies depending on the level in the TAO-model. Research programs tend to look at fundamental problems and take longer than deciding to paint a car in a required color. [27] Figure 18 gives
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the TAO-model with an additional time scale to explicit the decision time horizons. For the time in which decisions have impact are taken the hypothetical values from now until 2, 4, 6, and 8 years ahead.
8 years
explicit value
6 years Science Technology Bus devel. Vision Concepts Product Distribution Users Proc. of use Needed fs Value perc Satisfaction now 4 years
implicit value
Potential fs Engineering Production
time horizon
2 years
time
Figure 18: Time scale in the TAO-model. In Technology Roadmaps the horizontal axis also represents the time dimension. In roadmaps the time dimension is generally stated rather roughly, mostly with the accuracy of a year. The nodes in the different levels, usually connected with links, represent critical events or decision moments. These nodes can be seen as the steps at which the time horizon decreases, because the nodes are getting closer in time. This is where in the TAO-model a lower horizontal level is addressed. In a roadmap the contents of activities and decisions are abstract in the long term and are getting more concrete towards the short term, with every decision being made or path being chosen. To illustrate the importance of timing, the concept knowledge cycle is explained. Knowledge cycles describe supply and demand of knowledge of both types, know-how and know-what in an ongoing cycle of provision and matching with demand. Each cycle member has a specific time constant or dynamic frequency range within which is operates at reasonable efficiency, resulting in a useful bandwidth. The bandwidth of for instance Sales, however, will rarely overlap with Research. See Figure 19.Figure 19:
Research
Devel.
Production
Sales
Knowledge cycles with different bandwidths. [27]
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For effective transfer, however subsequent cycles need to have overlapping bandwidth, to be able to communicate efficiently and to match question and answer, supply and demand effectively. In organizations a number of control and staff mechanisms are put in place to secure these transfers. Roadmaps are examples of planning at different cycles, providing coordination over different cycles, both in time and requirements. In the TAO-model these differences are separated vertically to differentiate the decisions and matching based on different knowledge cycles. This separation provides a mapping useful in consistency and reality checks on decisions of different types and timing horizon. [27] The other dimension in TAO is the direction of the product flow referred to in Figure 18 as the explicit value stream, which is horizontally positioned and is referring to value creation through transformation, mostly at operational level. And downwards in vertical direction also implicit value is created, through efforts and investments done in technology, product development and engineering. In his explanation towards the structural build-up of a roadmap Muller [11] also defines a value stream coming from the companys resources like people, process and technology. Then passing through the product creation process and customer oriented processes like sales and production. And eventually, the value is delivered to the customer as shown in Figure 20. When this model is rotated clockwise ninety degrees, we can see that value stream is parallel to that in the TAO-model. Figure 20: Value stream towards customer. [29] The next step for linking TRM and TAO is defining the overlaps in the functional areas. The TAO-model there exist three columns. The right side represents the user and his needs or demands, what in TRM descriptions corresponds with the know-why or market-related information set out against time. See Figure 3 in chapter 2. The center column Organization has a strong resemblance with the generic roadmaps Products/Services level. And, of course, the Technology column corresponds with the third layer Technology/Competences. The fourth bottom layer for resources/skills in the generic roadmap is not taken into account in the TAO-model explicitly, however we can assume these fall under the left column. Now consider the elements of TAO individually with respect to TRM. Naturally the Technologydecision box in the left column of the TAO-model is also represented in a Technology Roadmap.
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The long-term market developments or Processes of Use are also defined in business oriented Technology Roadmaps. In Industry Roadmaps there is always an application, which drives the development of the technologies under consideration. Clearly, Vision as a match between the core technology of the firm and its chosen application process, is as well strongly supported by Technology Roadmapping. Foresight is one of the fundaments of TRM. But from the center column the element that has most in common with corporate Technology Roadmaps is Product Concepts. All the adjacent boxes are also in their own way related to the Technology Roadmap like Figure 21 shows with the lighter yellow colored parts. The darker orange parts represent the core of Technology Roadmapping. The boxes at the bottom are not part of Technology Roadmapping, because these decisions are more at a tactical and operational level.
market
product
8 years technology 6 years Science Technology Potential fs Engineering Production Bus devel. Vision Concepts Product Distribution Users Proc. of use Needed fs Value perc Satisfaction now 2 years 4 years
time
Figure 21: The location of TRM in TAO (darker means more in common) Once more we look at the time scale. The yellow diamonds at the right represent the critical events or decision nodes at which the decision time horizon is changing. E.g. a group of Users is defined to focus on for the next eight years. This results in a definition of the Process of Use for the next six years, followed by the Needed Functions for the upcoming four years. In a roadmap these nodes are defined as well becoming clearer the more proximate it comes in time, and eventually delivering output for the tactical and operational activities for the next two years.
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Concluding, the generic roadmap picture can be flipped on top of the TAO-model. However, it is to be considered transparent, for the emphasis of TRM is in the lower layers of Technology, Product Concepts and Process of Use. As the green line indicates, the time axis of the roadmap is tilted in the TAO model, because it has to cross the different time-horizon levels in TAO. After analyzing the resemblances, for further use, TRM could well be placed in the TAO-model as shown in Figure 22. In this picture the time scale is disregarded to make it less complex and better useable, however, awareness of the time aspect remains important.
Science Technology Potential fs Engineering Production
Bus devel.
Users Proc. of use Needed fs Value perc Satisfaction
TRM Concepts
Product Distribution
Vision
Figure 22: TRM in TAO In this chapter both Technology Roadmapping and co-operation are visualized with the TAO model. By doing so, awareness has been created of what TRM is in an organization, and how organizations can cooperate, having defined the interfaces. Realizing their relative positions will facilitate executing chapter 5, which deals with the theoretical approach to the key question: Does co-operation on TRM, in theory, create value for the companies involved?
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THEORETICAL APPROACH
For answering the key question Does co-operation between companies on Technology Roadmapping create value for the companies, the first approach is investigating whether there exist reasons, drivers and possibilities for co-operation. What are, in theory, the advantages or disadvantages of sharing the process and product of roadmapping and how can it be modeled? Moreover, the matter of value creation is analyzed with the real options theory. Because TRM is a form of Technology Planning, which is considered part of Technology Management, drivers for co-operating in those areas are likely to be drivers for co-operating in TRM.
5.1
Motivation for co-operative TRM
This paragraph will describe the motives for co-operative TRM. There exist some general drivers for both sequential and parallel co-operation but there is also a distinction to be made between them. Exploring the areas in which collaboration is done for both variants, the following can be seen. Sequential co-operation, between suppliers and customers, stems from the lower levels in the TAO model. Traditionally, transactional communication takes place between the seller and the buyer. In the last decades, however, interaction at higher levels like scheduling has been given more attention with the rise of phenomena like Supply Chain Management. Nowadays, also at the product development level, companies in the same supply chain are sharing information and even their resources. [25] Noticeably, sequential co-operation is making an upward shift in the TAO-model, next to maintaining its importance at the lower levels, of course. On the other hand, parallel co-operation originates from companies having links with institutes and universities, doing scientific research that might be of use for the industry. When more than one company is funding the same scientific project, they are in fact co-operating in a pre-competitive phase. This cooperation is located at the left upper corner in the TAO-model around Science. To increase the return on their investment companies want the research to be relevant to technologies that are useful for the right applications. It is seen that also in a competitive phase partnerships are formed for advantages like standardization of products (Sony and Philips). Thus the area of parallel co-operation is spreading downwards in the TAO-model and has a strong eye on the application side. Therefore, we could say that co-operations and alliances more often take place in the area of Technology Roadmapping. So a general driver for co-operative Technology Roadmapping is the need for co-operation at the levels of TRM in the TAO-model.
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5.1.1 Sequential co-operation In many Technology Roadmaps of high-tech companies a section is reserved for the role of suppliers in the future. For example, Figure 3 in chapter 2 shows the generic roadmap in which the bottom level defines the resources, and one the kinds of resources stated is partnerships. Likewise, in the same chapter, the hypothetical Technology Roadmap of Figure 4 defines the Supply Chain as a resource. So most roadmaps define what contributions a supplier could make for the companys technology development. Not only identifying the suppliers role for the own company is important, but also sharing this vision with the supplier would provide more clarity for him how to keep his customer, the company, satisfied. Maybe even a certain amount of control or influence on the suppliers strategies would be hereby provided. It has been long assumed that product innovations are typically developed by manufacturers. However, it now appears that this basic assumption is often wrong. [30] According to Von Hippels findings, new products are not always developed by product manufacturers, but also by suppliers or users of the products. In view of the network approach, product development processes take place in the form of interaction between different actors. Product development relies on three main processes that occur through this interaction: knowledge development, resource mobilization, and resource co-ordination. Ideas developed for other situations by one actor can be useful to other actors, what especially happens when the actors concerned are a buyer and a seller. This is called the interactive effect and is due to the fact that new knowledge often emerges at the interface of new knowledge areas or perspectives. [20] Also, new products are often using several technologies. Through the combination of resources in the form of technological knowledge and skills competencies in several areas are brought together, the socalled multi-competence effect. Next to combining these resources, they need to be mobilized and coordinated. For controlling the firms respective resources, their availability and possible consumption for the development process has to be arranged, motivated, and negotiated for. A lack of co-ordination exists when the collaboration partners do not have the necessary complementary technological skills and knowledge to resolve problems in the design of the new product. [20] The identification of such gaps in technological resources is a well-known benefit of the TRM process. Also for controlling the firms respective resources a roadmap can be very useful. Obviously, knowledge development, resource mobilization and resource co-ordination are processes that can hardly be performed by a single actor but primarily require interaction between the different actors that control the different resources. Product development, therefore, should not be seen as the product of a
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single actor but as a result of interaction between two or more actors. Consequently, in the network perspective, product development is nearly synonymous with technological collaboration. [20] Product development in a network thus forms a driver to organize collaboration at a technological level, which can be facilitated by shared Technology Roadmapping. The ultimate objectives for firms to involve suppliers in product development can be found in areas that are close to creating or sustaining competitive advantages. A general distinction can be made between long-term and short-term objectives. Long-term objectives include aspects like getting access to new knowledge and improvement of the supplier relationship. Short-term objectives are related to the specific development project the supplier is involved in. Of these short-term objectives, reducing development time, reducing development and product costs, and improving product quality are quoted most often. Apart from improving development project performance in terms of time, cost, and quality, manufacturers may have an interest in collaborating with suppliers in product development for reasons that are rather related to long-term objectives. These long-term objectives include the access to the technological knowledge of suppliers, and the long-term alignment of technology strategies. Maintaining co-operative supplier relations provides manufacturers with a possibility of getting permanent access to external knowledge. In the long run, manufactures may even have an interest in influencing supplier decisions with regard to the kind of technologies to make investments in, in order to provide the best conditions for future technological collaboration. These kinds of long term alignment efforts are visible in the so-called technology roadmaps that companies, like Ericsson and AT&T [31], draw up together with their suppliers, which serve to identify technological trends for both parties and to provide a basis for discussing future investments. [20] Long-term alignment of technology strategies and the interest in influencing the suppliers technology investment decisions are two strong drivers for vertical co-operative Technology Roadmapping. Compared to short-term collaboration, long-term collaboration is much more focused on supporting the development of underlying technologies and capabilities than on designing a specific new product. In essence, this difference could be described as the long-term creation of technological resources versus the short-term exploitation of resources. Manufacturers and suppliers, in the long run, may even develop joint capabilities, as in the case of telecommunication equipment manufacturers and Internet technology providers developing Internet Protocol telecommunication applications. Such joint capabilities may be highly specific to the combination of the knowledge of the manufacturer and the supplier, due to the diversity of resources mentioned earlier in this paragraph. [20] The combination of different knowledge resources stimulates the creation of new knowledge. TRM can identify those different resources with respect to the technological areas in which new knowledge is needed.
