Great technological projects based on the sectorial technological strategy
Luis Diaz Saco, Executive President of Saconsulting Advanced Consultancy Services
Those activities that are driven by governments to modify the productive model and to maintain the long term competitiveness of a society cannot be made only by an alone organization and require a high consensus of all the stakeholders to be done successfully. It is only possible to approach them when governments are advised by technological platforms where a group of professionals from research centers, public regulators, enterprises and final consumers establish a framework and a set of objectives to use properly the public research resources. These workgroups of expert people who have a good knowledge of society needs and present and future technology capabilities, taking advantage of previous works and alliances for the promotion of certain technologies in development, define those areas where the companies and other organisms public can establish consortia to execute projects with solid objectives. This work scheme helps companies to generate value for the society with its investments in research and development that will be compensated with the economic benefit that the shareholders will get selling new products developed to satisfy a real demand of the society.
Key words: technology, productive model, research and development, project management
We are living in a globalized environment, competing with new organizations with an unknown name. They have lower costs and usually fight hard (sometimes touching the border of the law) to get our market share.
This scenario was not a threat a few years ago; we can be always competitive in quality. But, the scenario has changed. In times of crisis, quality is considered a secondary issue and markets are afraid. The fear inculcates that cost-cuttings are an objective to survive. This matter produces that the worse prepared organizations increase their incomes in the new situation, while quality-focused organizations search for new ways to cut their costs reducing the quality of its products. The former can finance their investments to improve their products, while the latter try to cut costs reducing the quality of their products.
We could think that we would be replacing a quality-based competitiveness for a price-based one, but the truth would be that we would be destroying our main competitive advantages against emerging countries in a global environment.
In order to overcome that new situation, we have a powerful variable that is the most valuable. If quality is a strong competitive weapon, technology is more powerful. It is not an independent variable, it have an effect on cost and quality.
If we remember the twentieth century, Japanese succeed in changing the paradigm (JURAN, 1978), they demonstrated that it is possible to increase quality, reducing costs. Of course, it can be done, changing the productive processes, changing the technology.
Actual western governments think that the economic activity is a collaborative activity, as a few centuries ago. Commerce is not a recent invention; it had been developed by the most ancient civilizations. Nowadays, the economic activity is considered as a global win-win scenario. All actors win with trade, utility is created for vendor and purchaser.
This scenario must not forget that the background is always in competition (PORTER, 1982), and it is necessary to analyze it properly in order to prevent that others transform it in a winner-loser scenario.
When the situation produce that the market enters this inverse dynamic where thinking about improves implies a short-term disadvantage, governments talks about making changes of the productive models successfully.
This activity of influencing the productive model of a country must not be made only in times of crisis, it is necessary to work with prevision.
For this reason, national governments and the European Union makes activities continuously to analyze the environment of the main economic sectors and to establish periodically an agenda of research activities for investing with public funds.
In the following text, we will establish an analogy between different models to organize the sectorial innovation at state level and the classic policy theory, in order to identify qualitatively organizational benefits related to the way that technology platforms produce a real social benefit, as opposed to other traditional models like state planning or a model exclusively centered in users’ demands. The qualitative demonstration is based on the humankind history. The history demonstrates that decision making models involving all interested groups produce more benefits that authoritarian or demagogic models.
When the model will be described and qualitatively justified, we will propose a methodology to establish a formal problem modeling in order to get an optimal quantitative solution for public and private investment decision making based on the Technological Competence Strategic Matrix (BUENO, MORCILLO, RODRIGUEZ, 1996).
Finally, a real case will be presented. That case is based on the personal experience of the author.
The Technology Platform Model
The analysis of the surroundings of a sector has been done traditionally by civil servants, but, in order to be nearer reality it have defined a technology management model that includes different market actors. The objective of this initiative is to get information directly from all kind of organizations that can participate in technological innovation process that drives a productive model change.
Technology platforms are a group of entities that represent different organizations that participate in the different aspects of a productive sector (EUROPEAN COMMISION, 2006). Their objective is to build a realistic and workable vision of the changes needed to accomplish future challenges. It is usually coordinated, or supervised and supported, by Public Administration Representatives. Government has importance in these forums as main representative of global interest of the citizens, and can drive public investment to get the objectives selected by the platforms.
