by F. Michael Hruby. New York: Amacom, 1999. 239 + xi pages. $27.95.
Product developers seem to be in a love-hate relationship with technology. On the one hand, certain new technologies have led to incredible new product successes. On the other, some dismal new technology failures have moved us to concentrate on “market pull” in place of “technology push.” Unfortunately, the situation hasn’t moved much beyond this, so there is little guidance available for the product developer who would like to create a distinctive new product by employing technology. TechnoLeverage aims to fill this gap by showing us how to apply technology to gain business advantage.
This is a guide to using technology to “lift” a business—lift its profits, sales, and market share. As such, this book would be useful to product development managers, R&D professionals, strategic and financial planners, and marketers. As I will illustrate, Hruby’s concepts and examples apply to businesses from semiconductor chips to potato chips, as he puts it. In fact, some of his most fascinating examples apply technology to mundane businesses to boost their competitive advantage. Even beyond product developers, this book would be valuable to executives—even to securities analysts or investors—who want to relate technology to a firm’s bottom line. As we shall also see, the book’s main weakness is a serious lack of references or sources, which I believe would destroy the book’s value for academics.
This is a much-needed book, because I believe that we product developers have been denying what technology can do for a new product. For example, not one of the 36 chapters or appendices of The PDMA Handbook of New Product Development [[6]] addresses the role of product technology, except for a definition of technology-driven in the handbook’s glossary: “A new product or new product strategy based on the strength of a technical capability. Sometimes called solutions in search of problems” (handbook’s italics). Cooper’s Product Leadership [[2]] is similarly silent on applying technology, but it lists a differentiated superior product as the primary critical success factor for a new product. I submit that appropriately applied technology is a major route to a differentiated superior product.
Hruby states that most companies rely on either a marketing-based strategy—aimed at winning market share—or an operational strategy targeted on costs. In his experience, fewer than 5% apply a technology-based strategy. His view is that a marketing-based strategy is inadequate for the turbulent times that we live in, because it can leave a company vulnerable to more technologically sophisticated competitors.
To develop his point on the inadequacies of a solely marketing viewpoint in rapidly changing markets, Hruby contrasts what he calls contest competition with scramble competition. Contest competition usually exists in the form of two or three competitors battling for market share. They have been in business for a long time, know each other well, and compete using basically the same established production, distribution, and marketing strategies. Hruby describes scramble competition as disorderly, fast, and lethal. Scramble competitors employ technology to enter new markets; offer products that compete very well against established products, even though they don’t measure up by traditional standards; and their customers seldom return to the traditional product after trying the scramble product. Picture 30 years ago when Honda introduced motorcycles and tiny cars that were written off as toys by GM, Ford, and Chrysler. Scramble competitors are lethal precisely because they refuse to play by the rules, and we are seeing this more and more in these days of Internet commerce.
The book’s foundation is a concept called the technology applications spectrum (TAS). This is a graph showing that, as a technology migrates from being new to the world to being mature, sales volume increases as gross margins decrease. This is probably obvious to those who are familiar with technology S-curves [[3]]. However, Hruby divides the TAS into four stages—unique, exotic, specialty, and commodity—and offers useful conclusions regarding them. A unique is new to the world. An exotic is not yet in mass production but has won some acceptance among lead users and may have multiple producers. A specialty is mass produced and has wide market acceptance and strong growth, although it is still differentiated. A commodity has reached maturity, and competing products are largely indistinguishable.
In Chapter 9, TechnoLeverage shows clearly where so many companies get into trouble with technology: they fail to realize that it is difficult to operate in multiple stages of the TAS. Each stage has its specific needs and approaches that do not fit well with those of even adjacent stages. As the technology evolves to its next stage, the company’s mission changes, management styles must change, the type of engineers and salespeople needed change, and production objectives change. Thus, the company is faced with three alternatives as its technology matures: reinvent the organization, sell the business to someone who knows how to run it, or deny that change is happening. Companies that try to operate in multiple stages need multiple personalities, and psychologists have a term for this.
Interestingly, product portfolio techniques, which are quite popular now, largely ignore this complication. Portfolio management presumes that a technologically diverse portfolio is desirable and that such diversity can be managed straightforwardly.
Although Chapter 9 was a highlight of the book for me, it would have been even better had Hruby built on the literature rather than trying to go it alone. Both Crossing the Chasm [[4]] and The Innovator’s Dilemma [[1]] have much to say about old versus new technologies. Hruby offers insights that could put a capstone on these two popular books. Moreover, because The Innovator’s Dilemma was published 19 months before TechnoLeverage, the timing would have been perfect to leverage it.
Chapter 7 illustrates how to apply financial measures to a technology business. For example, gross margin is the best measure of the value added by a technology, and it has the added advantage that it is relatively difficult to distort. Asset turns also is hard to fudge, and it measures inertia as the firm gets locked into assets that may keep it from changing direction quickly, thereby making it a poorer scramble competitor. The author makes a couple of valuable points, one of which is that no one measure will do: you need several measures to manage different facets of performance. If management emphasizes just one measure, they are likely to get just this, as the business fails in another dimension. Another recommendation is to avoid forward pricing, in which price is dropped aggressively on a new technology in hopes of forcing market growth. Performance buyers in the early stages are able and willing to pay high prices. Curiously, dropping prices can alienate them, as it undermines the exclusiveness of their purchase. Consequently, forward pricing rarely succeeds; in fact, it just gives money away.
In addition to the useful tools and concepts it provides, this book’s strength is the numerous and varied examples used. These include the evolution of sneakers into engineered athletic footwear, a revolution that has occurred in billboard production, high-tech tools applied to frozen-pea sorting, carbon-fiber composites transferred from yachts to oil wells, engineered roof trusses that have revolutionized the building industry, and a sandpaper company that out-technologized 3M.
This book’s main weakness is an acute lack of references, outside substantiation, or sources for further study. Rogers [[5]] would provide a solid foundation for this work, but Hruby gives it only passing mention (p. 188). Moore [[4]], who focuses more narrowly on high technology, has much to say about moving from an exotic to a specialty. Christiansen [[1]], as already mentioned, provides a good foundation for Hruby’s more action-oriented approach. Mr. Hruby has a space on his website where I hope he will provide such references later.
I found the book’s graphics to be rather vague: for example, the y-axis on several graphs is unclear. Finally, this book uses an innovative learning tool—a series of “tips,” one of which appears in each chapter—that did not live up to its potential. These tips do not highlight the chapter’s most important point; they are inserted without being developed, and they seem vague to me. For example, the tip for the highly useful Chapter 9 discussed above is “Small work groups are the main tool for achieving technological change in business” (p. 192).
Preston G. Smith
New Product Dynamics
References
1. Christiansen, Clayton M. The Innovator’s Dilemma. Boston: Harvard Business School Press, 1997.
2. Cooper, Robert G. Product Leadership. Reading, MA: Perseus Books, 1998.
3. See Foster, Richard N. Innovation: The Attacker’s Advantage. New York: Summit Books, 1986.
4. Moore, Geoffrey A. Crossing the Chasm. New York: Harper Business, 1991.
5. Rogers, Everett M. Diffusion of Innovations, 4th edition. New York: The Free Press, 1995.
6. Rosenau, Jr., Milton D. (ed.). The PDMA Handbook of New Product Development. New York: John Wiley & Sons, 1996.
(Reviewed in the Journal of Product Innovation Management, May 2000, pp. 246-248.)
(c) Copyright 2013 Preston G. Smith. All Rights Reserved.