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Chapter 3 discusses the risks to partnering and indicates that the most important risks are trust and commitment of the participating parties. According to Allen and Jarman [24], to build trust from the suppliers perspective, the OEM customer: Gets the supplier involved early, preferably at the concept stage. Identifies the real decision makers and the criteria and time line for making decisions. Has stated priorities of quality and performance. Supports new and innovative approaches to manufacturing (especially new technologies). Understands the suppliers needs and is willing to discuss, with an open mind, what is reasonable or possible. To earn trust from the customers perspective, the supplier: Demonstrates openness and honesty in all interactions as determined by the character of the people involved in face-to-face meetings. Has plans and shares future investment strategies and resources with a goal of improving the combined teams competitiveness in the marketplace. Is willing and able to link internal information systems to those of the customer. All of these actions to enhance trust are supported by the Technology Roadmapping process. Monczka [25] describes a process for supplier integration in new product development. The last step of this process, after selecting appropriate suppliers and building relationships, is aligning objectives and Technology Roadmaps, with a world-class supply base as a result. To obtain maximum strategic benefit from the integration of the supplier, the companies should have shared objectives and complementary future technology plans. This most commonly described in terms of a convergence of the companies Technology Roadmaps, which describe the performance, cost, and technology characteristics of future products each company plans to develop/introduce over some specified time period. Sharing Technology Roadmap information between the buying company and suppliers (or potential suppliers) is an important tool for achieving alignment. To the extent that each company has visibility of the others technology plans, both have the opportunity where their plans align and, perhaps, where their plans diverge. If there is divergence, either company or both companies may alter their plans to create better alignment. [25] Next to creating a world-class supply base, it is important to establish a bookshelf of viable technologies and suppliers. Therefore, a parallel step at the end of the supplier integration process of Monczka is monitoring the supply market for emerging technologies. One of the techniques mentioned for doing so is sharing roadmaps.
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In sharing roadmaps, it must be recognized that supplier involvement in new product development can have the following positive effects on technology risk/uncertainty [25]: The supplier may have greater experience or expertise with the technology and, as a result, may have better information about where the technologies can be successfully applied. Some (or all) of the technological risk may be taken on by the supplier. The buying firm may have some ability to influence the direction of the suppliers research and development efforts in order to match developing technologies with the buying firms strategy. If a closer relationship between the buying company and the supplier develops as a result of supplier involvement, the supplier may be more willing to share information about its new/emerging technologies with the buying company. After the monitoring for emerging technologies comes the continuous evaluation of emerging technologies. One of the strategies that a company might use to evaluate and control or manage technological uncertainty/ risk in new product development is sharing its Technology Roadmaps with its suppliers, having several potential benefits [25]: The buying company can find out early if its technology plans will not be supported by its suppliers planned developments. The buying company may be able to influence suppliers to work on the technologies that will be of greatest value to the buying company. The buying company may be able to alter its own Technology Roadmap to be better aligned with what its suppliers will be working on. The buying company may try to get its technological requirements built into industry-standard components. 5.1.2 Parallel co-operation Many high-tech companies have ties with institutes or universities for increasing their technological knowledge, but also for getting government support. Many European research programs (such as those of the EEC and EUREKA) require that companies and or institutions of different countries establish a formal alliance to qualify for program support. Nueno identified negative aspects of such collaborative research ventures. Among other issues, concern was expressed about the relevance of the research for the competitiveness of the company; a company might be driven into an irrelevant line of research by another company. [32] A Technology Roadmap can be a good tool to define at an early stage which direction the collaborative research is going and whether it is relevant to the individual companies by making the link to their applications. By setting up the shared roadmap in advance, detours or side steps of one of the participants are not allowed easily.
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Some doubts are also mentioned about the distinction between co-operation and competition. It is difficult to establish whether those doubts are the result of different objectives of the partners in the alliance or they are due to the existence of second agendas purposely prepared to incorporate competitive ingredients from the start of the coalition. [32] During the TRM process the companies objectives for the alliance are made explicit. The roadmap will provide more transparency of the motives of the participants, which will result in a higher degree of trust. Also, by making explicit in what direction the activities of the alliance will be, a higher level of commitment will be provided. So it can be said that TRM can help overcome the risks of collaborating. About half of the companies studied by Nueno and Oosterveld also expressed deep concern for the evolution of technological alliances once the research and development phases are completed. The question is to what extent the companies involved in the technological alliance (often subsidized) will have the resources and/or will be willing to make the necessary commitments of resources to undertake the industrial/commercial stages. Two companies involved in the EUREKA alliances clearly suggested the need for an Industrial-EUREKA, that is to say, a framework program with some type of incentive to facilitate the transition from R&D to industrial exploitation. [32] Such a partnership framework to facilitate the transition from R&D to industrial exploitation can be very well delivered by a collaborative roadmap and its creation process. 5.1.3 General Drivers As alliances evolve, there is a need to develop effective ways of sharing knowledge across organizational boundaries. Research shows that knowledge resides in the management of routines used by firms. Building effective knowledge sharing routines is an important element in obtaining returns from alliances. Knowledge sharing and acquisition are likely to be particularly important when the alliance is used as a window on new technology. A production network with superior knowledge-transfer mechanisms among users, suppliers, and manufacturers should be able to out-innovate production networks with less effective knowledge-sharing routines. [33] The introduction of TRM in an organization does not only mean the creation of a roadmap but also periodically updating the roadmap. In this routine new developments in all the subjects of the roadmap are monitored and, if necessary, adjustments are made to the paths and milestones. In co-operative roadmapping this evaluation routine will satisfy the need mentioned above. Another mechanism contributing to successful alliances stated by Dyer [33] is establishing effective governance processes. As alliance partners create more co-specialized assets, they also increase their risk. The more specialized these resources become, the lower their value in alternative uses. This increases the risk of opportunism by alliance partners. For partners to make this kind of commitment to the alliance, an
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effective system of governance is critical. This mechanism for governing the relationship helps minimize the transaction costs, thereby enhancing efficiency. [33] Next to using formal mechanisms like contracts and informal mechanisms like interpersonal trust, it seems good to have something that lays in between those two. Technology Roadmapping is a governance process, which provides a visible plan to which both parties commit themselves, as well as the right amount of clarity needed for trust. When an alliance has the role of creating real strategic options for the firm, the uncertainty decreases a little, but there are still multiple paths to advantage in the future marketplace. In such situations, there are difficult choices: Committing prematurely to a technological path may be unwise if the technology proves unsuccessful. Yet, committing to large numbers of projects would not be feasible in a resource-constrained environment. In such, the use of multiple alliances, each representing a possible path to success in the future, is an appropriate response. [33] The description of these multiple paths can be very well done in a Technology Roadmap as well as the positioning of the individual technology partners. To illustrate the exploration of options, Intel is a company that has used an options approach to many of its alliances, particularly with companies involved in developing Internet technologies. Intel views certain new Internet technologies as having high potential as well as posing a potential threat because they may allow individual users to tap into applications, data, and processing power through relatively simple and inexpensive desktop devices. These technologies could be devastating to Intels microprocessor business and to reduce this risk, Intel has invested more than a half billion dollars in venture capital, taking equity positions (buying options) in over 50 companies, many of which are involved in developing Internet technologies. [33]
5.2
Value creation through co-operative Technology Roadmapping
As explained in chapter 4, the actual value is delivered to the company is when the product is paid for. Therefore, the value of a co-operative Technology Roadmap to a firm is very difficult to define, especially because the decisions made in a roadmap have their impact after a great period of time, maybe even fifteen years. Nevertheless, these decisions often imply immediate investments in for instance the research and development of a certain technology. According to traditional valuation methods like the Discounted Cash Flow model (DCF), such investments can only be justified when the expectations are very high. [34]
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5.2.1 Real Options Theory Discounted cash flow lays out how much cash a project will eat up each year and how much it will return, and discounts the net based on the company's risk-adjusted cost of capital. This method explicitly assumes the project will meet the expected cash flow with no intervention by management in the process (and how often does that happen?). All the uncertainty is handled in the discount rate, which is adjusted according to risk. Discounted cash flow is a static model. At most, corporate analysts might use probability models of the potential outcomes to find the expected average return over time. But management's flexibility to make decisions as conditions change is assumed away by this methodology. If future outcomes aren't realized, this type of analysis assumes that management continues on course, even if the outcomes turn out to be "bad," rather than allowing management to change strategy in midstream or shut down the project altogether. [35] For companies in a dynamic environment like the high-tech industry, however, uncertainty and the flexibility of the management to react to this play an important role. And traditional valuation methods are not paying enough attention to the importance of this flexibility, which could prevent some potentially moneymaking projects from getting off the ground. [34,35] A theory, which does take into account the extra value of flexibility in decision-making, is the real options theory. This way of valuing investments in projects is similar to the way we value stock options. A stock option lets us make a small investment today in order to reduce our risk later on. At the same time, it keeps open the possibility of making a bigger investment later, if the future goes the way we expect. The more uncertain the times, the more valuable an options approach becomes. A financial option gives the owner the right to buy (a call) or sell (a put) a stock at a given price within a certain period of time, without the obligation to do so. If the option isn't exercised, the only cost is the price of the option, but the upside potential is large. The flip side of the option the protection from the downside risk with the possibility of a large upside gain is what gives value to the option. The idea is similar with real-options analysis. The manager identifies options, and their exercise prices, within a project. If the future looks good, the option is exercised and the project goes ahead; if it looks bad, the only loss is the price of the option. This is different from the traditional approach known as discounted cash flow. [35] Real options analysis also gives management the flexibility to address uncertainties, as they are resolved. Once a project begins, a manager has the choice to defer additional work, abandon it outright, shut it down and restart later, expand it, trim it back, or even switch its strategic purpose.
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Real options offer another valuable comparison with financial investing: that holding a diverse portfolio of stocks is less risky than owning one stock. [35] In the real options theory the most important valuation model is considered to be the model of Black & Scholes, which is also used in the financial options world. An important disadvantage of that model is its formula is mathematically complex and intuitively difficult to comprehend. [34] Investments in real assets, particularly in emerging technologies, are often considerably more complex than financial options in their structure (in the number, variety, and timing of interdependent decisions) and in the availability of data inputs. Therefore, also the easier binomial model is used, which is derived from the Black & Scholes model, but is based on a decision tree structure. An example of a simple calculation in this manner is given in Appendix B. 5.2.2 Real Options and Emerging Technologies The potential returns from investments in emerging technologies are inherently uncertain because of the evolving nature of both the technologies and the markets they address. And, of course, the greater the uncertainties, the more challenging are the decisions to invest. Much, if not most, of the value offered by emerging technology investments is in the real options created. At the heart of this option value is the managerial discretion to take full advantage of favorable developments (such as unexpectedly positive research results) while limiting the negative effects of unfavorable developments (such as slow market acceptance). The greater the uncertainty, the greater is the value of such managerial flexibility and, hence, of the associated real options. The technological analogy of a call option is an investment in technology that enables entry into a promising field: one that is exercised only if that promise begins to materialize. [26] In making technology investments, a company might make a relative small bet to develop a new technology that then creates the opportunity for a larger investment and return through commercialization if the development effort is successful. The price of the option is typically the cost of developing or acquiring the technology. Exercising the option is usually the decision to commit to commercialization and the exercise price is the cost of commercialization. [36] Today, a company with a major stake in telecommunications may want to create technology options with respect to the critical question of whether data will reach homes predominantly via phone lines, cable, or direct broadcasting. Betting wrong would be disastrous, and the evolution of technology makes the outcome uncertain. Volatility in a technology sense is high new product announcements and new strategic alliances among potential competitors are announced weekly. Having a position that will work in any of the possible scenarios is valuable. CFO Judy Lewent of Merck put it well [26]:
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When you make an initial investment in a research project, you are paying an entry fee for a right, but you are not obligated to continue that research at a later stage. Mercks experience with R&D has given us a database of information that allows us to value the risk or volatility of our research projects, a key piece of information in option analysis. Therefore, if I use option theory to analyze that investment, I have a tool to examine uncertainty and to value it To me, all kinds of business decisions are options. The real options approach is particularly appropriate to emerging technology investments because they exhibit characteristics typically associated with options value [36]: Payoffs are highly asymmetric; the greater the disparity between upside and downside outcomes, the greater the option value. Future revenues and costs are highly uncertain; in general, the greater the uncertainties, the greater the value of managerial discretion. Initial investments (technology investment or acquisition) are relatively small in comparison with future investments (scale-up or full commercialization), increasing the benefits of flexibility. Most technology investment options proceed naturally through multiple stages, or a sequence of decisions, creating multiple options and increased value. Time horizons are often long, allowing increased opportunity for updated information on critical uncertainties and subsequent decisions, increasing options value; but preemptive competitor moves in the technology and/or markets can have the opposite effect.
Create Options
Structure Decisions to Increase Flexibility
Recognize Options
Options thinking
Co-operative TRM
Value Options
Financial Models or Decision Analysis
Realize Option Value

