Module V:

Impact of Technology on Strategy

 Putting Technology into Strategy
Technology bears an integral relation to a company’s strategic thinking by helping to define the range
of its possibilities. At the same time, it provides a good portion of the means by which strategy, once
decided on, is to be carried into effect.

The first major effort in this direction of putting technology into strategy was C.K. Prahalad’s 1973
essay on “Technology and Corporate Strategy,” the last section of which poses two key issues as a
guide to further research:

(1)the best means of linking a company’s technological profile with its corporate strategy and
(2)the development of a general process (i.e., resource allocation) model for technological
management.

There are numerous examples of organizations that encountered significant difficulties or that
disappeared as a consequence of some technological changes produced in their field of activity. The
evolution of the technology can represent for organizations a threat or an opportunity to strengthen
their competitive position.
 Impact of Technology on the Strategy of an Organization

According to its definition, technology consists of the concrete use of the scientific and technical
knowledge for conceiving, developing and producing a product; this stresses the fact that it
represents a decisive factor for the success or the failure of an organization.

The impact of the technology evolution on the competitive situation of an organization can be
analyzed at three levels:

Level 1 Level 2 Level 3

Activity as a whole Competitive Positions Competitive Structure
Growth Structure of the Costs Disappearance of the
Maturity existent Competitors
Value
Segmentary Limits Differentiation of the Emergence of new
Products Competitors

Adapted from : Alecxandrina Deaconu and Aurel Manolescu (Technology & its
Strategic Implications)
 Impact of Technology on the Strategy of an Organization
a) Impact of technology on the activity as a whole:

The technology evolution can strongly influence the development of an activity field by its effect on
the growth and maturity of the field.

Moreover, it can modify the borders between the strategic segments and can thus lead to a
repositioning of the organizations in their competitive environment.

For example, The progress of the microelectronics which led to the increase of the performance, the
decrease of the cost of the components, the significant reducing of the dimensions and of weight
favoured a large spread of the products generating a potential of growth very important in the
industry of semiconductors or in the downstream sectors (video, hifi, micro informatics, etc.).

The technology evolution can also lead to a segregation of the activity segmentation in fields that
become distinct. Thus, the field of the aeronautics construction evolved in this regard, being
progressively segregated in jet planes, strike planes, commercial planes, as a consequence of the
increased specialization of the technologies used in each of these fields.
 Impact of Technology on the Strategy of an Organization

b) The impact of technology on the competitive positions:

Technology can be the starting point of the competitive advantages of the organization as it:
• can provide a cost advantage;
• can be a source of differentiation.

Using more performing technologies can allow reducing certain cost elements, offering thus to an
organization a global advantage in comparison with its competitors.

Besides its effect on the costs, technology is one of the most important sources of differentiation for
an organization. Having performing technologies favours offering certain products with
characteristics superior in comparison with those of other products of the competition that exist on
the market.
 Impact of Technology on the Strategy of an Organization

c) The impact of technology on the competitive structures:

Leading to a modification of the key factors in an activity, the technology evolutions can alter the
mobility border of the activity and cause the disappearance of certain existent competitors or
facilitate the entrance to this sector of other new competitors.

Right after the new technologies get a decisive importance in an activity, the organizations that do
not master very well these technologies, which do not have the means or the will to purchase them,
can be tempted to abandon this activity.

On the other hand, the organizations outside the field, which master very well these technologies,
can take advantage of the opportunity to enter the market.
 Competitive Typology and the Portfolio of Technologies

Not all the technologies involved in the development of an activity have the same competitive
impact.

Arthur D. Little consultancy office proposes a repartition of the technologies in three main
categories:
• The basic technologies that are widely spread in carrying out the development of an activity;
although their implementation was at the origin of the activity, they do not have any more
currently a decisive impact because they are widely spread or paralleled by other similar
technologies.
• The key technologies are those whose competitive impact is the most important. They are the
core of the competition and mastering them confers distinctive competences, essential for the
success of an activity.
• The emerging technologies are those still in development, in the first application phase, and
have a limited impact on the activity. However, they have though an important potential and
some of them can become in time key technologies.
 Competitive Typology and the Portfolio of Technologies

In order to enter a technology in one of the three categories, we start rather from the role
they play in the competitive game within a certain activity field than from the own
characteristics of a technology. One and the same technology can be considered basic in a
field, key in another and emerging in others. We can see this phenomenon, for example, if
we analyze the computer assisted design and fabrication in the aeronautics, cars or textile
fields.

