Chapter 7Strategy and Technology©2017 Cengage Learning. Al

Chapter 7
Strategy and Technology
©2017 Cengage Learning. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Learning objectives
Understand the tendency toward standardization in many high-
technology markets.
Describe the strategies that firms can use to establish their
technology as the standard in a market.
Explain the cost structure of many high-technology firms, and
articulate the strategic implications of this structure.
Explain the nature of technological paradigm shifts and their
implications for enterprise strategy.
2
Learning objectives
Explain the cost structure of many high-technology firms, and
articulate the strategic implications of this structure.
Explain the nature of technological paradigm shifts and their
implications for enterprise strategy.
3

Technical Standards and Format Wars
4
Set of technical specifications that producers adhere to when
making the product, or a component of it.
Technical standards
Battles to control the source of differentiation, and the value
that such differentiation can create for the customer.
Format wars
Common set of features or design characteristics.
Dominant design
5
Benefits of Standards
Guarantees compatibility between products and their
complements.
Reduces confusion in the minds of consumers.

Reduces production costs and risks associated with supplying
complementary products.
Leads to low-cost and differentiation advantages for individual
companies.
Helps raise the level of industry profitability.
6
Establishment of Standards
Standards emerge in an industry when the benefits of
establishing are recognized.
Technical standards are set by cooperation among businesses,
through the medium of an industry association.
When the government sets standards they fall into the public
domain.
Public domain: Any company can freely incorporate the
knowledge and technology upon which the standard is based
into its products.
7
Network Effects, Positive Feedback, and Lockout
Network effects: Network of complementary products as a
primary determinant of the demand for an industry’s product.
Positive feedback loops - Increase in demand for a technology
that triggers an increase in demand for products that support it.

Alternative standards get locked out as consumers are unwilling
to bear the switching costs.
8
9
scanned, copied or duplicated, or posted to a publi cly accessible
Strategies for Winning a Format War
Make network effects work in one’s favor and against
competitors.
Build the installed base for the standard as rapidly as possible.
Ensure a supply of complements.
Leverage killer applications.
Killer applications: Applications or uses of a new technology or
product so compelling that customers adopt them in droves,
killing competing formats.
10

Strategies for Winning a Format War
Pursue aggressive pricing and marketing.
Razor and blade strategy: Pricing the product low to stimulate
demand, and pricing complements high.
Cooperate with competitors.
License the format.
11
Costs in High-Technology
Industries
Similar cost economics.
Very high fixed costs and very low marginal costs.
Law of diminishing returns - Marginal costs rise as a company
tries to expand output.
Profitability increases when a company shifts from a cost
structure with increasing marginal costs to higher fixed costs
with lower marginal costs.
12
13

first mover
Firm that pioneers a particular product category or feature by
being first to offer it to the market.
Creation of a revolutionary product results in a monopoly
position.
First-mover advantage - Pioneering new technologies and
products that lead to slowing the rate of imitation.
First-mover disadvantages: Competitive disadvantages
associated with being first.
14
15
Strategic implications: crossing the chasm
16
Advantages
Opportunity to exploit network effects and positive feedback
loops.
Ability to establish brand loyalty and increase sales volume

ahead of rivals.
Ability to create switching costs for customers and accumulate
knowledge.
Disadvantages
Bear significant pioneering costs.
More prone to making mistakes.
Risk of building the wrong resources and capabilities.
Risk of investing in inferior or obsolete technology
16
Strategies for Exploiting First-Mover Advantages
Develop and market the innovation.
Develop and market the innovation jointly with other
companies.
Through a strategic alliance or joint venture.
License the innovation to others and allow them to develop the
market.
17
Factors to consider when selecting a Strategy
Complementary assets
Required to exploit a new innovation and gain a competitive

advantage.
Help build brand loyalty and achieve rapid market penetration.
Height of barriers to imitation
Higher the barriers, longer it takes for rivals to imitate.
Give the innovator more time to build an enduring competitive
advantage.
18
Factors to consider when selecting a Strategy
Capable competitors
Companies that can move quickly to imitate the pioneering
company.
Competitors’ capability depends on their research and
development skills and access to complementary assets.
19
20

