Wharton on managing emerging technologies

Although Terry Fadem is officially director of corporate new business development at DuPont, in reality lie has dropped off the organization chart. He now works in a vortex of relentless experiments to gain advantage from the company's 18,000 or so patents. His division cannot be considered a business unit in the traditional sense, nor can his job be considered management. He behaves much more like a venture capitalist.

After its restructuring in the 1990s, DuPont charged a core group to develop new markets from inventions such as a light-emitting material that could replace a light bulb. "Their job was to build new businesses any way they could," Fadem said. "We don't start with teams of people reporting to us, but over time, we develop a business plan, an organization, and so on." Even this approach wasn't fast enough, however, so the company began to assemble an array of venture teams. "We pulled together people on a team and told them their job was to find an opportunity the company could pursue, do a business plan, and if the company approved we would fund it."

DuPont's core businesses in nylon, fluorocarbons, and other areas, continue to operate within a formal organization. But life for Fadem and managers at the frontiers is very different. How do they manage numerous emerging technologies that create new opportunities or disrupt established businesses? How do they navigate the complexity, uncertainty and rapid change inherent in this untamed territory? How do they remain a part of a larger established firm without being swallowed or slowed by it? Where do they find the knowledge and talent to manage emerging technologies?

When a pair of researchers from the Wharton Emerging Technologies Program asked Fadem where lie gets his insights on managing emerging technologies, lie responded, "I try not to read the thinking of the day. My job is to build new businesses and I have to look for the edge all the time. If everyone is doing it, it may be too late for us. The only way to gain a competitive advantage is to go beyond that."

Emerging technologies, based on advances in information technology, biotechnology, and other scientific disciplines, are the future of some industries and will transform many others. These technologies are creating and restructuring industries at an unprecedented rate, making traditional practices obsolete, and creating a need for new best practices, core competencies, and competitive strategies. Established firms often have no choice but to become players in external technologies that could redefine their future. Yet established firms sometimes face the greatest challenges from within because managing emerging technologies requires a very different set of skills, frameworks, and strategies than managing existing technologies. How do managers master these new approaches? Like Fadem, they look for the edge.

LOOKING FOR THE EDGE

The Wharton Emerging Technologies Management Research Program was established in 1994 (before the web was a household word) to address these challenges. A diverse team of faculty began working with senior executives such as Fadem to understand the unique challenges of managing emerging technologies and develop strategies for success. This work was based on a growing awareness from our work in industry that emerging technologies would be important to future management success. Since then, the explosion of the Internet and maturation of biotechnology have put emerging technologies front and center in management thinking.

This initiative represents one of the first and broadest attempts to bring an element of rigor to a field that has been characterized by simplistic prescriptions, hype, and occasional hyperbole. Our research program. marries the experience of practice with emerging tools, frameworks, and research by professors, consultants, and thoughtful practitioners. Some of these tools have been in our hands for decades (such as scenario planning and real options analysis) but are just beginning to find their way into popular use. The potential of other insights in this book, such as perspectives from evolutionary biology and network strategies, have yet to be widely recognized.

This book builds on an important research vein exploring the management of technology-based innovation. Some notable writings on this subject include Richard Foster's Innovation: The Attacker's Advantage (Summit Books, 1986), Geoffrey Moore's Crossing the Chasm (Harper, 1991), James Brian Quinn's Innovation Explosion (Free Press, 1997), and more recently Clay Christensen's The Innovator's Dilemma (Harvard Business School Press, 1997). While all of these works offer important insights into the management of emerging technologies, the goal of this book is to provide more than a single framework or perspective. This project draws together a wide range of authors from diverse disciplines who have focused their attention on emerging technologies. The management challenges presented by emerging technologies cut across the entire organization, calling on disciplines including finance, managing alliances, human resources, entrepreneurship, network theory, marketing, strategy, and many others. All these perspectives are represented in this book.