A complementary approach, developed especially by the office of consultancy in strategic

problems – SR International –, is based on the concept of portfolio of technologies. Inspired
from the steps used for constituting the activity portfolio of the organization, this approach
positions various elementary technologies applied in a bidimensional matrix:

• the competitive impact of the technologies, measured from the point of view of the
efficacy/cost, of the added value and of the differentiation potential;
• the degree of mastering the technologies by the organization.
 Competitive Typology and the Portfolio of Technologies

The positioning of the technologies in this

matrix allows the evaluation of the
technological patrimony of the organization
and confronting it with the activity portfolio;
the organization obtains interesting
information that can help it strengthen its
strategic position.
The various possible classifications of the
technologies do not lead though to a static
image of the situation of the organization and
of its environment.
The competitive impact of the technologies
evolves in time and, in a more dynamic
prospective, is may be useful to examine the
life cycle of the technologies
 Emerging Technologies Used in Strategic Management
Information technology has an inner logic that simply must be considered in a company's strategic
planning—that process of creating a concept of the business it is in, identifying its goals and
objectives and the long-term policies to meet them, and formulating plans of action.
Information collection is a procedure of diagnosis, which is one of three stages of strategic
management process, and information technology can facilitate the collection for helping an
organization to better understand their customers, rivals, industry, and policy. Information technology
facilitate its internal environment analysis, such as analysis of personnel, organization structure, and
management process. On the other hand, information technology’s contribution on external
environment analysis is more obvious and easier to understand. Customers’ data collection and
analysis is a significant instance.
Companies who want to provide their customers highly customized merchandise and services have to
change their strategy’s formulation for effectively and efficiently gathering massive granular
customers’ data, which includes customers’ demographics and psychographics, videos or webpages
they have clicked, and commodities they have been browsing, etc. For example, Amazon.com tracks
each of its customers’ browsing and shopping records, understanding the customer’s shopping
interests by analyzing these data, and advertises those merchandises that fit his/her interests or
needs.
 Open Source Software: Application in Strategic Management

Open Source Technology (Open Source Software/ Open Sourcing): Open source is a term that
originally referred to open source software (OSS). In simple terms open-source software is software
whose source code is published and made available to the public, enabling anyone to copy, modify
and redistribute the source code without paying royalties or fees. Open source software is developed
in a decentralized and collaborative way, relying on peer review and community production. Open
source software is often cheaper, more flexible, and has more longevity than its proprietary peers
because it is developed by communities rather than a single author or company.

Many large formal institutions have sprung up to support the development of the open-source
movement, including the Apache Software Foundation, which supports community projects such as
the open-source framework Apache Hadoop and the open-source HTTP server Apache HTTP.

Some examples of OSS: Linux, Mozilla Firefox, VLC Media Player, SugarCRM etc.
 Open Source Software: Application in Strategic Management

Organizations are increasingly recognizing the value and flexibility to be gained by leveraging and
investing in open source solutions. Thus, after decades of relying on commercial off-the-shelf (COTS)
software, business leaders are heading toward Open Source.

Four reasons to use Open Source Software:

• Open source keeps costs down

•
Open source improves quality
•
Open source delivers business agility
•
Open source mitigates business risk
 Artificial Intelligence: Application in Strategic Management

The intelligence demonstrated by machines is known as Artificial Intelligence. Artificial Intelligence

has grown to be very popular in today’s world. It is the simulation of natural intelligence in machines
that are programmed to learn and mimic the actions of humans. These machines are able to learn with
experience and perform human-like tasks.

EXAMPLES OF ARTIFICIAL INTELLIGENCE

• Siri, Alexa and other smart assistants

• Self-driving cars
• Robo-advisors
• Conversational bots
• Email spam filters
• Netflix's recommendations

To understand how Artificial Intelligence actually works, one needs to deep dive into the various sub
domains of Artificial Intelligence and understand how those domains could be applied into the
various fields of the industry.
 Artificial Intelligence: Application in Strategic Management