Effective Implementation
Exercise
Figure 23: Dynamic Real Options Framework. [36] The relation with co-operative TRM is added.
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Options do not just represent a new framework for valuing decisions. They represent a different process for structuring and managing these decisions. This process might be thought of as a cycle, as illustrated in Figure 23, and it includes [36]: Adopting an options perspective. A necessary first step in developing and managing options is to see them. Most business decisions present options, but these are frequently ignored or undervalued when decisions are framed from a traditional financial analysis perspective. Without a fundamental shift in managerial mindset, future opportunities may not even be recognized as real options. And options that are invisible cannot be managed or valued. Creating and structuring options. Real options are not just given. Some are inherent in the investment, but others can be created by building additional flexibility into the decision process. By structuring decisions to increase future discretion, managers can generate new options and increased value. Valuating options. Once options are recognized or created, they can be valued. Even here, the valuation is not a one shot deal. As each decision is made and intermediate outcomes are known, the value of remaining options will change, so valuation is an on-going process. Implementing the real options approach. What looks good on paper can sometimes be quite disappointing when implemented. Real options are focused on future value, which, by definition, does not exist at the time the options are assessed. It only is realized through careful management and exercise of real options over time. Unlike financial options, where information requirements are minimal and exercise is generally quite straightforward, exercising real options requires constant monitoring, information updating and timely decisions. This real options framework resembles the management processes of Figure 1 in chapter 2. 5.2.3 Real Options and Co-operative Technology Roadmapping Best practices suggests it is desirable in the early stages of exploration of an emerging technology to keep a number of options open by only committing investments in stages, following multiple technology paths and delaying some projects. Once uncertainty has reduced to a tolerable level and there is a widespread consensus within the organization on an appropriate technology path that can utilize the firms internal development capabilities. But what if there are many plausible technology paths, the risks of pursuing one to the exclusion of others are unacceptable, and the firm lacks the necessary internal capabilities? The strategy of collaboration makes good sense when exploring numerous possibilities. However it may collapse if issues of ownership of intellectual property are unclear. [37] In Figure 23 the location of Co-operative TRM is added. We can see that the areas of correspondence are the three processes to the left, which will be explained below.
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Recognize Options Like explained in chapter 2, a Technology Roadmap is a useful tool to monitor technology developments, competitor/complementor/supplier developments, market developments, and for setting out multiple paths. Therefore, the recognition of the real options is part of a co-operative Roadmap. Having an overview on the many future opportunities stimulates options thinking. Create Options Furthermore, co-operation or partnerships between companies in technological areas give one company access to the other companys resources and knowledge, and vice versa. The availability of these extra assets and especially the combination of assets implies the creation of many more options than one company alone could have. Careful consideration of both complementary and competitive possibilities often reveals the potential for wide-ranging additional options. Acquisitions, divestures, strategic partnerships, technology licenses, and a wide variety of expansion and diversification alternatives are among the most common candidates for option creation. [36] Realize Option Value Like the Technology Roadmapping process is on going in terms of updating and evaluation, also the development and assessment of real options must be on going in the Effective Implementation phase. Because options can only deliver value if they are exercised in a timely and appropriate manner, the organization needs to have structures and processes in place to continuously evaluate and re-evaluate options. To manage the options process, managers need to pay careful attention to the nature and timing of three activities [36]: Monitoring progress. Regularly updated information on project progress is essential to support decisions to exercise or defer options. It is particularly important in structuring decisions to identify the major uncertainties, which should be monitored over time. Testing and updating assumptions. Key assumptions and decision points need to be identified at the outset and tested against current conditions, either at regular intervals or when key project milestones or event triggers signal the need for re-evaluation. An event trigger might be a competitor action or an unexpected project outcome. Exercising options. Continuous updating and review provide the basis for management decisions to exercise, defer, or abandon identified real options. As projects and market conditions evolve, prior assumptions and expectations may need to be revised in response to updated information and these decisions will change. Furthermore, because options often have limited windows of opportunity due to competitive actions or other shifts in the environment, timing is critical. An option exercised too late may have little or no value. These three activities have a great resemblance with the periodical actions of the TRM process.
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The time aspect of a Roadmap is particularly valuable to the Real Options process, because one of the important questions to ask, according to Hamilton [36], is: At what points in time (or in the evolution of the project) might we be able to alter the timing of revenues, costs, and other outcomes? This idea strongly corresponds with the decision nodes seen in the Technology Roadmap. As shown in Figure 24, real options are generated at a high level, for instance through investing in technology development or through forming alliances for developing technologies. Then, the real options cycle of Figure 23 is performed in that decision box of the TAO model, resulting in exercising, abandoning, or postponing the option. The duration of this cycle varies in every TAO level, resembling very much the knowledge cycles defined in chapter 4. The moment of exercising these options corresponds with the moment a decision is going down one level in the TAO-model, thus when the decision time horizon decreases. At a lower level the exercised option in turn creates one or more options for that decision box. Naturally, these lower level options can only be within the scope of the higher-level options, since these provide the lower level options. This idea is also supported by the theory on the TAO-model, which says the upper echelons provide the boundary conditions for the lower ones. [28]
Science Bus devel. Users
create value recognize realize