The present volume offers a rigorous distillation of our collective wisdom about the study of emerging technologies to date. Among the questions we address: How do managers need to change their approaches to financial analysis, marketing, competitive strategy, and internal organization? How do they avoid common traps and work with partners? How do they anticipate the public policy issues that will shape the emerging markets? How can they manage the organizational issues that make or break emerging technology initiatives? These discussions help prepare managers in established and new firms to compete, survive, and succeed,

Emerging Knowledge

This book examines the management challenges posed by emerging technologies at the point where scientific research reveals a technological possibility and goes all the way to the commercialization of the technology into lead markets. This is roughly the zone in the graph on page viii between the intersections labelled "competing modalities" and "competing applications." We do not deal extensively with the management of R&D, nor with the later-stage commercialization of a proven technology. We approach the issue from a top management perspective and do not deal with the intricacies of individual technologies. We've chosen this zone because it presents the greatest challenges for management.

The ability to master emerging technologies is essential to survival in a growing number of industries. This promises to be even more true in the future. We are just at the beginning of a wave of breakthroughs that will equal or surpass those of the past decade. A quick glance, at the laboratories in industry and science reveals technologies such as microelectromechanical motors and sensors, made-to-order materials constructed an atomic layer at a time, personalized medicine through genetically tailored treatments, organic electronics, and iris scanning for personal identification. Many others promise to make life interesting and challenging for managers in the future.

Snow melts first at the edge. As emerging technologies on the edge begin to melt down the established structures of many industries, we can learn the most by looking at the periphery. This is where we can best understand how to compete in industries being transformed by emerging technologies. Traditional ways of thinking, analyzing, and organizing are no longer adequate. The different approaches that emerge at the periphery will eventually become part of mainstream management.

We have spent several years exploring the melting snows through a fortunate synergy of thoughtful practitioners trying to learn from their experiences and each other along with enquiring academics who are devising and testing new management theories and methods by studying winners and losers. These discussions with more than 20 leading companies have helped to shape a set of priority issues (see box) that formed the foundation for the development of this book. Since there is no established model or paradigm for managing emerging technologies-but at best a diverse array of perspectives and approaches-our book seeks to balance a plurality of views around the common core management challenges of playing the rather different game of emerging technologies better.

PLAN FOR THE B00K

This book builds off these priorities to examine how managers understand and assess technologies and markets, shape strategy, make investment decisions, and change their organizations to meet the challenges of managing emerging technologies. The opening chapters examine the overall mindset needed to understand emerging technologies, and how this is a "different game," characterized by high uncertainty, rapid change, and shifting competencies. The opening also examines the potential traps that often leave established firms at a disadvantage to smaller rivals, and strategies for avoiding these pitfalls.

With this foundation, we then turn our attention to the issue of assessing fast-moving technologies for development. In Part I, we explore the paths of technology development, frameworks for evaluating technologies and the role of government in the emergence of technologies and industries. After examining the technology assessment process, we turn our attention to the markets for these new technologies. In Part II, we examine how these markets, which are very different from mature technology markets, require new approaches to research and assessment. They also demand an understanding of the intersections between the "lumpiness" of the markets and various technology barriers. Finally, we examine how complementary assets affect the spread of new technologies and the impact these technologies can have on established firms.

The process of crafting strategy is itself turned on its head in environments of rapid change and high uncertainty. In Part III, we explore the demands of strategy making in emerging technology firms, including the need to combine discipline and imagination, the use of scenario planning, and strategies for dividing the joint gains.

Since the goal of developing emerging technologies usually is to produce a return at some point in the future, the next challenge we consider is the issue of evaluating investments in emerging technologies. Part IV offers insights on using real options to help assess the value and potential of emerging technologies for projects in which traditional NPV may be negative. This section also examines a variety of internal and external financing approaches tailored to emerging technology.

Fast-moving emerging technologies exert tremendous G-forces on the organization and call for different models and approaches to management. Part V explores the reshaping of the organization for emerging technologies-both in the development of external "knowledge networks" and alliances as well as through new organizational forms and employee relationships.

The story we tell here-like the industries we study-is a work in progress. It reflects the knowledge of leaders of practice and frontline researchers in the field, but there are no final words or definitive recipes for success. There are hard-won insights, but even these must be constantly challenged. Do they fit your particular situation? Do they hold true for this technology? Do the lessons of the past fit with the futures you see? Is there a better way to achieve your objectives and vision?

For those of us involved in this project, it bas offered some of the most rewarding and challenging work we have engaged in. There is no greater opportunity to make an impact than to wrestle with the future and its many unknowns. We will continue to learn in this environment and look forward to hearing from readers about their own perspectives in this endeavor. Like the technologies we are studying, the principles of management in this environment are very much emerging.