Machine Learning : ML teaches a machine how to make inferences and decisions based on past
experience. It identifies patterns, analyses past data to infer the meaning of these data points to reach a
possible conclusion without having to involve human experience. This automation to reach conclusions
by evaluating data, saves a human time for businesses and helps them make a better decision.
Deep Learning : Deep Learning is an ML technique. It teaches a machine to process inputs through
layers in order to classify, infer and predict the outcome.
Neural Networks : Neural Networks work on the similar principles as of Human Neural cells. They are
a series of algorithms that captures the relationship between various underlying variables and processes
the data as a human brain does.
Natural Language Processing: NLP is a science of reading, understanding, interpreting a language by a
machine. Once a machine understands what the user intends to communicate, it responds accordingly.
Computer Vision : Computer vision algorithms tries to understand an image by breaking down an
image and studying different parts of the objects. This helps the machine classify and learn from a set of
images, to make a better output decision based on previous observations.
Cognitive Computing : Cognitive computing algorithms try to mimic a human brain by analysing
text/speech/images/objects in a manner that a human does and tries to give the desired output.
 Artificial Intelligence: Application in Strategic Management

Artificial intelligence (AI) has become a popular topic in the realm of business. From predicting IT
failures to which new song will become a hit, AI presents many exciting opportunities. This begs the
question: how is AI affecting the most critical element of any business — its strategy?

By artificial intelligence the strategic management becomes more applicable and has the ability to
design the organization's strategy depending on the data analysis from the internal resources of the
organization and external environment to the organization.

AI helps the top management strategic decision making to define realistic organization's goals and
objectives that are alignment with the organization's vision and mission. Also, with artificial
intelligence, the top strategic managers can develop and implement the strategies and achieve a great
value to the organization that will be proactive and analyze the actions of its competitors, so will take
steps to competing and be a market leader.
 Artificial Intelligence: Application in Strategic Management

Artificial intelligence improves the strategic planning design; it defines the levels of strategy vision,
mission, and objectives. Then, formulating the strategy by doing internal and external analysis using
SWOT analysis, setting strategies, analysis these strategies, choosing the suitable strategy, and
preparing the strategic plan.

Evaluating the strategic plan before implementation, then start at implementing and practice this
strategic plan, controlling and monitoring during implementation, finally performing evaluation of the
strategic plan.

Example: Airbus’ AI was able to combine data from past production programs, continuing input from
the A350 aircraft program, fuzzy matching, and a self-learning algorithm to identify patterns in
production problems. The data gave Airbus the power to solve a problem more quickly and efficiently
than ever before.
 Machine Learning: Application in Strategic Management

Machine learning (ML) is the study of computer algorithms that improve automatically through
experience and by the use of data. It is seen as a part of artificial intelligence. Machine learning
algorithms build a model based on sample data, known as "training data", in order to make
predictions or decisions without being explicitly programmed to do so.

Machine learning algorithms are used in a wide variety of applications, such as in medicine, email
filtering, speech recognition, and computer vision, where it is difficult or unfeasible to develop
conventional algorithms to perform the needed tasks.

Machine learning approaches are traditionally divided into three broad categories, depending on the
nature of the "signal" or "feedback" available to the learning system.
Machine Learning: Application in Strategic Management
 Machine Learning: Application in Strategic Management
ML algorithms may have the potential for dramatically expanding the scale, scope, and speed of strategic analysis
through its capacity for interacting with the environment and generating data. ML Algorithm can be used in
Strategic management for doing External Analysis (PESTEL Analysis), Competitive Analysis and Internal
Analysis:
 Machine Learning: Application in Strategic Management

Political Factors: Infer ”political climate” across regions through AI-based text analysis tools Identify
patterns in news outlets, legislative debates and online political discourse Predict outcomes of elections
(e.g., Coletto et al., 2015), policy changes (e.g., Chan & Zhong, 2018), and political bias and conflicts
(Biessmann et al., 2016)

Economic Factors: Measure economic trends, such as economic growth, the onset of economic
recessions (e.g., Wu et al., 2020), increasing poverty (Kshirsagar et al., 2017), and bankruptcies (Cielen,
Peeters, & Vanhoof, 2004) Predict stock returns and thereby make better investment decisions
(Avramov, Cheng, & Metzker, 2019) Estimate systemic financial risks (e.g., Kou et al., 2019)

Social Factors: “map the contours of cultural fields, classify cultural elements and trace the evolution of
culture over time” (Bail, 2014) Enable the systematic measurement of culture and modeling of its
evolution within organizations and social groups (Doyle et al., 2017)
 Machine Learning: Application in Strategic Management

Technological Factors: Assist companies in monitoring technological developments and anticipate any
relevant technological changes Identify patterns of technology development by sifting through massive
amounts of patent or publication data (e.g., Lee et al., 2018) Construct “knowledge profiles” of their
industry and major competitors (Suominen, Toivanen, Seppänen, 2017).