Technological paradigm shift
Shifts in new technologies that:
revolutionize the structure of the industry.
dramatically alter the nature of competition.
require companies to adopt new strategies for survival.
Occur in an industry when:
established technology is approaching or is at its natural limit.
new disruptive technology has entered the marketplace and is
invading the main market.
21
22
23

24
STRATEGIC Implications FOR ESTABLISHED COMPANIES
Being aware of how disruptive technologies can revolutionize
markets is a valuable strategic asset.
Investing in new technologies that may become disruptive
technologies.
Creating an autonomous operating division solely for the
disruptive technology.
25
Strategic Implications for New Entrants
Do not face pressures to continue the existing out-of-date
business model.
Do not have to worry about established:
customer base.
relationships with suppliers and distributors.
Can focus their energies on the opportunities offered by the new
disruptive technology.
Must decide whether to partner with an established company or
go solo.
26

Page 1 of 1
MGT3035 Fundamentals of Project Management
© 2013 South University
The EVM
The EVM is a sophisticated technique that attempts to measure
all parameters, especially cost
and schedule of the triple constraint, in one set of metrics.
Thus, the EVM tries to improve upon
the limitations inherent in measuring the scheduled progress or
the budget in isolation.
For example, it is possible to be within the budget at a
particular point in time but not on schedule
in making advancements in technology. In such a case, the
project may greatly exceed the
overall budget at its completion, as by the time the project has
caught up with making the
technological improvements, the expended funds could far
exceed the overall budget. The EVM
links cost and time management in one set of numbers.
The EVM is generally not worth the effort (necessary for large

data collection) for small, low-
visibility projects. However, it becomes popular when managing
large, high-visibility projects with
powerful external stakeholders requiring accurate, periodic
reporting.
Page 1 of 1
Conflict Resolution and Negotiation
The best time to start managing a conflict is before it starts.
This is the time when debates are
likely to be least heated. As the project progresses, discipline
and professional maturity will be
required to make sure the rules for resolving conflict are
obeyed. This is the perfect time for the
manager to lead by example. This is done by showing more
respect for procedure than the desire
to get your own way.
Sometimes, when you are part of a big project, you will find the
most important conflicts are
happening between the manager, who is overseeing the entire
project, and the other managers
who are responsible for smaller sections of the project.
Conflicts also arise when the individual
project managers vie for resources simultaneously and the
functional managers may be unwilling

to relinquish key resources.
Sometimes, a situation exists in which the best way to handle a
conflict is to just ignore it.
Usually, however, this method of dealing with a conflict is the
worst. Sometimes, the project
manager must resolve a conflict in an authoritarian way by
making the decision almost alone.
Most conflicts can be managed through a better balance of
authority and participation than these
extremes.
When team members participate in the resolution of a conflict,
it results in commitment and a
more permanent resolution. However, all stakeholders should be
aware of psychological
phenomena, such as groupthink and conflict avoidance. Sooner
or later, an important conflict will
“out” itself, even if it is only important to very few people.
Page 1 of 1
Conflicts
In a small group, constructive conflict can challenge accepted
beliefs or paradigms that
sometimes need to change for the betterment of the company. It
develops team dynamics,

encourages and motivates members to look for alternate
solutions, and revitalizes the energy
level and enthusiasm in a team.
Personal conflicts are another matter; they are destructive. The
project manager is then
responsible for addressing the conflicts within the team before
they escalate to affect team
effectiveness and continuity. Project managers must show a
balance of concern between
achieving project goals and team-maintenance goals.
It is not always clear whether a conflict is a professional one,
that is, a professional difference of
opinion over a legitimate project concern, or a personal conflict,
which, while it has little to do with
formal goals, threatens the health of the team. Naturally, some
conflicts contain elements of both,
and these are especially tricky.
Page 1 of 3
Different Types of Project Documents
There are various types of project documents. Some of them
have been given below.

