OVERVIEW: A firm's ability to build competitive advantage on the basis of technology depends on the practic of general management. In firms that are especially good at making strategic use of technology, general management exhibits a distinctive set of practices that creates the context for, and gives direction to, technology development: they consistently pursue a strategic focus, which they build around their firm's unigue capabilities; they strive, within their areas of focus, to be total leaders--to offer the best performing, lowest cost, highest quality products; they strive to be pioneers in their areas of focus, rather than fast-followers, and to balance continuous, incremental improvements in their product lines with more radical, discontinuous innovations; and they exhibit an underlying style of decision making that is driven more by the imperative to stay ahead in their areas of focus than by projections of financial returns.
Underlying the decline of U.S. industrial competitiveness in technology-intensive industries is a paradox. The U.S. industries that have been most clearly outperformed by Japanese competitors--automobile, machine tool, semiconductor memories, consumer electronics, and factory automation--were all technology-rich. The firms in these industries, such as GE, RCA, Texas Instruments. Cincinnati Milacron, and General Motors, all had broader and deeper technological capabilities than their competitors, yet this technological capability was not translated into competitive advantage. Technology-rich companies, in a technology-rich society, failed to compete effectively in technology-intensive industries.
This paradox leads to a question about innovation and technology management: Why are some firms, foreign or domestic, more adept than others at building and sustaining advantage on the basis of technology? In virtually every competitive environment, and in virtually every region of the globe, it is possible to find some competitors that are superior at recognizing and seizing upon the strategic implications of technology. Merck has been more adept at building advantage on technology than many of its counterparts in the pharmaceutical industry; Union Carbide, Dow Chemical and GE Plastics in their sectors of the chemical industry; Hewlett-Packard in computer peripherals, Intel in microprocessors, AMP in electronic connectors, Nucor in steelmaking, and Microsoft in software. Likewise, Sony, Matsushita and JVC have been more successful than their U.S. and European competitors in making strategic use of technology in consumer electronics, Toshiba in semiconductor memories, Canon and Sharp in fax and digital imagery, Fanuc in factory automation, and Kyocera in advanced materials.
This article summarizes the findings to date of an ongoing study designed to shed light on this paradox. In particular, it examines the role general management plays in the process of building and sustaining competitive advantage on the basis of technology. Factors other than general management help explain some of the variation in the ability of firms to make effective use of technology. There are external factors, such as differences in financial environment, industry structure, and government trade and technology policy. Others are internal, such as differences in product development cycle time and degree of commitment to total quality management. But the primary focus here is the behavior of general management--the people with profit and loss responsibility who set the tone, objectives and directions of the business. The premise of this study is that to understand why some firms are better than others at building advantage on the basis of technology, and to understand why so many U.S. firms have failed to compete effectively in technology-intensive markets, we must look first and foremost inside the firm and at the top.
The three companies in the study that represent successful use of technology--GE, Corning and Motorola--are entirely different from each other in history and culture. …