Ecological Factors: Research into whether hydrogen electrical vehicles may become the dominant
means of transportation for consumers (Ranaei et al., 2016)

Legal Factors: Support firm internal collection and processing of legal data, potentially reducing
overall legal expenditures (e.g., Yousfi-Monod, Farzindar, and Lapalme 2010) Automate financial
compliance monitoring and regulation (e.g., Treleaven & Batrinca, 2017)
Machine Learning: Application in Strategic Management
Competitive Analysis using ML Algorithms
 Machine Learning: Application in Strategic Management
Internal Analysis using ML Algorithms:
ML in Human Resource
ML assist managers in identifying employee performance, predicting career trajectories, and revealing
patterns of compensation and inequality, among others (Strohmeier & Piazza, 2013).

ML in Accounting & Finance

Algorithms may boost the interpretation of what causes certain financial resource conditions (e.g.,
fluctuations in liquidity, exchange rate premiums at corporate treasuries) relevant to the type and timing
of the firm’s strategic commitments (Fethi & Pasiouras, 2010).

ML in Planning & Forecasting

ML algorithms are increasingly providing efficient analysis on other resources relevant to the strategy
process, such as demand forecasting, production planning, resource allocation, and logistics. ML can
augment production planning decisions by automating the process of searching for potential suppliers by
mining data from online catalogues and other repositories (Nissen & Sengupta, 2006), providing
predictions on performance of prospective suppliers (Humphreys, McIvor, & Huang, 2002), and even
estimating valuation and evaluating online bids (Cheung et al., 2004).
 Application of ML (AI) Technology in Strategic Management:
Summary
Through the availability of ML/ AI-driven system, the strategic planning process will be transformed
in these ways.
•A comprehensive, well-reasoned, evidence-based planning process will actually take place. It will not
be postponed, minimized, ignored, or cancelled.
•Most of the process can occur without human intervention, unless management chooses otherwise.
•The process will use much larger volumes of relevant data; they will be much more accurate.
•The process will take into account many more influential factors.
•More logical conclusions will be drawn from the data gathered. Human bias and distortion will be
greatly reduced.
•The resulting strategic plans will be based as much as possible on scientific evidence.
•Strategic decisions can be made at any time (24/7) year-round.
•A larger number of strategic options will be considered.
•Strategic decisions are more likely to produce positive results.
•The validity of assumptions on which plans are based are regularly reviewed.
•The implementation and performance of the plans are regularly monitored.
•The organization is more likely to achieve a competitive advantage through strategic action.
Usage of Big Data and Block Chain for Strategic
Analysis and Prediction of Outcome
 Block Chain: Introduction

A blockchain is, in the simplest of terms, a time-stamped series of immutable record of data
that is managed by a cluster of computers not owned by any single entity. Each of these
blocks of data (i.e., block) are secured and bound to each other using cryptographic
principles (i.e., chain).

The reason why the blockchain has gained so much admiration is that:
• A single entity does not own the data stored inside the blockchain
•The data is cryptographically stored inside
•The blockchain is immutable, so no one can tamper with the data that is inside the
blockchain
•The blockchain is transparent so one can track the data if they want to
Block Chain: Introduction
 Block Chain: Introduction

Types of blockchains Based on the participants, blockchains are categorized as public,

private or hybrid. This is similar to comparing the public internet and a company’s intranet.

• Public and permission-less: Public and permission-less blockchains resemble bitcoin, the
original blockchain. All transactions in these blockchains are public, and no permissions are
required to join these distributed entities.
• Private and permissioned: These blockchains are limited to designated members,
transactions are private, and permission from an owner or manager entity is required to join
this network. These are often used by private consortia to manage industry value chain
opportunities.
• Hybrid blockchains: An additional area is the emerging concept of sidechain, which
allows for different blockchains (public or private) to communicate with each other,
enabling transactions between participants across blockchain networks
 Big Data: Introduction

“Big data is a term used to refer to data sets that are too large or complex for traditional data-
processing application software to adequately deal with. Data with many cases (rows) offer greater
statistical power, while data with higher complexity (more attributes or columns) may lead to a
higher false discovery rate.”