Project Charter: A document used by the project initiator or
sponsor that formally
authorizes the existence of a project and provides the project
manager with the authority
to apply organizational resources to project activities.
Project Scope Statement: The narrative description of the
project scope, including
major deliverables, project objectives, project assumptions,
project constraints, and
statement of work. It provides a documented basis for making
future project decisions
and for confirming or developing a common understanding of
project scope among the
stakeholders.
Request for Proposal: A type of procurement document used to
request proposals from
prospective vendors of products or services.
Statement of Work: A description of products, services, or
results to be supplied.
Contract: A mutually binding agreement that obligates the
vendor to provide a specified
product or service or result and obligates the buyer to pay for it.
Project Plan and Subsidiary Plan: A formal, approved document
that defines how the
project is executed, monitored, and controlled. It may be a
summary or composed of

constituent plans.
Work Breakdown Structure (WBS): A deliverable-oriented
hierarchical decomposition
of the work to be executed by the project team to accomplish
the projected objectives
and create the required deliverables.
Project Activity List: A summary of all the components of
work performed during the
course of a project, derived from the WBS.
Project Networks: Any schematic display of the logical
relationships among the
schedule activities.
Schedule: Planned dates for performing schedule activities and
meeting schedule
milestones.
Gantt Charts: A graphic display of schedule-related
information. Schedule activities or
the WBS components are listed down the left side of the chart,
and dates are shown
across the top.
Budgets: The approved estimate for the project, the WBS
component, or any schedule
activity.

Organization Chart: A method for depicting interrelationships
among a group of persons
working together towards a common objective.
Responsibility Charts: A structure that relates the project
organization structure to the
work structure. This helps ensure that each component of the
scope of work is assigned
to a responsible person.
Page 2 of 3
Risk Register: The document containing the results of the
qualitative risk analysis,
quantitative risk analysis, and risk response planning.
Risk Breakdown Structure: A hierarchically organized
depiction of the project risks
arranged by risk category and subcategory that identifies the
various areas and causes of
identified risks.
Probability Impact Matrix: A common way to determine
whether a risk is considered

low, moderate, or high by combining the two dimensions of a
risk; its probability of
occurrence, and its impact on objectives, if it occurs.
Audits and Lessons Learned Archives: A store of historical
information and lessons
learned about the outcomes of previous project selection
decisions and previous project
performance.
Change Requests: Requests to change or expand the project
scope, modify policies,
plans or procedures, modify costs or budgets, or revise
schedules.
Periodic Reports: Formal documents required by the
communications plan at various
important points of scheduled project progress.
EVM: A management methodology for integrating scope,
schedule, and resources, and
for objectively measuring project performance and progress.
Stakeholder Communications: The formal manner by which
persons and organizations,
such as customers, sponsors, performing organizations, and the
public that are actively
involved in a project or whose interest may be affected, are kept
informed throughout the
project life cycle.

Forecasts Estimates: Predictions of conditions or events in the
project future based on
information and knowledge available to the time of the forecast.
Quality Tools: Tools adopted from quality management, such
as flowcharts,
benchmarking studies, fishbone diagrams, and control charts.
Status Review Meeting Minutes: Formal documentation of
major topics covered and
decisions made during planned meetings throughout the project
life cycle.
Corrective Actions: Documented direction for executing the
project work to bring
expected future performance of the project work in line with the
project management
plan.
Issue Log: Centralized documentation of matters in question or
in dispute, points of
matter not yet settled, and over which there is still discussion.
Test Reports: Formal reports of the results of the technological
or other tests of progress
along known dimensions of uncertainty.
Subcontract: A contract let by a main contractor to another,
usually more competent

organization in a given area, normally in a specialized field
needed for project completion.
Job Descriptions and Performance Evaluations: Documents
used in project human
Page 3 of 3
resource management to record the job requirements of someone
who will be needed to
work on a project, and subsequently the record of how a person
filling that job has met
the requirements of the description.
Resource Breakdown Structure: A hierarchical structure of
resources by resource
category and resource type used in resource leveling schedules
to develop resource
limited schedules, and which may be used to identify and
analyze project human
resource assignments.
Page 1 of 1