Technology

Vision

Proc. of use

Potential fs

Concepts

Needed fs
Uncertainty /Risk

Engineering

Product

Value perc
Invested Value

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Figure 24: Real Options in the TAO-model This process of creating and exercising options goes on and on until the bottom level is reached. This is the operational level, meaning that the options can only be exercised. Because time is now, no new options can be created, nor can the decision be postponed. Besides exercising the option, the only thing that can be done is abandoning the option. This means, however, that the company gives up producing,
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distributing or selling the product/service at the last moment, which can obviously be very costly. This brings us to the essence of the value of real options, which is the core of the value created by Co-operative Technology Roadmapping. Any option to be flexible is valuable, and the greater the uncertainty the more valuable the option becomes. (See arrow in Figure 24) Also, the longer the life of the option, or the higher the risk of the underlying asset, the more valuable is the option on that asset. [38] However, the later the stage of the option, the more money is invested in it. For deciding to exercise an option is similar to deciding to invest in the further creation of options. So in the last stage before getting operational the option has reached its maximum invested value, which were necessary to provide that option in that place. It seems that having only one option at the last decision moment is economically the best solution. If, however, for some reason (e.g. political), the option has to be abandoned, no income will be generated obviously having disastrous consequences for the company. So the more options available the more flexible the company can be in bringing a product to market. On the other hand, having (and therefore creating) an enormous amount of options is not perfect either. For keeping all options open until the last moment will cost a great deal of money. Although the chance of having a successful option is significantly high, abandoning all the other options implies throwing away all the money invested in them. The product has to be very successful to compensate this. In my opinion, Co-operative Technology Roadmapping can bring the solution to this dilemma of few options at low cost versus many options at high cost. First of all, through co-operation many more options can be generated for the company than is possible individually. Secondly, through shared investments this variety in options can be created at relatively low cost. In the third place, placing these options in a Technology Roadmap can provide the vision for identifying the best options at an early stage. The best options are the ones that can provide the most and best sequential options. The Roadmapping process evaluates and updates the options, facilitating the decision to exercise, alter, postpone or abandon them. This Technology Roadmapping argument is more about the quality of the options, and also about the timing of exercising the options. Concluding, Co-operative Technology Roadmapping will provide sufficient high quality options at the right time and at low cost. The fact that these options are shared with the allied companies does not necessarily mean the outcomes of the options have to be shared too. Moreover, sharing the options has the benefit that when one option out of a created set is chosen, the other options, disregarded by one company still can be of use for the other. In that way effectiveness is increased.
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5.3
Ways and risks of co-operative Technology Roadmapping
So, co-operative TRM can create value, but can it be implemented? After having described the relevance of co-operative Technology Roadmapping in the previous paragraph, now the question under what conditions co-operative roadmapping could be introduced best, in theory. Furthermore, what the structure and the risks of co-operative TRM could be is briefly described. 5.3.1 Introducing co-operative Technology Roadmapping The concept of Technology Roadmapping as a technology management tool is only starting to get global attention and has not become commonplace in all industry sectors. Let alone the sharing of this sensitive process. Before practicing on a regular basis this way of technology management in collaboration with other companies, it has to be successfully introduced. So there are a few conditions that are best for initiating it. And it depends on which form of co-operation, sequential or parallel, what these starting conditions are. To start with sequential co-operation, first of all, for two companies in the same supply chain wanting to start co-operative TRM there has to be a desire to collaborate at operational level. This is because the products of the suppliers operations are to be used as a basis in the operational activities of the manufacturer. In fact, before the actual shared roadmap can be created there has to exist a form of communication and interaction at higher levels like on product development or even technology development. The existence of a technological alliance would be perfect. Secondly, a company introducing TRM individually will have to put a lot of effort in it. Issues like management commitment and cultural change have to be generated for success in the TRM process. So if one of the co-operating companies already has experience in TRM, this would certainly smoothen the start-up. It is likely that the collaborating companies learn from each other, and also the knowledge on Technology Roadmapping can be transferred from one company to the other. Even more favourable would be that both companies already have their own TRM, nevertheless Roadmaps are always customized to the company so when they differ too much they will have to be aligned in structure. For parallel co-operation on TRM there does not need to be a desire to collaborate at operational level. In fact, it is very unlikely for parallel companies, like competitors, to have this desire. Because competing companies have conflicting goals with respect to their market positions instead of a shared goal like in the sequential alliance, there is a need for an impartial entity to guide the common needs in the precompetitive phase. The involvement of industry associations, universities or other institutes will provide better conditions for starting-up the horizontal alliance. Like with sequential co-operation, here it is very much desirable if one of the companies has TRM experience.
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5.3.2 Structure of the co-operative roadmap(ping process) Having a shared roadmap between two or more firms implies these firms to have an individual roadmap as well. Just like a hierarchy of roadmaps for science, technology, product and some combination of these becomes increasingly evident in the literature [39], one can imagine a form of hierarchy of the individual and co-operative roadmaps. The individual roadmap needs to fit into the co-operative roadmap, meaning that the format needs to coincide, for instance for the time intervals. It also provides input to the cooperative Technology Roadmap, whereby the nature and the extent of the information is chosen by the individual companies. The other way around, the co-operative roadmap needs to provide input for the individual roadmaps. Information on the available resources and their corresponding options is transferred to the companies Technology Roadmap. This exchange of information is visualized in Figures 25 and 26. Not only the roadmap, but obviously also the process has to be shared. The roadmap creation process will resemble the process of single companies where different business units are participating, like defined in chapter 1 for different methods. The cross-functional relations in an individual roadmapping process are resembled by the inter-organizational relations of the co-operative roadmapping process. First, all stakeholders will express their needs and expectations of the roadmap. Then all visions on the top-layer of the roadmap, e.g. market, will be exchanged, etcetera. This will go on until a shared roadmap is created and after that the process will have to be continued in an iterative manner.
Co-operative TRM
TRM 1
TRM 2
Figure 25: Information exchange in sequential co-operative TRM
Co-operative TRM
TRM 2 TRM 1
Figure 26: Information exchange in parallel co-operative TRM Because the way of performing co-operative TRM is not the subject of this survey, and because it will depend on the participating companies, it wont be explained here any further. However, an important
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part, that needs to be mentioned, is the coordination of resource commitment, because the shared resources are the enabling the generation of various options. Therefore, in the co-operative roadmap, the technology/resource layer defines which resource or technology will be provided by which company. Finally, the execution of the plans made in a co-operative roadmap means really sharing and combining resources. This process of collaboration can be visualized like done in Figures 16 and 17 in paragraph 4.3. 5.3.3 Potential risks and problems Like to the formation of alliances and co-operation in general there are negative aspects to be considered when introducing co-operative Technology Roadmapping. So most of the risks mentioned in chapter 3 are also applicable to co-operative TRM. Hkansson suggests that collaborative relationships generally evolve organically. They originate when a number of factors happen to coincide in an appropriate manner. It may then be interesting to ask what happens if a company starts doing more to plan its relationships? Can one in fact plan them? The answer is by no means necessarily affirmative. However, a company can obviously improve its own character as a partner in collaborative projects. Those responsible can raise their own awareness, they can learn to pick up signals from the other party, extend their interest in the other parties development, improve their handling of co-operation, and so on. Nonetheless, it seems that given the character of collaborative relationships, a planning model of an over-simple or rigid kind may well do more harm than good. [9] This point of view does not support co-operative TRM, however, a roadmap may be a simple model but is not supposed to be rigid. And it can facilitate the issues mentioned for a company improving its own character. Next to general problems, for sequential and parallel relations different problems can be considered for cooperative Technology Roadmapping. Sequential co-operative TRM The barriers to sequential co-operation in Technology Roadmapping are about the same as the barriers to supplier integration in new product development. Table 1 in chapter 3 presents these barriers and especially the strategic barriers to the left also hold for co-operative TRM. Some of the operational barriers do not apply to co-operative TRM; they may even be solved by it, like the ones stated under Cultural Alignment. Also, the co-operative TRM process can enhance the Integrated Supply Chain Process and Program/Project goal alignment. In sharing roadmaps, it must be recognized that supplier involvement in new product development can have the following negative effects on technology risk/uncertainty [25]:
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Involvement with a supplier may lock the buying company in to the supplier and its technologies. This makes initial selection of the supplier a more critical issue, as the buying company needs to anticipate whether the supplier will remain a technology leader.
A supplier with inside track may not have as much incentive to innovate, slowing the pace of technological advancement. The buying company must find a way to make sure it is getting the suppliers best efforts.
Parallel co-operative TRM Companies that are competing at operational level, so in providing value to the market, will have to make a lot of effort to trust the competitor in collaborating at technology level. This can be very hard as companies are concerned with the potential unplanned loss of knowledge through coalitions. [24] Some of the executives interviewed for the article of Nueno and Oosterveld were concerned by the different speeds and types of learning experienced by different members of the coalition and the possibility of opening the eyes competitors about opportunities. They are afraid of new competitors as a result of learning, which could be attributed to technological alliances. This trust-issue is obviously very sensitive to competitors; therefore, the extent to which the competitors share their information in a Technology Roadmap should carefully be determined.
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SITUATIONS IN PRACTICE
In chapter 5 a theoretical approach is given to co-operative Technology Roadmapping. The theory provided there is deducted from the prior chapters on TRM, on co-operation and on the TAO-model. This chapter will show some examples out of practice on co-operative Technology Roadmapping, for both sequential and parallel collaborations. In the last paragraph conclusions will be draw about what is happening in practice.
6.1
Examples of sequential co-operation in TRM
6.1.1 Motorola The pioneer in Technology Roadmapping is also one of the first to have created a process for co-operative roadmapping. Motorola refers to Integration Roadmapping [18], which is the next step after having broadly incorporated TRM in their own company and the process for doing so is also called Fusion. The driver for this next step is Rockefellers quotation: Next to knowing all about your own business, the best thing to know about is the other fellows business. The integration involves intra-sector roadmap sharing or inter-sector roadmap collaboration (internal roadmaps), and involves cross-customer and supplier roadmaps (external roadmaps). The success can be attributed to supply management like the story below describes. External roadmap injection can be modeled as in Figure 27. This model shows that different business units at the left are working together to form various internal roadmaps. The internal roadmaps and the external roadmaps of suppliers, partners, customers and the industry are combined and composite roadmaps are created. By mixing the external and internal roadmaps in a so-called Fusion, collaborative roadmaps are created, which in turn have their influence on the internal roadmaps.
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Figure 27: External Roadmap Injection [18] When working together with customers and suppliers on roadmaps, many things can be learned [18]. Customer Roadmaps: What can we learn about our customers? Impact of changes to their business model. Who are they dependent on? Do we know their strategic intent? Internal problems that can be fixed. Competitor strengths, weaknesses, strategies. Market size and share information. Who is growing and how? Who are they partnering with? Identify an upcoming industry decline or growth spurt Spot a movement in your competitors market position Alerts to upcoming technology shifts Share seemingly irrelevant information about products and customers that allow Motorola to: Benchmark your business from a resource prioritization perspective Establish a reference point for what stage of product development a competitor is in Make you aware of problems a competitor may be having, or changes in a strategy
What can we learn from customers?