The Six Vs of Big Data

• Volume
• Velocity
• Variety
• Veracity
• Value
• Variability
 Big Data: Introduction

With data being important to so many diverse sectors- from manufacturing to energy grids,
most of the companies rely on one or all of these types of analytics. With the right choice of
analytical techniques, big data can deliver richer insights for the companies

Before diving deeper into each of these, let’s define the four types of analytics:

1) Descriptive Analytics: Describing or summarising the existing data using existing

business intelligence tools to better understand what is going on or what has happened.
2) Diagnostic Analytics: Focus on past performance to determine what happened and why.
The result of the analysis is often an analytic dashboard.
3) Predictive Analytics: Emphasizes on predicting the possible outcome using statistical
models and machine learning techniques.
4) Prescriptive Analytics: It is a type of predictive analytics that is used to recommend one
or more course of action on analyzing the data.
Big Data: Introduction
 Big Data: Introduction
Use Cases of Big Data

• Enhanced Customer Experience

• Machine Learning Models
• Product Development
• Fraud Prediction
• Predictive Maintenance
• Improving Company Operations
• Improve Innovation
 Usage of Big Data and Block Chain for Strategic Analysis and
Prediction of Outcome
Blockchain ensures data storage and privacy to increase the data integrity, whereas the big data deals
with data ensuring the data quantity, velocity, and variety to deliver better predictions. The
combination of these technologies is unbeatable. Big data’s requirements and challenges are
perfectly complied with blockchain technology, providing transparency and security.

Using blockchain adds another data layer to the Big Data analytics process. Most importantly, this
data layer complies with 2 main demands of the Big Data analysis:

• Blockchain-generated Big Data is secure, as it cannot be forged due to the network architecture.
• Blockchain-based Big Data is valuable, meaning it is structured, abundant and complete, making
it a perfect source for further analysis.
 Usage of Big Data and Block Chain for Strategic Analysis and
Prediction of Outcome
The data in the ledger can relate to energy trading, real estate and a variety of other domains. There
are multiple Big Data analytics improvements stemming from this fact. For instance, fraud
prevention, as the blockchain technology allows the financial institutions check every transaction
real-time. Thus said, instead of analyzing the records of the fraud that already happened, the banks
are able to identify risky or fraudulent transactions on the fly and prevent the fraud entirely.

Big Data is an incredibly profitable business, with revenues expected to grow to

$203 billion by 2020. To say even more, by 2030 the data contained in the blockchain ledger might
be worth up to 20% of the global Big Data market and generate up to $100 billion in annual income.

Blockchain technology coupled with Big data can provide requisite information to support prediction
of outcomes (i.e predictive analytics) and strategic analysis.
 Usage of Big Data and Block Chain for Strategic Analysis and
Prediction of Outcome

Though, predictive analytics is used to predict future outcomes. However, it is important to

note that it cannot predict if an event will occur in the future; it merely forecasts what are
the probabilities of the occurrence of the event.

A predictive model builds on the preliminary descriptive analytics stage to derive the
possibility of the outcomes.

The essence of predictive analytics is to devise models such that the existing data is
understood to extrapolate the future occurrence or simply, predict the future data.

One of the common applications of predictive analytics is found in sentiment analysis where
all the opinions posted on social media are collected and analyzed (existing text data) to
predict the person’s sentiment on a particular subject as being- positive, negative or neutral
(future prediction).
 Usage of Big Data and Block Chain for Strategic Analysis and
Prediction of Outcome

Hence, predictive analytics includes building and validation of models that provide accurate
predictions. Predictive analytics relies on machine learning algorithms like random forests,
SVM, etc. and statistics for learning and testing the data.

Usually, companies need trained data scientists and machine learning experts for building
these models. The most popular tools for predictive analytics include Python, R,
RapidMiner, etc.

The prediction of future data relies on the existing data as it cannot be obtained otherwise.
If the model is properly tuned, it can be used to support complex forecasts in sales and
marketing. It goes a step ahead of the standard BI in giving accurate predictions.
 Usage of Big Data and Block Chain for Strategic Analysis and
Prediction of Outcome

The first use of predictive analytics through blockchain is almost autologous. The
technology can be used to predict price movements for cryptocurrencies and other financial
markets.

Analytics is at the core of numerous marketing applications. For example, customer

segmentation used to take into consideration only demographic and sociographic
coordinates, while now new categories can be defined by market realities.

Through predictive analytics, recommendation systems for the previously mentioned

categories can increase engagement, sales and the customer’s opinion on the brand. Not only
will such a policy create a way to sell more but can also adjust the price dynamically to keep
your offer competitive and increase the profit margin.