Impact of a Prolonged Project
There are numerous instances which depict how one can be
committed to a project that should
not be completed. One such instance is the designing and
building of Hercules, a large cargo
aircraft designed during World War II.
At the beginning of World War II, Howard Hughes’ company
was assigned the task of designing a
very large cargo aircraft to transport wartime materials and
troops across the Atlantic Ocean.
However, the project faced numerous delays related to
technical, supply, and political issues.
These delays pushed the completion of the aircraft project
beyond the end of the war, past the
time when it was really needed.
Ideally, the project should have been hauled after the war
ended. However, Howard Hughes was
determined to complete this massive airplane, and Hercules took
its first and only flight on
November 2, 1947, two years after the war. The airplane had no
viable commercial application
and became a museum piece in Long Beach, California.
As you can see, some projects take on lives of their own. They
continue to exist only because of
the momentum built up from their prior existence. Some
projects that should be closed continue
to exist because of psychological reasons. There is a well-

studied human behavior that does not
give up even when all available information points to an
inevitable failure.
Obviously, managers don’t get rewarded for failed projects;
they get rewarded for successful
ones. Though you may consider rational decisions as being
driven by economic or similar logic,
organizational politics plays a crucial role driven by an equally
powerful rationality. Thus, many
times projects continue to exist for career advancement reasons,
as well as job retention reasons.
The reasons for the continued existence of projects, makes it
clear why planned project closure is
an important and overlooked phase of the project life cycle.
Though it sounds odd, project closure should start in the
planning stage. That is, planning efforts
should document how the project will be closed. Knowing
closure requirements, right at the
beginning, precludes detrimental surprises and helps avoid
scope creep.
You have learned about project audits. Project audits may be
done at any time; this is especially
true for large projects with many external stakeholders. Audits
at critical, periodic review points,
determine whether or not the project will continue. This
certainly applies at project closure;
auditing a project at closure may even be a fiduciary
responsibility, not just a good management
option.

of 1
The Correct Way of Closing Projects
As you are aware, a formal mechanism is essential for the
acceptance of deliverables. When all
deliverables are accepted, contractually the project comes to an
end. It signals the closing of
many monetary accounts and the transfer of funds, especially
final payments.
Sometimes, some procedural documents are, themselves,
deliverables. You have seen how the
EVM is a method that is commonly required of major contracts;
so are formal meetings and
written reports that detail the EVM metrics.
Similarly, project closure requires an administrative and
contractual report to be included in the
final delivery. Such a retrospective analysis generally termed as
a “lessons learned” document,
may be a part of the project audit or submitted separately.
Finally, it is good human resources management to hold a
special event to commemorate the
official closure of a project. Project teams often have a team
lunch to mark the end of a project.

Monitoring and Control Techniques
Once plans are set into motion, managers have to monitor and
control events to turn out the results as planned.
Processes need to be set up so the management is aware of how
things are going against the baseline budget,
schedule, and scope. The term "scope creep" refers to the
tendency of projects to be punctuated by many changes
that go beyond the original scope of the project. Quite a few of
these changes are, in fact, good ideas. While many
changes compensate for early oversights or uncertainties
needing to become clari�ed as the project goes along,
they do change the scope and affect the deliverables. These, in
turn, affect schedules, costs, and resource
requirements of the entire project.
In order to manage hundreds of potential changes in any given
project, a formal management function needs to be
established. The most common term, in this context, is
con�guration management. Basically, the term
"con�guration" implies the overall scope, even though
con�guration is almost always de�ned in exquisite detail.
In high-tech projects, if you have to make a change in the
con�guration, a mechanism commonly called an
engineering change request is submitted. This is then considered
by the con�guration control board for its

