Project-Driven Technology Strategy

Robert McGrath, PMP, EVP, MBA

• Publisher: Project Management Institute
• Year: 2012
• ISBN:
  9781935589730
• Edition: 1
• Topic: Business
• Subtopic: Project Management
• Index: Business

In today's enterprise, technology isn't about software or hardware. It's about knowledge and competence. And it's the key to creating a sustained competitive advantage for your organization. Dr. Robert McGrath's new book not only redefines technology but reshapes how to approach the age-old challenges of fostering innovation, growing entrepreneurship and creating value. Described as a combination of "a master class taught by your most thought-provoking professor" and "a troubleshooting session with your most trusted mentor", this groundbreaking work uses classic economic theory from luminaries such as Adam Smith and Joseph Schumpeter to force a new perspective on the art and science of strategy and project management.

PART I

Technological Innovation and Evolutionary Theories

If we economists were given less to wishful thinking and more to the observation of facts, doubts would immediately arise as [to] the realistic virtues of a theory that would have led [us] to expect a very different result. Nor is this all. As soon as we go into details and inquire into the individual items in which progress was most conspicuous, the trail leads not to the doors of those firms that work under conditions of comparatively free competition but precisely to the doors of the large concerns…and a shocking suspicion dawns upon us that big business may have had more to do with creating that standard of life than with keeping it down.

—Joseph Schumpeter, Capitalism, Socialism, and Democracy, 1976.

Overview

About one century ago, scholars started to take a systematic interest in how technological innovation happens. This was after the first hundred years of the Industrial Revolution had already occurred. By that time, the surge of technology was both wonderful and terrifying, spawning many myths and whole political-economic doctrines.

Since that time, investigating some of the most common myths has resulted in learning some of the most profound truths—even by a scholar or two that had a positive bias toward a myth in the first place. However, myths persist. The chapters in Part I do not directly attack them. In a sense that would be to legitimate their own fallacious thinking.

Many myths become popular because a few appealing anecdotes are improperly generalized as being typical or even universal. This is a classic error of logic called the inductive fallacy (Gula, 2007; Seay & Nuccetelli, 2007). We have known since the days of Aristotle that deductive reasoning is far superior to inductive reasoning. It is better to go to the effort to understand universal principles first, and then draw inferences about particular cases.

When we see what we think is a repeated pattern, we should look at what we think to be the causal relationships among the elements within the pattern, and only then make specific predictions for practical purposes. Therefore, our approach will be mostly deductive. Rather than point to one instance as typical and then attach superstitions that make it work, we will begin by examining broad patterns that have been empirically validated, and progressively deduce through closer inspection, conclusions that seem meaningful and practical.

Let us start somewhere in the middle of a myth and try to explain our way out of it. Many people, depending on their previous exposure as to how innovation happens, assume that causality most often runs from (a) investigation of how nature works, to (b) the creation of a technology, and (c) straight to selling it. From a few select or famous observations, we might induce from them that science comes first, then a technological invention results, and then consumers lap it up. In that case, technology would sit between science and consumption.

However, because so many new technologies obviously fail, there must be something else—another variable—to the overall connection from science to consumption. We will just call that something else, commercialization. The better model (Betz, 2003) often presented is

Science > Technology > Invention + Commercialization = Innovation

As simple and appealing as this model seems, it is still flawed. First, observe that in the strictest sense, there is no single process variable called technological innovation—these are two separate and separated stages of the flow. Aside that illogic, things are not always linear, and that is the main problem.

For example, the Wright Brothers are credited with inventing the airplane, which we celebrate as occurring upon their first flight at Kitty Hawk, North Carolina, on 17 December 1903. This was considered a difficult task by the general public, and it was thought to be impossible by the best scientific minds of the day (Thurston, 2000). The science of that time said it was impossible and against the laws of nature.

Obviously, science that is more accurate followed the invention. Though we think it quaint that the Wright brothers constructed their gliders and flyers from spare bicycle parts, the truth is that the two were actually very, very good engineers who taught the best aerodynamicists of the time a thing or two. The first Wright Flyer was not the technology; the technology was all the learning that was in the minds of the two brothers. The airplane was the artifact, the evidence of the technology.

Yet despite the Wrights’ genius, the airplane was not an innovation for years to come. Commercialization followed later and then, largely because of the outbreak of World War I in 1914; i.e., the first successful market was military, not commercial. The next market was governmental—the contracting of airmail by the U.S. mail service to the U.S. Army. The next market was industrial, once delivering airmail became a profitable business. Entrepreneurs being what they are, technologies then improved—sometimes in little amounts and sometimes in leaps—that would allow carrying passengers as well as bulk mail, at a profit. Soon delivering people was more profitable then delivering. Commercial airlines happened. The rest of course, is history.

We can augment this view by suggesting that no technology can be successfully commercialized unless there is a demand for it already. Marketers assert that demand cannot be created—only discovered. Demand for a new technology may be conscious in a small number of people, which is called a market niche. More broadly, demand tends to be latent or not conscious in the masses. An immediate dilemma is that innovators cannot make much progress in a large latent market without first satisfying the needs of the attentive-but-very-different few. After all, we cannot identify what our latent demands are, or they would not be latent. We need information, often in the form of demonstration.

This tale contradicts several common myths, which will become evident later. Right now, the point is that if we are to develop the basis for a project-driven technology strategy, we must avoid myths and superstitions by first coming to understand generally repeated patterns.

The purpose of Part I is to first explain broad evolutionary patterns so that in subsequent parts of the book, we can draw managerial inferences and make practical suggestions. We will start from scratch and systematically explain what we think we know about the cyclical nature of how (capital-intense) technologies, products, and industries tend to evolve.