Supplier Roadmaps: What can we learn about our suppliers?
What can we learn from our suppliers?
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Figure 28: Roadmap Integration Process [18] Motorola sees the Roadmap Integration Process as shown in Figure 28. And Motorolas basic idea behind the creation of collaborative roadmaps is: Unless we listen to what our suppliers and customers have to say, we will never understand the possibilities of tomorrow. The success story was published in Purchasing magazine of which a summary is given below [40]: Metty is overseeing sweeping changes in Motorolas PCS (Personal Communications Sector) supply chain management organization. These changes are focused on reducing Motorolas product portfolio and complexity, lowering cost, boosting profitability and improving cycle time. To implement these changes Motorolas PCS division is using more purchasing engineers in new product development, outsourcing more products to original design manufacturers (ODM) and reducing its supplier base by two thirds. We want to get more of our resources up front in our strategic sourcing so we can influence design and work with suppliers on Technology Roadmaps, says Metty, Corporate Vice President and Director of Motorolas PCS global supply chain organization. We need to be more competitive and supply chain management can do that for us. What struck Metty when she joined the company was the unbelievable complexity and lack of industry standardization in the parts and material that Motorola PCS purchased. At the time cell phone growth was explosive and appeared to have no end, says Metty. Growth doubled each year. There wasnt a lot of concern about re-using components or trying to use industry standard components. You could afford to start from scratch every time you designed a new phone. By re-using components, Metty means designing the same type of parts displays, batteries, capacitors, resistors, flash memory in multiple phone models rather than have different part numbers or custom parts. With demand easing, cell phone manufacturers have to lower their cost of manufacturing. Reducing cost by using industry standard parts and re-using components in multiple models to gain leverage with suppliers has become important for Motorola because it helps improve profitability. Motorola also decided to reduce its product portfolio as a way of reducing cost and complexity. Metty says there is an enormous effort to redesign its product portfolio around the concept of re-using components across the entire portfolio. Besides improving purchasing leverage with suppliers, the strategy will also result in greater flexibility in responding to customers. Having fewer phones and using similar components in the models also means low inventory and lower cost.
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Technology is foremost factor when deciding which suppliers to keep. Part of the job of the strategic sourcing organization is to make sure Motorola is aligned with the suppliers that can provide early access to the latest technology that Motorola needs for its cellular phones such as color displays. Therefore, the next part of Motorolas supplier strategy is to sign long-term agreements with the suppliers it keeps. The longer-term agreements basically state that we will continue to do business with the supplier as long as the supplier provides cost competitive technology, says Metty. Then we can share long-term roadmaps with them on technology and have them come inside and design with us. Involving suppliers in design is not new at Motorola, but having them involved very early in new product development is. In the past we would bring suppliers in early and say heres our spec and we would say we did early supplier involvement because we brought them in nine months before production and gave them our spec. Using suppliers early in design will improve design cycle time, lower cost and ultimately result in better products because the supplier knows more about the product he manufactures than Motorola. 6.1.2 Philips Another company that introduced Product-Technology Roadmapping early in some of its decision-making processes is Philips. Philips also has ideas about supplier involvement in their roadmapping. A roadmap may belong to different organizational units. Philips television display tubes, for example, are made by Philips Components but used in television sets developed and manufactured by the separately managed Philips Television group. A roadmap for television display tubes requires co-operation between both groups, because its functionality in terms of customer benefits (daylight view, quick start, power consumption) is determined by the user of the television set. This example also demonstrates how roadmapping supports strategic supplier relationships. Differences in background, thinking and ways of working among different departments (marketing, development, manufacturing, etc.) need to be reconciled. A degree of trust needs to be built up and nurtured by management to ensure both a successful start and completion. Lack of openness may block the whole process, as occurred in a situation in which management prohibited the circulation of a set of draft roadmaps showing weak product and technology areas. [41] At the Technology Roadmap Workshop in 1998 Philips presented its Roadmap Creation Process [39]. In it was explained that in the perspective of Philips, the use of roadmaps is not necessarily limited to a single organization. It is also beneficial if long term co-operation with key suppliers or co-producers can be based on the use of common roadmaps. Three reasons for enhancing the supplier relationship through product-technology roadmaps were stated by Philips: Creating a long-term strategic supplier base 58
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Setting long-term common objectives for product/system development Sharing Technology and (R&D) Resources
6.1.3 Supplier Integration for Product Development This paragraph comprises six case examples about buyers and suppliers aligning objectives and Technology Roadmaps discussed by Monczka [25]. The cases obviously are mostly related to improving the new product development. The companies mentioned are anonymous; therefore each story has its distinct title. The Standard Bearer One of the high-tech companies we examined shares its Technology Roadmaps with the supplier of one of its critical product systems, which is an industry-standard item. Through discussions and long-term planning with the suppliers designers, the company has been able to influence the features included in the industry standard. By driving the leading edge of standard, the company is best able to plan its own product platforms and is often first to market with new product introductions a key competitive advantage in this industry. It Started with a Hunch At one company, one of the best supplier integration examples was a relationship that was initiated by an engineer in the buying company. The engineer thought he saw synergies in the capabilities of his company and a supplier and began talking informally with a counterpart in the supplier company. This led to a highlevel meeting between executives from the two companies. At this meeting, supplier executives hared technology plans and roadmaps and identified common research streams in a very broad category of materials. An executive consensus was reached regarding what the buying company wanted to work on next to support the next product or product family. A list of the top four projects was targeted directly to future product needs, both short-term and long-term. This relationship has now become institutionalized, with the two companies meeting periodically to share their roadmaps and update the projects list. Process Alliance One of the companies we studied has achieved significant cost savings and manufacturing process improvements through a strategic alliance relationship with a supplier of a key element in its process technology. The company and its supplier hold periodic high-level meetings at which they discuss their respective technology plans. The buying company provides information about anticipated developments in its product lines and their possible implications for its process technology requirements. The supplier provides information about new process technology developments it is pursuing. This level of information sharing requires a high level of initial trust between the parties as well as continuous strengthening of the trust through performance over time. The buying company may alter its product plans based on information about process technology developments, and the supplier may adjust its development efforts to focus on developments that are a 59
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higher priority to the buying company. This approach helps to keep the companies better aligned, and both companies benefit. The buying company has greater assurance that needed process technology will be available, and the supplier has greater assurance that there will be a market for the technologies it is developing. Establish Trust Upfront One computer company shares Technology Roadmaps with specific suppliers, based on nondisclosure agreements that are part of a broad general agreement with the supplier. Suppliers also share their Technology Roadmaps. Both parties may change their designs based on future roadmap directions. A chip supplier may include specific features for unique customers, in what may become a future standard chip design. Only trusted suppliers who currently supply significant volumes are provided with general information on future products. Hitting the Sweet Spot A different type of roadmap sharing is done by one electronics company whose managers are unsure where needed technology developments are most likely to occur. In select cases, internal development groups will share early information about future Technology Roadmaps with just about any global supplier who will listen in an attempt to ensure that the required technology will eventually be available. For instance, in one commodity, the manager has established a technology map with performance curves, and expected targets by date. The target area is essentially the sweet spot, which is shown to suppliers. Suppliers are told that if they cant hit the sweet spot by target date, they wont get the business. This concept is somewhat different than conventional early involvement. Because of the volatility of this industry, the company does not have the time or the need to form alliances and go through an early involvement program. Rather, the strategy is to make sure the technology is available by openly sharing Technology Roadmaps with any qualified supplier who will listen and moving business around to take advantage of performance at the target price. Sharing Roadmaps In one company studied, the sharing of Technology Roadmaps often strongly influenced the type of buyer/supplier interactions that resulted in the new product development process. The actual process of sharing information occurred in a variety of forms, which in some cases influenced the type of relationship that emerged: Two-way information sharing between buyer and seller One way sharing (buyer to many suppliers) Supplier councils tied to new product development Technology fairs
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This Japanese company has formed an industry group where customers, manufacturers, and suppliers meet every quarter to review proposals and share opinions on emerging product standards. Over 250 companies are involved in the effort. Two acceptable standards have been adopted largely through these efforts. 6.1.4 AT&T Until 1992 AT&T did not pay much attention to purchasing. But the market changed. The multinational with a purchasing volume of seventeen billion dollars suddenly had to look after expenses. AT&T introduced a centralized purchasing department, but it only had influence on a limited part of the total purchases. Just a coordinated purchasing department for getting leverage does not achieve the highest cost reductions. One of the biggest challenges for purchasing is getting involved at the right moment with the decision to be made in the company. The earlier the purchaser is involved with de development of a new product, the more influence he has to the product costs regarding the used technology and the material choice. Without the involvement of the purchaser, opportunities are missed on the total cost of ownership. According to Ekas there exist four levels of supplier relationship sophistication and the higher this level the more impact is has on the total cost of ownership. The third level of sophistication comprises global approach for global suppliers, platform products, standardization of material through design, trust relationship between R&D and early supplier involvement, and application of Technology Roadmaps for materials and products. In this phase arise the make-or-buy decisions. The fourth level is the level of true supplier relationships, risk sharing and forward pricing, technological reliance on certain suppliers, application of Technology Roadmaps for platforms and services, and sharing roadmaps with certain suppliers. Traditionally, designers would rather do everything themselves. The not-invented-here syndrome occurs easily in a development department. Research programs have to be directed more. You have to look for tools to give direction to the development process and convince the developers they have to change. At AT&T Technology Roadmaps are used to steer such decisions. The Technology Roadmap consists of a pyramid and a time plane. The pyramid divides the product in material, components, platforms and products. A platform is a part of the product that is similar for more products. The goal is to create as many platforms as possible. The second component is time. The Technology Roadmap has for instance a time horizon of five years. Ekas: The changes in these markets occur very rapidly en we map them in a roadmap. We forecast what a product looks like in a couple of years. That way we can present our vision of the future on one sheet of
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paper. With this we work towards platforms, handle make-or-buy decisions and determine the desired relations with the supplier. [31]
6.2
Examples of parallel co-operation in TRM
6.2.1 SIA The literature reveals that the semiconductor industry has embraced technology roadmapping more than any other industry. The SIA's Technology Roadmap for Semiconductors (TRS), widely acclaimed as the industry roadmap "model," has been the basis for other industry roadmapping efforts. At the same time, most individual semiconductor firms utilize technology and / or product roadmaps for many reasons, not the least of which is communication of vital strategic planning information to the broader organizational network of suppliers, users, even competitors. Broad acceptance of roadmapping practices may help explain the characteristically different patterns for innovation, strategy, and policy within the semiconductor industry over time. SIA's TRS has been referred to as a contemporary model of consensus forging on industry-wide R&D and other strategic resource requirements. [7] The 1997 Roadmap was the culmination of a collaborative two-year process involving more than 600 scientists and engineers from industry, government, and universities. Collectively, these participants succeeded in establishing a set of technological innovation targets that will extend the historical pace of technological change according to Moore's Law through the year 2012 (See Appendix D). In sum, the Roadmap is an articulated vision of the near future (15 years) of technological innovation requirements in semiconductors. Equipped with such a tool, the industry has a clearer picture of where it is headed and can work in concert in bringing about this vision.
