Sunday, September 23, 2007

Technology Fountainheads

Technology Fountainheads: The Management Challenge of R&D Consortia

This book is a study of six R&D consortia in the US – Sematech, Semiconductor Research Corporation (SRC), Microelectronics and Computer technology Corporation (MCC), the Electric Power Research Institute (EPRI), the Gas Research Institute (GRI) and Bell Communications Research (Bellcore).

“The six consortia…were borne out of sense of industry crisis and/or deeply sensed need to advance the cause of industry R&D. In each instance, industry and/or government leaders articulated the need, advocated collective endeavor, and called for action.”

Why was Sematech successful?:

1. A viable, sustainable nationally important mission
2. Worked at precompetitive level
3. Outstanding leadership
4. Secured government funding
5. Industry led with 80% participation

Classification of R&D consortia;

1. Open membership
2. Exclusive membership
3. closed membership

Functions of R&D consortia:

• Development & dissemination of new industrial process technologies
• Technical education & training
• Environmental research (safety 7 health)
• Supply-industry infrastructure development
• Academic research & graduate education support
• End-product development & commercialization
• Industry standard-setting
• Industry disaster & crisis response

Strategy: “Vision is the basis for a call to action. The validity of a vision may depend upon the stature of those sounding the call, and on the premise that certain objectives can be met more effectively in a collective endeavor rather than the undertaking of a single firm.

If the vision is the basis of collective action, mission is an articulation of purpose. To be sustainable, a mission must promise the fulfillment of some broadly perceived need at the industry or sector level. It should attract the support of relevant constituencies – those whose backing can contribute to the consortium’s success, or whose lack of support could jeopardize its success from the onset.”

“A viable mission has several characteristics. First, it must not deal in domains of corporate core competencies or threaten consortium members’ competitive advantage. Second, it must offer firm-specific economic value. To the extent that a consortium reflects public purpose and the national interest, it will have validity and legitimacy. As a primary mission, however, collective or public purpose may attract support only in the short run. In the long run, return on R&D investments, becomes more the compelling objective – and at least for the United States, that measure tends to give priority to short-term results.”

Basic elements of consortium strategy:

1. its membership constituency, as well as other founders (that is, the markets it will serve
2. It’s R&D sourcing modes (basically the choice between an internal staff and external contracting)
3. Its product line, or range of services it will provide
4. Its pricing modes (that is, the forms in which its revenues are derived – e.g., one time shareholder fees, annual membership dues, cost per project charges)
5. Its R&D delivery systems (the channels used in the diffusion of new technology to member companies, their suppliers and their markets)

Theory of Consortia

“”The relevant theory, developed largely by Olson and Hardin, may be summarized as follows. A collective good is likely to be provided if the economic gain is great enough for one party or group that it alone would be willing to pay the full cost. Others may join the group if the net benefits to them contributing to the collective effort are positive, or if some attractive by-products are available through membership. Non economic benefits – for example the psychic rewards of belonging – may be relevant in small groups, but may decrease in importance for larger groups.”

“Current theory also holds that large groups will be less effective than small ones, on the grounds that:

‘The larger the group, the smaller the share of the total benefit going to any individual and the less likelihood that any small subset of the group, mush less any single individual, will gain enough from getting collective good to bear the burden of providing even a small amount of it.’”

I’m not sure that I agree with this. It seems like the premise is based upon additive rather than synergistic value. It would seem to be true if there was a decreased value for adding members. But, I don’t believe it’s true in general.

Benefits of Collaboration

“In theory, the economic rationale for the formation of a collaborative group is the anticipation of gain by some member or core group – a greater gain than if the member or core group were to undertake the same mission independently.”