Government must have an outstanding role, but, it is only one of the actors. The private companies, that are going to invest money from their shareholders to improve the processes and can offer new quality jobs in order to put the results in the market, are more important to reach the target of the platform with success. A platform without high representatives of the main companies of the sector would be useless.
Lobbies represent the interest of a group of actors of the market. In a different way, technology platforms include representatives of the main groups of entities of the sector in the workgroups. The objectives of these groups can be opposite in the market, but the work is framed into a future scenario development, in order that technology innovation investments have the highest probability of commercial success. This scheme follows the philosophy of Drucker (DRUCKER, 1992). He proposed that it cannot be a good idea to acquire a new technology assuming all of the investment risk with own development or acquisitions. It is more adequate to establish collaboration agreements in order to decrease risks and to increase the probability of success.
Working thus, the activity of changing or evolving the productive model will be able to be done later with the lowest possible resistance in the market.
If we did an analogy with the policy theory, technology platforms represent a democratic model of the technology strategy. A model based on the public administration would be an authoritarian model like economic planning in the soviet countries, and a model impulse by a lobby of enterprises will be an aristocratic model, using these words with Aristotelian meaning (ARISTOTLE, A.C.). Aristocracy means the government of the more qualified ones, and it is different of Oligarchy that is the government of the rich without take into account the interests of the poor. Enterprises are similar to Aristocracy in this analogy because they can invest and create jobs in a sector. They always have the capability of creating wealth depending on their assets.
It is important to notice that a sector can work properly “governed by the aristocracy”, but it only occurs when the competition is large and market laws have produce a government of the best (most competitive) that always rely on the clients, and it do not degenerate into “oligarchy” as it happens in oligopolies, where the interests of the customers cannot be protected. In that case, the technology platform model is more necessary and it can contribute with a bigger value for the general public.
In the same way as Democracy can degenerate into demagogy (for Aristotle, the government of the poor without take into account the interests of the rich), a model oriented to include all the stakeholders as decision-makers, will be a model centered in the customer exclusively. This model does not permit to introduce new possibilities of the new technology, unknown for them. This focus, traditionally followed by private companies, is not applicable when technology is managed in a complex environment, because focusing on short-term demands of the users can prevent large and middle term technological development decreasing the future competitiveness.
|Society Management||Innovation Management|
|Monarchy||Management of the public sector|
|Oligarchy||Monopolies and oligopolies|
Table 1. Analogy between classic policy management and sectorial innovation management
As we can see, the technology platform model is immersed into the European culture, and the policies of the Union. European Commission tries to preserve the competition in the economic activity. Technology platforms are another tool in order to avoid excesses of monopolies and oligopolies, and to facilitate a correct performance of the economic activity.
Working methodology using the technology platform model
Technology platforms search for agreements, in that sense they are politician forums. But the work has a technological focus, that focus in framed into the economic policy, and the economic development is the fundamental target.
As we want to control the future technology as variable, the participants of the workgroups must be technicians mainly, and participating organizations must include representatives from all the innovation value chain. The profile of the participating people depends on the management level of the workgroup, but as the main work is to make a strategy, participants are directors and managers.
The platform is coordinated by a main group or advisory council. In this group, the Government and the main actors of the sector have a representative. The members of the advisory council are senior managers (CEOs or CTOs). The advisory council decides how the platform works, and approves the results of the workgroups. It usually includes the chairmen of the different workgroups.
The vision group is one of the most important groups. This group will be responsible of defining the vision of the sector strategy. The vision group identifies interesting technology areas and workgroups will be created to start the analysis of the threads and opportunities related to them. Information will be recovered from the technology and innovation management work developed in every organization (LINDSAY, 1999).
When the vision group agrees the document about the future challenges, this group will integrate the work of the other groups as technical supervisor.
Working at the technology platform
When the technology strategy has been defined, the innovation objectives for the next decade will be settled.