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Figure 29: Future Lithography Technology Alternatives [7] For example, the introduction section of the 1997 TRS provides a conceptual illustration showing the spectrum of technology covered by the first four generations of the semiconductor roadmap using lithography as an example. Figure 29 illustrates uncertainties in the research and development options or approaches to be pursued in lithography technology. As seen in this illustration, there are at least five alternative lithography technologies that will help achieve future semiconductor process requirements. This figure embodies the primary purpose of the SIA Roadmap: to identify future technology needs and requirements. Secondarily, the roadmap offers alternative means of achieving these needs. [7] Furthermore, the relative R&D investment curve indicates that the level of investment is rising when evolving from research towards narrowing options for production, which is also stated in paragraph 4.2.3. The SIA Roadmap is now in a publication cycle every two years. The association was formed with the idea of presenting to the federal government a unified image of the state of the industry and soliciting its help. Member companies cooperate pre-competitively in key areas of semiconductor technology, sharing expenses and risk. Their common aim is to accelerate development of the advanced manufacturing technologies that will be needed to build tomorrow's most powerful semiconductors. [42] 6.2.2 IMTR This example is about the Integrated Manufacturing Technology Roadmapping (IMTR) initiative. [43] The objective of IMTR is to develop a manufacturing R&D agenda that addresses the diverse needs of industry and government and cuts across all major manufacturing sectors. The underlying purpose of IMTR is to:
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Define important technology goals that affect all manufacturing sectors. Provide focus for concentrated efforts to achieve the goals. Promote collaborative R&D in support of the critical tasks. Move the developments from the laboratory to industrial use.
Using a series of workshops and reviews involving more than 400 individuals from across the nations manufacturing community, the IMTR team has completed its baseline roadmaps. Each IMTR roadmap provides an assessment of the current state of art and practice in the technology area, a vision of the future state, and a series of goals, requirements, and tasks to achieve that vision. Each document includes a series of milestone schedules that lay out a high-level, time-phased plan for accomplishing the defined scopes of effort. These plans represent an important first step in the initiation of a broad-based effort by government and industry to identify, develop, and deliver advances technologies that will enable manufacturers to operate with unprecedented speed, quality, precision, efficiency, responsiveness, and cost-effectiveness. The Integrated Manufacturing Technology Initiative (IMTI) team has applied a structured methodology (see Figure 30) to develop technology roadmaps that identify the grand challenges and define specific goals and requirements to meet the defined needs of the national manufacturing infrastructure. The first step was to conduct a broad-based survey of the national manufacturing community for each technology area. This provided input for the IMTI participants to start mapping near- and long-term needs, and to identify solution approaches to meet those needs. The team then conducted a focused workshop for each technology area to define time-based goals, requirements, and tasks for R&D to address the high-priority, cross cutting needs of the nations manufacturers and manufacturing infrastructure. Based on the survey and workshop results, the roadmap documents were developed and distributed to a broad cross section of the manufacturing community for review. All of the roadmaps are maintained on the IMTI Web site and will be updated as progress is made against the plan.
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Figure 30: IMTR Roadmapping Methodology. The IMTI roadmaps are comprehensive. Each of the four technology areas Information Systems, Modeling & Simulation, Processes & Equipment, and Enterprise Integration is broken down into a series of tiered "functional elements" that encompass all of the functions of a manufacturing enterprise in that domain. For every functional element, the IMTI roadmaps characterize the current state, define the desired future vision, identify the goals required to achieve the vision, and define requirements and tasks to achieve each goal. The goals, requirements, and tasks were then time-phased to create baseline milestone plans for each technology area. The IMTI roadmaps define visions and supporting goals that can be used to build programs and deliver successes for companies and organizations. Viewed collectively, they illuminate a total vision for change that can be a roadmap to success in the next century. To provide some insight into this wealth of detail, each of the IMTI roadmaps was sifted to identify 10 critical capabilities so-called "Nuggets" as focal points for R&D priority. Each Nugget was then analyzed to identify specific IMTI goals that must be accomplished to support the Nugget. These sets of goals were then integrated into high-level "Nugget roadmaps" to provide a national planning framework for crosscutting R&D initiatives that will provide the greatest benefits to industry as a whole. These benefits will only result from wise, business-driven R&D that addresses the highest-priority needs of continuous process industries.
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6.2.3 MATI Even when companies do not have a common interest or goal for creating value for the customers, it is possible that companies co-operate in Technology Roadmapping. Improving technology planning skills in itself is the common goal of the participating companies in MATI [44]. Of these skills, Roadmapping is mentioned first as a process on which greater insight is to be acquired. MATI (the Management of Accelerated Technology Insertion) began in 1996 with two small groups of firms working under the auspices of the National Center for Manufacturing Sciences (NCMS). These companies had recognized that the new competitive environment demanded customer and context responsive innovation that was strategic, rapid, timely and integrated across both the business and technology value chains. Dissatisfied with what was generally available in the technology management field to guide practice and tools improvement, as manifest in the literature and from both consultants and academia, the two small groups merged to tackle the challenge. Starting in 1997, they formed what is now known as MATI I, a five firm consortium consisting of General Motors, Kodak, Lucent, Rockwell and Westinghouse (subsequently acquired by Siemens), working in collaboration with faculty, staff and student support drawn from the Kellogg Graduate School of Management at Northwestern University. Established over the January through August period, the MATI II consortium was launched in September 1999 with 16 (and growing) best-in-class member firms. MATI II is a self-financed not-for-profit consortium of firms working in collaboration with selected university, particularly Kellogg School, personnel and a similar affiliated consortium based out of the University of Cambridge in the UK. Dedicated to the identification, review, refinement and integration of technology management tools for practical business application, it is managed by its own board of directors, one from each member firm. Through active, creative and open sharing of experiences, issues, ideas and insights among its members, MATI has already leapt into a leadership position in the technology management field, in general and particularly in the area of roadmapping and decision management. MATI II membership continues to grow but currently consists of: Baxter, The Coca-Cola Company, DSM Desotech, Ford, General Motors, IBD Inc., Kraft, Kellogg, Lucent, McDonalds, Motorola, Redex Packaging, Roche, Rockwell, Siemens-Westinghouse and United Technologies. In addition, an alliance has been developed with a similar consortium at Cambridge. This consortium includes: ABB, BAE Systems, BG Technology, Domino Printing Sciences, Federal Mogul, Hoogovens, Lucent, Marconi, Philips, Rolls Royce Aero, The Post Office, Unilever and Com Dev. To facilitate in-depth exploration of issues and practices and encourage interaction among MATI member companies, task forces and interest groups are formed. These may have links to organizations outside of
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MATI. Three ongoing task forces are currently active and are the primary focus of MATI II: roadmapping, technology transfer and strategy/portfolio management. [44] The companies participating in MATI II are operating in very different industries, however they share an interest in effective technology management. Therefore, the discussions will probably be at a strategic level and maybe it is their difference in market applications that makes them willing to share their experiences and knowledge. In this example the goal for co-operation in Technology Roadmapping is improving the Technology Roadmapping skills. 6.2.4 Vision2020 The Chemical Industry Vision2020 Technology Partnership (Vision2020 [45]) is an industry-led partnership/process among public and private sector stakeholders in the chemical and allied industries. Stakeholders identify common problems and leverage technical expertise and financial resources to develop the critical enabling technologies of the future. Through collaborative efforts among industry, national laboratories, and academia, the Vision2020 Partnership fosters industry, national laboratories, and academia; the Vision2020 Partnership fosters step-change technology innovation, which may be beyond the risk threshold of individual companies. Vision2020 is helping to maintain U.S. leadership as the world's largest chemical producer. The Vision2020 process was launched in 1996. Company representatives created a vision for the future chemical industry and identified key technical challenges to realizing that vision. Detailed roadmaps have been developed to outline research needs addressing many of these challenges. The roadmaps are used to guide academic and government funding and research in directions that will benefit the industry. An ongoing process reviews the vision and updates priorities. The key benefits of Vision2020 are: Enhance Competitiveness, Profitability and Proprietary Development. Vision2020 focuses resources on pre-competitive technology priorities, thereby providing a critical mass of funds and technical resources to solve common technical problems. Companies in the business of chemistry become more competitive by building on technical synergies and accelerating private innovation and commercialization. Achieve Sustainable Growth. Vision2020 addresses future societal and market needs such as biobased feed stocks and environmentally sound processing, which may be beyond the R&D horizon of individual companies. The public image of the business of chemistry is enhanced by proactively developing technology for long-term sustainability.
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Achieve More Efficient Investment of Public Funds. The technology roadmaps of Vision2020 help align public funding with industry priorities and coordinate R&D among government agencies, thereby strengthening the effectiveness of government programs. Facilitate Collaboration to Leverage Resources. The Vision2020 process provides a legitimate forum for company experts to come together and discuss common needs. These interactions can produce specific, directed collaborative efforts, shared financial and technical resources, and access to specialized capabilities. Through Vision2020, chemical companies are: Strengthening linkages with customers and suppliers Understanding long-term technology needs and trends Forming collaborative technology relationships and teams to Respond to government solicitations Reducing risks and costs of complex multidisciplinary R&D Gaining access to top scientific expertise and facilities Leveraging and redirecting public R&D investments Promoting sustainable growth Enhancing public perception of the chemical industry
As its first order of business at the September meeting, the steering committee sought to identify the precompetitive areas of R&D in which it would make sense for chemical companies to work together. Collectively, the 12 companies that constitute Vision2020's charter membership account for over $90 billion in annual sales. The member companies are Praxair, Air Products and Chemicals, BP, Cargill, Ciba Specialty, Degussa, Dow Chemical, Dow Corning, Dupont, General Electric, Millennium, and Rohm and Haas. While dues paying companies are entitled to a seat on the steering committee, the Vision2020 Partnership is open to all U.S. chemical companies.
6.3
Conclusions out of practice
What can we conclude from these practical examples of co-operative Technology Roadmapping? Again this will be discussed separately for sequential and about parallel relations. 6.3.1 Sequential relationships In the first place, about the motivation for the companies can be concluded that alignment with the suppliers strategy or long-term common objectives is mentioned the most in the examples. Also influencing the suppliers in their choices for design or for the creation of industry standards is one of the
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most important motivations for the companies to co-operate in TRM. In two examples, Philips and It Started with a Hunch, sharing technologies and resources was found important, referring to this as synergies and common research streams. Furthermore, Motorola is really focusing on learning from and about the suppliers, thereby increasing their own knowledge and ability to identify upcoming market and technology developments. Interestingly, AT&T uses the shared Technology Roadmaps to convince their own R&D department to focus on certain projects and let the suppliers handle the other developments. They also discuss the usefulness of the timeline to forecast products, platform and the related make-or-buy decisions, along with the consequences for supplier relationships. Secondly, the way of co-operation was not in every example the same. Philips is talking about collaboration with the suppliers and Motorola even has established a formal collaborative process to create collaborative roadmaps. However, the success story of Motorola gives to understand that the approach is more focusing on sharing their objectives to suppliers for them to comply. Many of the other examples are mainly about sharing the roadmaps between supplier and customer, rather than collectively creating a roadmap. About the business level at which the co-operation takes place it can be concluded that the supplier integration examples all have their focus on product development except the one titled Process Alliance. Philips says co-operation on technology level is important and Motorola puts the emphasis on product development and design, but also indicates a need for early access to the latest technologies. The most important problem or challenge to co-operative Technology Roadmapping mentioned by some of the companies is the need for mutual trust and the potential lack of openness. 6.3.2 Parallel relationships The first thing that attracts attention when viewing the examples of parallel co-operation in Technology Roadmapping is that these are in fact about, or very close to, Industry Roadmaps. In all of them exists a steering committee or a coordinating association, often with a linkage to universities or government organizations. Especially SIA and Vision2020, as industry associations, are also focusing on involving the suppliers of those industries in the technology planning process, thus, in fact, co-operating sequentially. The motivation for co-operating generally is the sharing of resources, of expenses and of risks. However, MATI has another purpose, it focuses on stimulating knowledge transfer and the sharing of experiences. The participating companies in MATI want to learn from each other to improve their skills in technology management, especially in Technology Roadmapping. The two purposes of the SIA Roadmap are to identify future technology needs and requirements, and to offer alternative means of achieving these needs, like the multiple paths towards the same achievement in Figure 29 illustrate.