• Cost sharing opportunities
• Sharing complementary knowledge
• Transitioning opportunities for firms moving into new fields of technology or diversifying into new businesses
• Risk reduction opportunities
• Monitor technological advances
• Risk of not collaborating
• Non economic motivations (especially for the core group)
• Potential for economic gain
• Improving the health of the industry
• Networking opportunities
• Sense of mutual dependence (smaller firms)
• Potential for selective and proprietary product offerings

Technology Fountainheads: The Management Challenge of R&D Consortia, E. Raymond Corey, Harvard Business School Press, 1997

Sematech: Saving the US Semiconductor Industry

Why Sematech consortium worked:

1. Members were willing to change
2. Members reduced interfirm secrecy
3. Solved problems with facts and information
4. Continuously reapplied the cooperative model
5. Accomplished specific, agreed-upon goals
6. Members avoiding “sandbagging”
7. Leverage continuous learning
8. Microchip industry profited by helping itself
9. The amount of investment was too big to dismiss
10. The organization was the optimal size
11. Leaders were willing to contribute without assurance of direct payback
12. Founding members brought with them the confidence of previous success

“The most important and timely success factor mentioned by everyone involved in Sematech is unprecedented cooperation among competitors requires an absolute belief in the necessity for collective action – a commonly held conviction that without hanging together, each will surely hand separately. In Sematech’s case that conviction was a widely held view that the industry’s survival was gravely endangered, and with it, the nation’s economic and military independence.”

“If it’s not competitive, it has to change.”

“The first empowerment was the decision to try. The second empowerment was the planning workshops, which said, ‘Try to do what?’”

“The biggest secret is that there is no secret.”

“One of the things we learned at Sematech early on was that all the secrets we were keeping from each other were basically the same secrets.”

“The prohibited areas of competitive collaboration were related to proprietary product and marketing issues. Legally allowed precompetitive collaboration involved core competencies or generic manufacturing process issues. The approximate proportions of the two types of information were eventually discovered to be a surprising 85 percent generic to 15 percent proprietary.”


1. Being open to ongoing self-assessment and willingness to change
2. The recognition of long-term interdependence for survival
3. The importance of hearing every voice
4. The necessity of continually learning from learning
5. The moral conviction of the win/win rewards of systematically expanding mutual support

Sematech: Saving the US Semiconductor Industry, Larry Browning & Judy Shetler, Texas A&M University Press, 2000

Friday, September 21, 2007

Technological Substitution in Publishing: Part 3 - Student Device Technology

Student devices have changed from desk top to lap top over the years, and are now changing again to other types of devices. This substitution is summarized in graph below.

Data: America’s Digital Schools, The Greaves Group & The Hays Connection, 2006

While the number of data points is small, the data fits the Fisher-Pry model well, and supports common knowledge. Desktops are in decline and laptops have reached their maximum penetration of the market. Other types of student devices are rapidly gaining share of the market. While there is data presented in America’s Digital Schools on a number of other student devices, with the limited number of data points, it was impossible to segment the other device category. However, thin client, handheld, cell phones and portable gaming devices seem to be on the decline. While, tablet PCs and student appliances are gaining market share.

Saturday, September 8, 2007

Technological Substitution in Publishing: Part 2 - Reference Library

Substitution analysis is a powerful tool to examine and forecast the substitution of one technology for another. In this case, the substitution is electronic media for print media in the reference library. The surrogate data that we have is that provided by Association of Research Libraries. It is not the complete world of expenditures on reference materials for libraries, but it is representative, at least of the big libraries. The data that ARL provides is a measure of expenditures. This is a useful surrogate for the number of units, the number of users or the amount of material, all potentially more direct measures of the substitution. However, sales figures are quite often used as they provide an aggregate way of indicating the impact of the new technology on the market.

It is also important to note that there are multiple substitutions going on in a cascade of change from print - CD, LAN and Internet, to just name a few. If data were available on this level of detail, a multiple substitution model could be created.

The Fisher-Pry substitution model is often used to analyze a substitution like electronic for print media in the reference library. The relationship between the fraction of total market taken by the new technology, f, is often given as:

f = 1 /(1 + c exp(-bt))

where t is time, and c and b are empirically determined coefficients. In this case b and c were determined from the data provided by Association of Reference Libraries for the years 1992 to 2004.