More than one definition of technology presents it as being the application of knowledge about how nature works (science) to a known problem or opportunity. Indeed, this understanding is more common in the technology management literature, than not!

As meant in this book, the word technology applies to all technologies in all products in all industries. We will never identify a “technology industry.” All industries have their own technologies based on every known natural science. While information technologies are for very good reasons very newsworthy, it is ironic for this reason that IT will be assumed endemic and necessary to all organizations in all industries. The correct strategic issue is not having superior information technology, but creating a superior and dynamic knowledge management capability.

On this idea, the book depends.

CHAPTER 1

Entrepreneurship and Technological Innovation

Introduction

Joseph Schumpeter

Entrepreneurship

Technology and Competence

The Locus of Innovation

Schumpeter and Project Management

Summary

Chapter 1 Takeaways

Questions for Discussion

Chapter 1 Appendix Entrepreneurship in Bureaucratic Settings

Introduction

This is not an economics book, but most of the reasoning is economic in nature. In the author's mind, several fields of economics have contributed the most powerful concepts for effectively managing business organizations.

REMEMBER

Economics is not really about money per se.
Economics is about understanding the nature of exchanges of things of value among parties.
Economics is one way to approach such exchanges logically and rationally.

We all know that modern business decisions are not always logical or rational, but using this kind of reasoning is a useful and practical way to go about developing a Project-Driven Technology Strategy. That is what economics is there for.

When the “father of modern economics,” Adam Smith, wrote his seminal work, he must not have been thinking of technological innovation (Rostow, 1994). For that matter, he was probably not thinking about technology at all. Although this happened over 200 years ago, we still do not have a complete economic theory of technology and innovation that takes into full account dynamics that should probably be taught to all students of economics – at least the Entrepreneurship majors.

Many are familiar with Adam Smith and are acquainted with his work The Wealth of Nations, which was published in 1776. Smith and this work coined the term invisible hand to hypothesize that unrestricted commerce, guided only by countless small decisions made by the many, would yield optimal economic results.

What most people do not know is that none of this had anything to do with the American Revolution, or the American colonies in general. Smith, who was Scottish, focused on Great Britain and the situation that European countries had created not only in Europe but also on the continually expanding world scene. Noting miserable living conditions mostly in England, Smith felt that mercantilism had had its day.

For hundreds of years, the prevailing economic philosophy (Lekachman, 1959) held that wealth was a finite commodity. That is, any wealth that one country had was wealth that another country did not have, at least at any given point in time. Logical enough perhaps, but it also meant that for any nation to increase its wealth, it had to be done at the expense of at least one other nation. The final measure of a nation's wealth was gold, which was in finite supply. Naturally, this made all nations potential enemies, and eventually led to what was probably inevitable—colonialism, imperialism, and endless wars.

Many scholars since Smith's time have shown that if nations are allowed to trade with relative freedom, they will come to focus on what they produce most efficiently. They will then trade their surplus production in a narrow range of commodities for the surpluses of other countries, to result in an ever-increasing expansion of wealth. In other words, despite the finite characteristics of gold, true wealth was really something else and could be grown for all without limit.

Today meaningful measures of progress are growth in productivity, gross domestic product, and standard of living, causally, in that order (Porter, 1990). This reflects what is called the theory of comparative advantage. Any given nation does or does not have a comparative advantage relative to other nations. As we will see throughout this book, however, national comparative advantage is not the same as firm-level competitive advantage. We will start that discussion soon enough.

What makes Adam Smith the father of modern economics is not so much the fuss concerning the invisible hand, but the beginning of the destruction of mercantilism. Mercantilism has not vanished by any means, though some of its advocates eschew the word. Neomercantilist economic instincts and policies are all around us, seen in trade barriers, restrictions to labor mobility, and other instruments that implicitly assert that wealth is a finite commodity—what's mine is mine and hopefully soon, what's yours is mine too.

These instincts do not reflect the spirit of the entrepreneur in a capitalist system, entrepreneurship as an economic phenomenon, and technological innovation as the most important contribution to the growth of firms, industries, and economies. We will inspect this more closely. For now, let us agree that wealth is not finite—that the total amount can always be expanded, improving the lot of firms and the local communities they serve, investors, consumers, workers, economies, and nations.

However, we need a new unit of economic exchange to observe how growth happens, how wealth is created, and how things flow in the systems we have institutionalized. The new gold is—knowledge.

Joseph Schumpeter

Entrepreneurship. In 1942, economist Joseph Schumpeter, pronounced “shoom-PAY-ter” (1976) articulated a basic view of economic growth that grappled with a problem that had perplexed economists since Adam Smith: how to consider technological change as an endogenous variable in a model of macroeconomic development (Rostow, 1990).

Here, endogenous refers to whether or not technological change is itself considered to be a variable in a model of macroeconomic theory. An endogenous variable is one that is considered within the boundary of a theory, though it may or may not necessarily be an independent or dependent variable. In fact, it could be a theoretical constant—but least it is in the model.

Exogenous means that technological change would be external to a theory. It is neither an independent nor dependent variable in the model—it simply is not considered, at least not directly. Of keen interest to us is that an exogenous variable is somethin...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables and Exhibits
• List of Abbreviations and Acronyms
• Acknowledgements
• Introduction
• Part I—Technological Innovation and Evolutionary Theories
• Part II—Strategic Management and Technology
• Part III—Business Strategy and Project Strategy
• Part IV—Managing Multiple Projects
• Appendix—Study of Electric Vehicles 1993–1995
• Bibliography