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An important goal in all these industry roadmapping activities is to provide a clear view on what the industry is planning to do research on. The purpose is to present a watertight story to get funding from the government or other institutes. The ways activities are practiced are, next to sharing information, collaborating in an extensive form. The companies are searching for a consensus about the goals to be achieved and a shared vision how to achieve them. And, like already mentioned, there always exists an (independent) controlling committee. All collaborations take place at a pre-competitive level, focusing on research and technology developments, and for MATI on technology management. Only IMTI has the desire to move the developments from the laboratory to industrial use, although it is not clear at what stage of commercialization the co-operation between the competitors ceases to exist. The mere fact that co-operation on Technology Roadmapping is happening in practice, proves the need for it. In all cases, the benefits of such collaborations are outnumbering the risks. Although these examples might not provide an objective view on the advantages and disadvantages, at this point we can conclude that, in practice, co-operation on Technology Roadmapping creates value for the companies involved. With the situations in practice structured and this conclusion in mind, the next concluding chapter will present an evaluation of the theory generated in chapter 5 and will give the final answer to the key question.
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CONCLUSION
In this concluding chapter the theoretical approach described in chapter 5 is evaluated with the situations in practice, discussed in the previous chapter. The first question to answer in this chapter is: What similarities and what differences can be recognized between the assumptions or ideas creating in theory and the real-life situations? In the second paragraph the conclusions of this literature survey are presented, providing the basis to answer the key question. Finally, a set of recommendations is given of subjects that are interesting to do further research on.
7.1
Evaluation of theory and practice
The ideas about co-operative Technology Roadmapping formulated in chapter 5 are just theory and do not have much value when none of them is recognized in real-life. Therefore, this theory is compared to the existing situations mentioned in chapter 6. To facilitate this evaluation of theory and practice, a summary is given of the motivation for co-operative TRM, the way and level of co-operating, and the problems to do so. A summary of the motivation in theory for TRM in co-operative relationships is given below.
Motivation in theory: Access to the partners competences, knowledge, technologies and resources Managing/controlling the firms respective resources Identifying gaps in the total of technological resources Long-term alignment of technology strategies Enhancing trust between supplier and customer Communicating with supplier Influencing the suppliers investment decisions Monitoring the supply market for emerging technologies Risk/uncertainty reduction Creation of industry standards Early definition and explication of the direction the alliance is going Transparency of the participants motives Facilitating the transition from R&D to industrial exploitation Creating innovation evaluation routine Definition of multiple paths and positioning of the individual partners
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In the situations in practice the following kinds of motivation were recognized.
Motivation in practice: Alignment with suppliers strategy/long-term objectives Influencing suppliers in making choices for design or creating industry standards Sharing technologies or resources Learning from and about suppliers Identifying upcoming marketing & technology developments and needs Offering alternative paths to achieve those needs Possibility to forecast along the time-line Sharing expenses or risks Stimulating knowledge transfer Creating leverage on (government) funding
Many of the issues stated in theory to probably motivate co-operative Technology Roadmapping are also recognized in the examples of chapter 6. Alignment, influencing, sharing resources and risks, and identifying developments or gaps are the most important congruencies. The most important inconsistency between theory and practice is the assumed trust enhancement, which is identified as a problem in the practical situations. Transparency of the motives, and facilitating the transition from R&D to industrial exploitation are not identified as motives in practice either. In practice, justifying funding from government or other associations is a renowned motive for co-operative TRM, but it was not expected to be so important in the theoretical approach. However, this is related to the clarity, transparency and enhanced communication that is provided by co-operative Technology Roadmapping. In the theoretical approach the value created by co-operative roadmapping is explained with the real options theory. The practice examples do not mention the benefits or the existence of real options explicitly. However, the idea of the real options value theory of co-operative Technology Roadmapping is supported implicitly. The companies speak of learning from their partners and stimulating knowledge transfer, which corresponds with creating options for future investments. In practice, risk reduction is achieved through sharing expenses, which is similar to investing in relative cheap options that can be exercised in the future by making larger investments. Also, influencing suppliers in their decisions will generate extra options and the attraction of funds means having more resources to create new options as well. Furthermore, Identifying upcoming market and technology developments is exactly the same as recognizing options. And the activity closing the real options cycle, the valuing of options, is not mentioned in the examples either, but probably the financial impact is of every potential investment is
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calculated by the companies accountants. Whether or not this calculation is done with the Discounted Cash Flow method is unknown, but this can make a significant difference for the decision-making. The way and level of co-operating are generally similar in practice as proposed in theory. When cooperative TRM is introduced there already exists a collaborative relation between the companies. Also, the initiators of a co-operative roadmap with the partner are often prominent roadmappers themselves, like Motorola and Philips, wanting to transfer this tool to their partner. Furthermore, parallel co-operative Technology Roadmapping projects are always governed by an independent entity, as expected in theory. The assumption that higher-level co-operative roadmaps partly coincide with and exchange information with the lower level company roadmaps is confirmed by Motorola. In their process the collaborative roadmaps are created out of the internal roadmaps and afterwards are fed back to the internal roadmaps. Nevertheless, the most co-operative efforts in sequential TRM comprise mere sharing of roadmaps rather than interacting to create a collectively managed Technology Roadmap. Parallel relations like in the SIA roadmap do present a collaborative Technology Roadmap creation process. Like discussed earlier, the only problem identified in practice is the lack of openness and trust between the firms. However, this is contradicted by the theoretical approach, because the trust-problem is supposed to be diminished by co-operative Technology Roadmapping. The other theoretical problems like the lock in to one specific supplier and the suppliers lack of incentive to innovate are not mentioned at all in the practice examples. In chapter 6 only a limited number of case examples are discussed and these stories might not be complete in the sense that every positive and negative aspect of co-operative TRM is discussed. This means we cannot pass judgment about the value of the theory that does not have a corresponding story in practice. We can only conclude that the parts of the theory that are confirmed by the case examples are highly plausible.
7.2
Conclusion
This paragraph comprises the conclusions of the literature survey. It will also provide the answer to the key question as formulated in the introduction. This answer is based on a couple of ideas considered true, because they are both mentioned in theory as well as identified in practice. The answer to the key question is as follows: Yes, co-operation between companies on Technology Roadmapping does create value for the companies involved.
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This answer is supported by the following conclusions of this literature survey: 1. Through co-operative TRM companies are better able to recognize the existing options in their environment. This is because in co-operative TRM: 2. Market and technology developments are identified earlier and better.
Through co-operative TRM companies are better able to create options to increase flexibility because: They learn from each other and knowledge transfer is stimulated. They do more investments through sharing expenses and attracting funds. They can influence their partners in their decision-making.
3.
Through co-operative TRM companies are better able to decide when and which options to exercise. This is thanks to: The time-line and decision nodes that bring awareness about the moment of exercising. The multiple paths, which show the presumed consequences of exercising an option.
The third step in this real options cycle, valuing, is only supported by the theoretical approach, but not explicitly in the examples of chapter 6. Therefore, the following conclusion would have been more valuable if corresponding real life stories were found: 4. Through co-operative TRM companies are better able to value the technology options. This is supported by the following statements: Using real options theory means including the value of flexibility of management. The forecasting ability provided by TRM helps accurately estimating the chances of success of the options, which are needed for the real options value calculation. However, no insight at all is given in which financial models the companies in the case examples use to value technology options. It might just as well be done by DCF as by options theory models. Throughout the entire report a distinction is made between parallel and sequential relationships of the cooperating companies, and likewise the conclusion may be divided between both. Is the answer to the key question similar for both situations? From the examples in chapter 6 can be concluded that all parallel cooperations are at a pre-competitive level, meaning that no commercialization of the developed technologies is involved in the co-operation. Information sharing is limited to top two levels in the TAO model and the application of technologies to engineering or product concepts is beyond the scope of the partnership. In the theoretical approach this matter is also mentioned with the suggestion that collaboration makes good sense for exploring numerous possibilities, but can collapse if issues of ownership of the
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intellectual property is unclear (Paragraph 4.2.3). This risk is much less for sequential co-operations, because even at operational level the objectives are aligned, namely maximizing value for the same customer at the lowest cost. Furthermore, it can be concluded that a combination of parallel and sequential co-operation in TRM is performed. For in the cases of SIA and Vision2020 competing companies form an alliance to collectively co-operate with suppliers and share Technology Roadmaps with them. Finally, the theoretical suggestion that introduction of co-operative Technology Roadmapping is facilitated when one or more of the companies have experience with TRM is affirmed in practice. For many of the companies dealt with in chapter 6 are renowned roadmappers themselves, such as Motorola and Philips.
7.3
Recommendations
While reading the literature for performing this investigation, some interesting questions came up, that did not fit into the subject of this survey. As ever, the research has to be kept within strict boundaries, not to get tangled in an everlasting quest to find the answers to every new question. Fortunately, the recommendation was invented, and writing them down somewhat eases the need for answers. In the expectation that others may be incited to do research on them, the following set of recommendations is given: The conclusions of this thesis indicate that combining Technology Roadmapping with the Real Options theory has potential for improving decision-making. Further evaluation of this combination is recommended, better yet, with the inclusion of some Scenario Planning techniques, which has relations with both approaches and may complement the two. The extent to which parallel co-operations can perform Technology Roadmapping is beyond this research, yet it makes the difference whether or not parallel co-operative TRM would work. To what stage of commercializing a technology are competitors prepared to collaborate? Related to the latter recommendation is the matter of trust. Chapter 5 indicates that success factors for trust between co-operating companies can be provided by TRM, but this is still an important subject to investigate. For companies are sharing their strategic information with their long-term partner, while on the other hand the partnership is considered as an option, which can also be suddenly abandoned. Finally, the influence of the developments in information and communication technology on the success of co-operative TRM could be explored. It is all about communicating and information sharing and this has become easier and easier in the past decade.
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APPENDIX A: THE ROAD MAP METAPHOR
Picture has been removed for Cap Gemini Ernst & Young Strategy Award 2003 submission
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APPENDIX B: ROADMAPPING PROCESS
SOURCE: [47] TOA II
APPENDIX C: REAL OPTIONS EXAMPLE