Initially, the presence of public research and technology centers is fundamental. In theory, they have a deep knowledge of the state of the art of the technologies that cannot be applied. They can estimate the possibilities of the future evolution of those technologies. On the other hand, technicians of the enterprise world have knowledge about the use with a market and production cost-cutting focus. The role of the users is basic in order to get a practice and innovative focus from their needs. At last but not least, the attendance of governments and regulators will make easier to develop best-fitting laws and standards to introduce the proper changes into the sector. For instance, if a technology platform propose the development of new construction materials, it is necessary that the legislation at the end of the development lets to use them, and correct mechanisms for evaluating if they can be used in production must be established. In the same way, it is necessary to establish a set of quality control procedures too.
The second phase of the works is based on the preparation of the Strategic Research Agendas or SRAs. The mission of the SRA’s is to define a set of concrete areas of interest where different organization will be able to define oriented research, development and innovation projects. This mission can be done prioritizing and organizing possible actions that support the defined strategy. The result of this work ought to be assumed by the governments into their innovation support plans, in order to the states direct the public resources to the largest utility areas. Here again, the involvement of the government in the platform is fundamental in order to get success of this activity. If the Administration established other support areas in its funding programs, it would be acting against the logic of the technicians and the markets, driving the funding effort of the country to fail.
Theoretically, it does not exist a third phase of the work in a platform, but technology platforms are an adequate forum to establish concrete collaborative projects among their participants, because personal contacts among enterprise and public centers managers (decision makers or influential ones) are aroused.
The role of the enterprise in technology platforms
There are a lot of definitions of technological innovation; personally, I always define it to simplify as the introduction of novel products in the market. This meaning includes not only product innovation. It includes process innovation if we use the word novel with two meanings: Novel for the market related to the product innovation and novel for the company (on the way of manufacturing) related to the process innovation.
Notice that this definition has two important aspects: NOVELTY and MARKET.
In the former part of the article we have remarked the role of the governments and public research centers to do the SRA, as coordinators of the public interests and with knowledge of the novelty, but, the target of the technology platforms is the use of the knowledge to generate wealth instead of the knowledge creation.
Other innovation management models have fail because they have been focused in the novelty and they have forgotten the market. One of the main values of the technology platforms is the permanent and prevalent involvement of the market (enterprises and customers) in making decisions about public funding of innovation.
In a market economy, the Administration has not got tools in order to act directly on it, and it can only have influence through incentives of actions that have an effect on the economic activity. It can act on the markets assigning public expenditure, and through the tax policy and the monetary policy (O’KEAN 2000).
The monetary policy in the Euro zone is defined the European Central Bank and the National Governments cannot work on it. This is the reason because they only can operate on the markets through the policies of public expense (increasing or decreasing) and the tax policies.
First of all, we will analyze the public expense: if the development of a technology that does not produce wealth for the society will be done, an inefficient assign of sparing resources would be made. Getting that private initiative finances the most adequate tasks in order to develop the nation is more efficient. This solution takes into account that private initiative will always demand a reasonable benefit for the investment in order to compensate for the assumed risk. It will demand production of wealth that governments will be able to redistribute though the tax policy.
There are two basic instruments related with the investment and tax policies in the area of incentives for innovation.
Governments have a mechanism in order to promote innovation, reducing tax for innovation expenses (DÍAZ-SACO, 2003). The costs must be considered as projects by the accounting, and this instrument lets that the enterprise improves its competitiveness in the market. It is applied by the company, with a subsequent control by another entity that audits the activity. The value for the company it is not only in cash, the senior managers can decide the activity that the company executes, supporting not oriented research.
At last but not least, when governments want to influence in the productive model, they need to impact not only in the decision making but in the development of innovation activities. In order to support oriented research, governments make use of another mechanism: the subsidy. Tax reductions are applied to the decisions of the managing board, but subsidies do not be used if companies consider that the development of the activity selected by the government is unviable. It is important to notice that subsidies finance cost, not sale (there is an additional opportunity cost that is never considered by governments) and the legislation limits the maximum percentage that an organization can perceive (typically a 50 % of the development costs). If the activity has not an attractive potential of benefit, the company will not develop it although the state assume a percentage of the risk.