When these data are analyzed utilizing the Fisher-Pry method, the graph shown in Figure 1 results. It clearly indicates that the substitution of electronic for print is well underway in reference materials. The crossover point will occur in 2008 and 90% substitution will be achieved ten years later.

Figure 1. Data:

Taking 1990 as the beginning of the substitution, and the middle projection, the time to 90% substitution by electronic media will take 28 years.

One of the interesting, and most insidious aspects of this type of substitution, when the substitution is taking place in a growing market, is that a large percentage of the substitution has taken place before the old technology sees two successive years of decreased revenue. This is the case here as well. Fifty percent of the total time to 90% substitution has elapsed before the print media have experienced two years decline, as shown in Figure 2.

Figure 2.

There is an additional substitution going on and that is collaborative user generated content for traditional organized, hierarchical development and production. The reference industry is a pioneer in this substitution in Wikipedia. This is a substitution within the electronic reference resources, and unfortunately we have no data to indicate how this substitution is progressing. Revenue is not a good surrogate for this type of substitution as the results of the Wikipedia effort are available for free. The only possible measure would be the number of accesses or amount of time that people use Wikipedia versus other traditional reference resources. Wikipedia is certainly growing fast (Figure 3), in spite of professional criticism of the quality of the effort. Figure three indicates the growth in the number of English articles. The number of English articles is projected to be:

2007: 1.7M
2008: 4M
2009: 8.5M
2010: 18M

Figure 3. Source: Wikipedia

The transformation of the reference library has not been completed. There are many factors, trends and driving forces that could affect the future of the reference library. I think that the two most important trends affecting the future of the reference library, and by association, the reference publishing industry are: search engines vs. indexed collections, and proprietary vs. open content creation.

Search engines select information to be delivered to you based on your keywords matching them to the content of documents it searches, based on the algorithm of the search engine. It does not deliver the information that is "best" for the purpose of the researcher, as a reference librarian would, nor does it verify its authority, as indexed and abstracted peer reviewed articles/books/reports does. Most search engines will deliver documents that are current, are used frequently and are linked to my other documents (a type of authority measure). What search engines provide is quick, cheap access to over a billion web sites in the world. Given the high costs of the traditional system, and the rapid improvement of search engines, I see search engines providing a lot of the services now fulfilled by reference librarians, and the reference publishing industry.

Wednesday, September 5, 2007

Technology Substitution in Publishing: Part 1 - Introduction

Information technologies (hardware and software) are playing a key role in innovations in industry after industry. They diffuse through an industry by improving procedures, processes and products. The diffusion usually begins with incremental changes aimed at improving costs, or more broadly, efficiency. This is like a virus infecting a living cell, the informed or informatized (we don’t have good language to describe the result) is transformed into something new. Informed segments of the economy then multiply their effects on the industry radically changing it or destroying it.

The publication industry is one of the industries being so affected. Information technologies have found their way into the processes of printing books, their distribution, the way they are sold, and even the way we communicate about the books. Now information technology is altering the very nature of publications, especially in the textbooks and supplemental materials used in K-12 education. And, now the information technologies developed to aid social change and societal development have begun to impact the industry, threatening to destroy it.

This series of eight blog entries summarizes the meta research done on the industry searching for data that indicates the nature and rate of substitution of information technologies into print. There are two overall conclusions from this study. First, that there are indications of the substitution going on in a number of areas. And, second, that we lack a coherent set of data on the industry that would enable us to make firm predictions.

Substitution analysis is a well accepted method of technological forecasting in use for 36 years. In these analyses, the Fisher-Pry model was used. The Fisher-Pry model predicts characteristics loosely analogous to those of biological system growth. It results in a S-curve (more formally, sigmoidal curve) familiar to many because the curve is in the shape of an S. These natural growth processes share the properties of relatively slow early change, followed by steep growth, then a turnover as size asymptotically approaches a limit.

The Fisher-Pry substitution model is often used to analyze a substitution like electronic for print media in the reference library. The relationship between the fraction of total market taken by the new technology, f, is often given as:

f = 1 /(1 + c exp(-bt))

where t is time, and c and b are empirically determined coefficients.