viability. At the other end of the spectrum, a change request
may be made for reasons other than engineering;
possibly by an important external stakeholder.
In all cases, requests are evaluated and most are rejected. The
ones accepted are carried out with little fanfare, as
they are already within the scope of the original project. If
others go beyond the scope, especially those entailing
large changes, they need an amendment to the contract. The
rework effort needed to amend a contract is reason
enough to reject most changes.
You need to measure where your project really stands with
respect to where it should actually be, and metrics
help you to make that comparison. Differences between these
two situations are known as variances.
Variances can be positive or negative. With regard to schedule,
a positive variance means the project is ahead of
schedule. With regard to costs, a positive variance means the
project is below budget. To analyze the trend, you
need to collect the metrics and/or variances over time.
Identifying a negative trend early in the life of the project
provides an opportunity to respond quickly.
For reporting purposes, one method of applying metrics to
projects is called the EVM. This method has become
particularly popular to use while making periodic reports to

major external stakeholders in the case of large
projects.
Additional Materials
View a Pdf Transcript of The EVM
(media/week5/SU_MGT3035_W5_L4_G1.pdf?
_&d2lSessionVal=ci8aH3u0fFqOZQwWEPolysax6&ou=85477)
https://myclasses.southuniversity.edu/content/enforced/85477-
17099880/media/week5/SU_MGT3035_W5_L4_G1.pdf?_&d2lS
essionVal=ci8aH3u0fFqOZQwWEPolysax6&ou=85477
Project Documentation
Project management is different from other styles of
management in its reliance on documentation. The
importance is veri�ed by the inclusion of project
communications as one of the nine core areas in project
management knowledge in the PMBOK® Guide. Project
communications is really about managing the timing and
�ow of information, in the various stages of documentation.
There are various project documents that you have already
discussed such as project charter, project scope
statement, and work breakdown structure.
Depending on the organization, its level of project management

maturity, the legal environment, and other
factors, there are many more types of project documents. This
paperwork may make project management seem
like the antithesis of modern management, which emphasizes
speed, short cycle times, and control not through
bureaucracy, but through charismatic transformational
leadership, and a strong culture that communicates clear
behavioral expectations.
Without thorough project documentation, there would be
haphazard terminology, chaotic processes and
methods, and lack of process standardization. Benchmarking
and continuous improvement would be impossible.
Project management would be a tribal, word-of-mouth practice,
handed from one generation of managers to the
next. With proper documentation, project management becomes
a core competency of the organization and a
potential locus of sustainable competitive advantage.
One of the �rst things you learned about project management is
that each project has a �nite life cycle. That
means every project eventually ends by design. It does not drag
on forever. Some projects are so successful; they
morph their missions and continue operating with new
objectives, taking on some of the characteristics of
permanent programs. There is no particular best way to close a
project, especially considering how much they

vary in scope.
View a Pdf Transcript of Different types of project documents
View a Pdf Transcript of The �ve level structure of maturation
_&d2lSessionVal=ci8aH3u0fFqOZQwWEPolysa x6&ou=85477)
View a Pdf Transcript of Impact of a prolonged project
View a Pdf Transcript of The correct way of closing projects

Page 1 of 1
The Five-Level Structure of Maturation
In project management, the maturity of the organization’s
project management capabilities is
related to its expertise at thorough documentation.
Level 1
At this level, the organization recognizes the importance of
project management, emphasizing a
common language and terminology.
Level 2
At this level, the organization has clearly defined processes,
such that success on one project
can easily be replicated in subsequent projects.
Level 3

At this level, all corporate methodologies are combined into
one, that is, of project management.
Synergies across organizational units are stressed and sought
through commonality of
processes.
Level 4
At this level, benchmarking is stressed towards the goal of
maintaining a competitive advantage.
Level 5
At this level, the information gathered in the earlier levels is
used on an ongoing basis to achieve
continuous improvement.
Project Audit
The subject of a project audit is not very popular, and some
managers have a tendency to skip project audits
altogether. There are several reasons for this, and they are all
very human.
However, audits become part of the permanent record of the
project, which has important implications for
organizational growth, learning at the cultural level, and project
management maturity efforts. An audit helps to
establish best practices for future projects.