Time for new PCs [30] Here's a simple purchasing example that shows how the traditional approach concludes that a project is a no-go money-loser, but real-options methodology suggests it's worth the risk. Assume a company is planning to replace the five PCs in one department, at a cost of $1,000 each. The average revenue the computer is expected to generate is $300, $500, and $250, respectively, over the three years of its life. (A tree with the possible cash flows is shown in the chart "A Decision Tree Of PC Value".) But instead of replacing all the machines at once, the IT manager tries to better estimate the potential return by first replacing only one. The question of whether to delay or expand an investment is precisely the kind of choice that's not handled well in traditional analysis. Each year, there are two possible outcomes: an increase or a decrease in value, both equally likely. Now say that the CFO has set a hurdle rate of 12% as the expected return on all investments; any project that can't deliver at that return won't be approved by the executive. The total cash flows on the computer upgrade project are slightly more than its initial cost--$1,050 vs. an initial $1,000 investment. But considering the 12% rate of return on investments that the CFO is demanding, the discounted cash flow is negative (a deficit of $155). The project looks like a dog. The purchase is dropped (see chart "A Dog Of A Story" below). But there's another way to look at this investment. The manager is not really purchasing a computer for its own threeyear return, but as a trial to see if a complete rollout of new computers is in order. Here's where the application of realoptions analysis offers greater insight. Purchasing the single computer today gives the CIO the option to purchase the four machines 12 months from now if the returns look promising in the environment that exists then.
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How can this option be valued? Black and Scholes examined a method nearly 30 years ago for pricing financial options, and it's been much refined since then. While the technique isn't perfect, it can also be applied to physical or real assets. Let's go back to the stock-option comparison. Three things influence the price of stock options: the spread between the current price and the exercise price, the length of time for which the option is good, and the volatility of the stock in question. The current price of the asset is known, and the exercise price at which the stock can be purchased sometime in the future is also set. The greater the difference between the two, the lower the price will be, because only a great change in the market will make the stock's value climb above the exercise price and pay off for the owner. And big shifts are less likely to occur than small ones. The date at which the option expires also is a factor. The longer the option lasts, the greater the chance that the stock will overshoot the exercise price and that the owner will make a profit--so the price is higher. Don't ignore volatility Finally, the volatility of the stock price over time influences the option price. The greater the volatility, the higher the price of the option, because it's more likely the price will spike above the exercise price and the owner will be in the money. Black and Scholes consider these factors to solve the problem of pricing the option. We won't go into the mathematical details, but let's use their formula to address the computer example. The price of the "stock" in our computer replacement example is the discounted value of the cash flow one year later. The value of each computer is the discounted value of its future cash flow; in this case, it's $845. The exercise price of this option is the cost of the machines, $1,000 each. The option expires in one year. It starts to get a little complicated here, but one can find the value of the option if an assumption is made about the volatility as measured by the standard deviation. Assuming it is 40%, and the risk-free interest rate is 6%, we have the necessary information to price this alternative. Using the Black-Scholes method, the value of the alternative is $237. Therefore, the project looks like it's worth doing. It's important to know that the value of this option is driven by the volatility figure; in this case, it's only viable if the volatility is greater than 22%. The more certain the cash flow, the less valuable the realoptions method will be, because the uncertainty creates the value. This example demonstrates one other important attribute of real options as opposed to the conventional discounted cash-flow analysis. In discounted cash-flow analysis, increased risk is handled by increasing the discount rate; the more risk, the higher the return the company has to earn as a reward for investing. This has the effect of decreasing the value of the cash flow in later periods. Thus, uncertainty reduces the value. But in a real-options approach, the value would be increased because managers have the flexibility to make the decision to either delay or expand the project.
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APPENDIX D: MOORES LAW

Moore's Law: Gordon Moore made his famous observation in 1965, just four years after the first planar integrated circuit was discovered. The press called it "Moore's Law" and the name has stuck. In his original paper, Moore observed an exponential growth in the number of transistors per integrated circuit and predicted that this trend would continue. Through Intel's relentless technology advances, Moore's Law, the doubling of transistors every couple of years, has been maintained, and still holds true today. Intel expects that it will continue at least through the end of this decade. The mission of Intel's technology development team is to continue to break down barriers to Moore's Law.
For example, SIA's Roadmap is based upon extending Moore's Law over the next 15 years enabling projected enhancements in memory and logic chip capabilities. The role of consensus paradigms in guiding the process of technological innovation seems a very important factor in successful technology roadmaps such as the SIA Roadmap. The general acceptance of notions like "Moore's Law" in semiconductors may be prerequisites to successful roadmaps. [7]
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Co-OPerative Technology Roadmapping

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Co-OPerative Technology Roadmapping

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Co-operative Technology Roadmapping