Strategy and Technology

Course Number 1286

Assistant Professor Andrei Hagiu
Fall, 25 Sessions
Paper

Overview

This course explores the unique aspects of creating an effective strategy in technology- intensive businesses. When managers operate in environments with large sunk costs in R&D and network effects, they face a set of challenges that are specific to technology-based industries. Which technologies should a firm explore? How can technology be leveraged to build valuable multi-sided platforms? How can firms create and capture the value from their innovations? How can they sustain value despite wide-spread imitation and new technologies emerging? Many firms invest heavily in R&D, only to see competitors take advantage of their work. Others build great technologies, but fail to build the necessary complements and infrastructure to allow the technology to flourish. This course tackles these issues directly, providing a series of frameworks that can be applied directly to a wide range of strategic problems. The primary focus will be on hardware and software, Internet, intellectual property, consumer electronics, communications, and other information-intensive businesses.

Course Content and Organization

The course is structured into four modules:

Network Effects and Increasing Returns: Technology-intensive businesses have unique attributes, which make their products increasingly valuable if more consumers buy their product or if more complements become available. Also, the cost structures of some technology businesses are fundamentally different from traditional manufacturing or service industries. What are the implications of these characteristics for strategies and for anti-trust.

Complements and Multi-Sided Platforms: Understanding the role of complementary assets is critical in technology-intensive businesses: it is virtually impossible today for one company to produce a technology product all by itself. This means that a key aspect of strategy is getting suppliers of complementary products/services on board, while at the same time maintaining the ability to extract enough value for oneself. In many contexts, there are many types of complementors and customers, whose participation decisions are interdependent (i.e. more customers of type A attract more customers of type B and viceversa). We are then in the realm of multi-sided platforms: how can you devise a business model for getting all of these customer types on board (i.e. solving a multi-dimensional chicken-and-egg problem) - profitably.

IP, Licensing and Creating Standards: The problem of creating and capturing value from intellectual property (IP) is another critical component of formulating strategy in technology industries. What are the different ways in which a firm can create a market for and make money from its IP? How does the answer to this question change in industries dominated by standards? More broadly, is it possible for a firm to build a marketplace for transacting IP.

Digital Convergence: Industry evolution and change is faster in technology than in other markets. And the most disruptive form of industry evolution is technological convergence. As previously separate industries collide and competitors invade your markets, how can firms maintain their competitive positions and transform themselves to take advantage of new technological opportunities.

The answers to these questions change as firms, industries and technologies evolve. As the course progresses, it focuses particularly on the challenges faced by small firms facing growth for the first time and on the difficulties experienced by larger firms attempting to move through technological discontinuities.

The course utilizes lectures, case analyses, independent reading, and will have several visitors from entrepreneurial and large companies. Grades are determined by class participation, participation in Java polls, and a final paper or HBS-style case.

Career Focus

The course should be of particular interest to those interested in managing a business for which technology is likely to play a major role, and to those interested in consulting, private equity or venture capital.