Technology platforms correct this latter aspect because areas to be financed with subsidies have been selected from a consensus of enterprises and future users.
This sentence can be transformed into a mathematical problem that can be resolved in a formal way using the Technological Competence Strategic Matrix. This matrix takes into account the foreseeable scenarios, the temporal horizon, the business strategic units and the technological competences. Based on this matrix, a linear programming model with economic and technological competence related restrictions can be done. The solution of the optimization problem will be an optimal point of the objective function that maximizes the benefit for the shareholders (MORCILLO, 1997).
In our model, it will be necessary to replace business strategic units with sector strategic ones, and to define an objective function as a utility function for all of the stakeholders including additional aspects to shareholders’ benefit. The analogy with the initial problem shows us that the solution of the linear programming problem that maximizes the objective function will be optimal for the problem hypotheses, if it exists.
Results for enterprises
Now that we have explained the model, analyzed from a qualitative point of view, and established a formal mechanism to justify the possibility of finding an optimal point that maximize a utility function for the stakeholders, we can show the main results that it has been got in real technology platforms with several years of lifetime (EUROPEAN COMMISION, 2010).
Electricity networks sector has been chosen because of the direct knowledge of the author as member of this technology platform, and because it is very dynamic for integrating new technologies (wind energy production systems, solar energy production systems, and so on), scientific production (atmosphere behavior for wind energy, electronics for solar farms, and so on), private investments (a lot of new companies in the share market, then, with high attraction for the investors), and industrial applications (it affects the industrial development of the world), then, its benefits are numerous and easily identified:
- Generation of research areas with high attraction for the investors, increasing the access to financial resources.
- High participation in public funding decision making.
- A forum to establish innovation consortia.
- Contact with the demand side of the market through groups of users.
- Benchmarking with other companies of the sector related to the innovation activity.
- Knowledge of the sector trends, useful for defining no oriented research internal actions.
Simplified models: Alliances for the promotion of technologies
As we can see, technology platforms has a global capability to integrate different groups of stakeholders, but, it is not always easy to join wills in order to start an interesting activity in a sector, for lack of public funds, politic interests, and so on.
When it happens, the business world can anticipate to these platforms proposing new alliances for the promotion of a certain technology. This action is not substitutive but complementary. It is a way to prepare the platform, and in general the society, to consider an innovative technology as a priority, and it can be established as an innovation project with public funds as any other action.
The work of these alliances is to analyze the benefits of a concrete technology and as the technology platforms, they need knowledge from different actors of innovation: enterprises, research centers, regulators, users, and so on.
The collaboration of the Government is not very important, because they arise from the market, and their objective is not changing the productive model, but simplifying the development of a technology that the market consider useful and is emerging.
But the platform has the politic objective to convince the main establishments about the viability of a certain technology, using highly technological works. Newly, they are different from a lobby because of their collaborative focus integrating different entities with different objectives. The result collects the best practices for developing and deploying of the considered emerging technology, supporting the development of new business opportunities (NUENO, 1993).
The construction sector is not considered a high tech sector, but, leading companies of this sector has been investing in new technologies. Some of the main companies have entered the world of renewables. They have been in contact with emerging technologies though diversifying.
Regardless, it is important to notice that the sector has its own technologies although many of them are mature. The methodology of the platforms can be applied in the same way, and the benefits will be defined according to the aptitude of the technologists of the public and private sector for identifying and developing emerging technologies, in the large and middle terms, with real industrial application, in the same way that this methodology is applied in the high tech sectors.
An important aspect to improve the sector is to impulse innovation in the auxiliary industry. Any technology platform must include product and service suppliers in the working groups. This issue can produce huge improvements in order to reduce costs through innovation in materials, machinery and, technologies for the design and execution of projects.
The big constructive projects have shown the need of high performance machinery. An example in civil engineering is the use of huge machines to make underground highways. In order that the sector can continue winning big international contracts because of the cost and quality competitiveness, mechanisms to analyze the future in the middle and large terms must be established and the sector must get sufficient capabilities.