Project audits can take many forms and formats, but there are
some very important concerns a good audit should
address. The main concern of an audit is how well the
objectives of the project were achieved. However, the
responses to the concern may vary quite a bit, depending on
individual points of view. For example, the
contracting of�cer may have a different set of opinions than the
project manager. Team members may also differ
in their opinion, as they often have informal goals set and
expectations. More importantly, the project sponsor
and the customer also have a stake, which must be given due
importance.
Con�icts in aggressive projects are virtually inevitable. In this
context, aggressive means that during the planning
stage a project has set ambitious cost, schedule, and technical
goals. The fact of each one being dif�cult to meet
presents a set of three individually tough problems, but, in turn,
it becomes even more likely for trade-offs to
happen among the triple-threat parameters.
When properly managed, certain con�icts can be very useful in
�nding unique solutions to problems. It also helps
in advancing project management competencies across the
organization. Professional con�icts or disagreements
are sometimes a very healthy sign. They often indicate the
company is a tough competitor; that it has set tougher

performance standards for itself than the market forces. Such
companies often become global leaders in their
respective industries.
Destructive con�ict can destabilize personal and group morale,
cause a sense of isolation in some members,
distort the effective communications vital for developing team
effectiveness, and inhibit some individuals from
taking the initiative for handling problems they are best suited
at solving. Members can become mildly paranoid
and risk averse in this type of con�ict. Whether con�ict
becomes constructive or destructive, depends not only on
the inherent nature of the problem, but also on how well it is
managed by the formal leader, the informal leaders,
and other individuals on the team.
Project managers use their experience, their people's skill, and
sometimes pure instinct to tackle project-related
problems. Let's see what the right time is for con�ict resolution
and negotiation:
View a Pdf Transcript of The Reason why managers avoid
audits (media/week5/SU_MGT3035_W5_L5_G1.pdf?
View a Pdf Transcript of Con�icts

View a Pdf Transcript of Nature of Con�ict
View a Pdf Transcript of Con�ict Resolution and Negotiation

of 1
The Reason Why Managers Avoid Audits
There are some basic reasons why managers are reluctant to go
through audits.
Open Criticism
People do not enjoy being criticized in an open forum,
particularly if it relates to information that
may not reflect well on their performance.
Utilizing Scarce Resources
Performing a project audit consumes time and other resources
just like any other management
process. When audits are performed at the end of a project life
cycle, these resources may be
especially scarce.
Tied Down to Same Project
Project close-outs can be very hectic times. There is pressure to
get deliverables finalized and
signed off, and people begin to look at life beyond the project,
perhaps towards the next project or
even towards a new job.

of 1
Nature of Conflict
As the project life cycle evolves, the nature of conflict changes.
During project formation, priorities
and procedures are the issues that tend to be the major areas of
conflict. In subsequent phases,
scheduling and technical (scope and quality) issues become
common.
At the planning stage, you will not be able to foresee
everything; therefore, the chances of the
plan getting modified are always there. Cost is not always the
foremost concern as, theoretically,
the budget still has enough in it to get by on a short-term basis.
As the project gets into full swing, delays and uncertainties
cause possible schedule violations
and technical shortfalls.
Near the end of the project, just finishing on time can become
such an obsession that all other
concerns may suffer.
So, over the life cycle of the project, individual problems
change in their seriousness. Pressures
to prioritize problems result in making trade-offs, and the
nature of the trade-offs can change too.

of 1
Nature of Conflict
As the project life cycle evolves, the nature of conflict changes.
During project formation, priorities
and procedures are the issues that tend to be the major areas of
conflict. In subsequent phases,
scheduling and technical (scope and quality) issues become
common.
At the planning stage, you will not be able to foresee
everything; therefore, the chances of the
plan getting modified are always there. Cost is not always the
foremost concern as, theoretically,
the budget still has enough in it to get by on a short-term basis.
As the project gets into full swing, delays and uncertainties
cause possible schedule violations
and technical shortfalls.
Near the end of the project, just finishing on time can become
such an obsession that all other
concerns may suffer.
So, over the life cycle of the project, individual problems

change in their seriousness. Pressures
to prioritize problems result in making trade-offs, and the
nature of the trade-offs can change too.

Chapter 7Strategy and Technology©2017 Cengage Learning. Al

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Chapter 7Strategy and Technology©2017 Cengage Learning. Al