This work introduces the value that the technology platforms are contributing to the society. Although many shareholders and employees do not know their utility, they are a source of benefits, because they guarantee that the investments of the companies in technological innovation have the highest probability of future success. Collaborating in a technology platform is not a useless spending; it is a reasonable way to lever up the investment in technological innovation for any company. The cost of an internal manager or an external expert manager is ridiculous in front of the leverage of the investment, and the risk reduction. A company can avoid wasting the work of hundred people during several years.
Technology platforms increase value for all actors in a sector, including the citizens of a country represented by public administrations, through the generation of wealthy and employment.
There are similar initiatives promoted by the business world, the alliances for the promotion of technologies. These alliances have not the objective to make a sectorial strategy in order to change the productive model. They are focused on the introduction of a certain emerging technology.
It has been introduced the differences between this initiatives and the lobbies. Lobbies show the vision a group of stakeholders only, whereas technology platforms and alliances integrate the vision of different groups of stakeholders.
It has been established, as novelty in this work, an analogy between innovation management and the classic theory of the management of a country, in order to understand easily the benefits of integrating all stakeholders in the decision making process and justifying the social benefit qualitatively, as the benefits that democracy produces against other types of government.
It has been proposed the methodology of Strategic Matrix of Technological Competences in order to pose a linear programming problem that guarantee the possibility to model mathematically a problem and get an optimal formal solution.
It has been extracted the results in the real case of the technology platforms in the electricity sector in order to analyze the technological, scientific, and industrial applicable results that have produce new technologies, new equipment and new systems, new knowledge about environment, physics of the conducting materials. These results have driven new business that generate a huge number of jobs and have a direct effect on the industrial economy all over Europe.
The construction sector is not considered a high technology sector, but it can improve strongly though the innovation in the auxiliary industry and the development of new design and execution methodologies that increase quality decreasing costs.
[ARISTOTLE, A.C.] Politics. Aristotle. Philosophy Classic Masterpiece
[BUENO, MORCILLO Y RODRIGUEZ, 1996] Management of Technology: Proposal for a diagnosis model. Bueno, Morcillo y Rodriguez. The Journal of High Technology Management Research Vol. 8. Arizona State University 1996
[DIAZ-SACO, 2003] R & D & I Project Certification in the Innovation Activity. Luis Díaz Saco. UNE 175. Pag. 26- 29. AENOR. 2003
[DRUCKER, 1992] Managing the Future. The 1990’s and Beyond. Peter E. Drucker. 1992
[EUROPEAN COMMISION, 2006] European Smartgrids Technology Platform: Vision and Strategy for Europe’s Electricity Networks of the Future. Directorate-General for Research. European Commission. 2006
[EUROPEAN COMMISION, 2010] Smartgrids Strategic Deployment Document. Directorate-General for Research. European Commission, 2010
[JURAN, 1978] Japanese and Western Quality—a Contrast. Quality Progress. American Society for Quality Control, December, 1978
[LINDSAY, 1999] The Technology Management Audit. Jeffrey Lindsay – PA Consulting Group. Cambridge Strategy Publications. 1999
[NUENO, 1993] Entrepreneurship: The art of creating business and its artists. Pedro Nueno. Ediciones Deusto. 1993
[MORCILLO, 1997] Technology and Innovation Strategic Management. A focus of competences. Patricio Morcillo Ortega. Editorial Civitas. 1997
[O’KEAN, 2000] Business Economy. Analysis of the business economic environment. José María O’Kean. McGraw-Hill Management. 2000
[PORTER, 1982] Competitive Strategy. Michael E. Porter. 1982
Luis Díaz Saco is President of Saconsulting Advanced Consultancy Services nowadays. He has been Head of Technological Innovation and member of the Technological Innovation Committee presided by the CEO at Soluziona Quality and Environment, and R&D&I Project Auditor of AENOR. He has been an Endesa Red Representative in several groups of the European Smartgrids Technology Platform and its Spanish Mirror Platform, participating in technology areas groups and the mission and vision groups.
© 2009-2010 Saconsulting Servicios Avanzados de Consultoría S.L.U. All rights reserved.