211. Technology Strategy for Business Leaders
Jul 10, 2024
To succeed, corporates and start-ups must innovate. Learn how to manage technology strategy as a Business Leader from MBA prof Alberto Galasso.
Professor Galasso teaches Strategic Management and Technology Strategy at the University of Toronto's Rotman School of Management.
He is the author of The Management of Innovation: Managing and Creating Technology Capital
Timestamps:
02:18 Why Technology Strategy is important for Business Leaders
04:13 The Relationship Between Technology and Innovation
07:59 Tips for Becoming More Innovative
12:40 Case Study: CT Scanner Industry Crisis
15:04 Strategies for Addressing the Crisis
20:07 Balancing Technological Advancements and Value Creation
23:26 The Role of Intellectual Property and Data
27:43 Collaborative Approach to Innovation
31:37 Identifying Innovative Companies
35:21 Enhancing Personal Innovation Capabilities
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Episode Transcript
Alberto Galasso (00:00.078)
What would you have done now if you were a leading company in that industry, in which you see out of the blue many news articles saying that your technology is problems. Change completely the perception of a technology that is very valuable because this technology can save a lot of life.
Sophia Matveeva (00:21.806)
Welcome to the Tech for non -Turkish podcast. I'm your host, tech entrepreneur, executive coach at Chicago Booth MBA, Sophia Matveeva. My aim here is to help you have a great career in the digital age. In a time when even your coffee shop has an app, you simply have to speak Turkish. On this podcast, I share core technology concepts, help you relate them to business outcomes, and most importantly, share practical advice
on what you can do to become a digital leader today. If you want to have a great career in the digital age, this podcast is for you. Hello smart people. How are you today? I'm in London where the weather does not know it's July. You know, I had the heating on the other day at my home. What is happening? But on a brighter note, in today's lesson, you are going to learn about technology strategy from Professor Alberto Galasso.
Professor Galasso teaches a course on tech strategy at the Rotman School of Management at the University of Toronto. And it's a great school, so this is going to be a great lesson. And about 20 minutes into the episode, he actually shared a case study that he teaches to his business school class. And this case study is quite dramatic and you have to choose what you would have done in this really sticky situation. So I'm really curious what you think of it.
And right at the end, he shares some really good career advice that's applicable to entrepreneurs and to employees. So I really think you'll enjoy this episode. And don't forget to subscribe to this show to get more free lessons on how to succeed in the digital age. My aim for you is to do interesting work, get paid exceptionally well, and to never be intimidated by a tech pro. So subscribe and that's what will happen. And now let's learn from Professor Galasso.
Hello, Alberto Grasso and welcome to the Tech for Noon Techies podcast. I'm so happy to have you here with us.
Alberto Galasso
Thank you so much. Thank you so much. It is a pleasure to be here. So you teach technology strategy, but you teach that at a business school, not a computer science school. So why is it that business leaders today need to learn about technology strategy? So I think that there is quite a lot of evidence across a lot of different fields like finance, business, economics, that the main engine of economic growth for organization and companies is innovation.
It's essentially very, very hard to find the story of a company that reached a leadership position in its industry and kept that position for a long period of time without being innovative. So that's why I think is the number one reason why managers in all sorts of industries and in all sorts of firms, from small firms to large firms, they need to think seriously about technology because it's a key engine of growth of companies. The reason that I think it's also very important is that big changes in the technology space, the development of big new technologies, can have huge effects on industry.
can really affect survival of a lot of companies, can generate new business leaders. So to think seriously and look seriously and monitor the new technology development in your industry is crucial. Just an example, we're living now the early stage of the artificial intelligence developments. I'm in one industry, like education, is probably one of those that has been exposed most.
We have like, you know, from one month to the other students being able to do the assignments. We just, you know, five cycles. It's changing even the, you know, the education industry is changing all sorts of industries. So I am curious because I asked you about technology strategy and you started talking about innovation and I think some people, for some people, they're the same thing and for other people, they're different. So what do you think of that?
Are they the same thing, technology and innovation, or should they be talked about in different things? So from the business perspective, they are closely related. I usually think about technology and technology strategy, but if you don't like what technology strategy is, I think it's about answering two big questions. One is related to how as an organization, I generate
Sophia Matveeva (05:08.974)
ideas for new products and new production processes. So it's kind of related to innovation if we think about innovation as coming out with new products and processes. But there is also probably is related to what related the idea of like, once we have new technologies that are being developed inside the company or outside the company, how we deal with them in order to generate value. Interesting. So
What you're talking about is, so for example, you could have innovation in how, let's say, Hermes makes a handbag. And obviously they have craftsmen or craftspeople rather, that are working with their hands and making leather and software is not involved in the making of a Hermes handbag. But there's innovation there. And so would you say that that would also fit into technology strategy? Because as you're calling technology, it's basically a process, right?
So the process could be handmade leather or it could be an algorithm. Is that right? That's a good, you're hitting the nail on the head. Like one of the things that I spawned with is that when we talk about technology, it's true that, you know, historically we always been focusing on few industries like think about the pharmaceutical industry, medical device industry, the software industry, tech. But a lot of the insights that have been developed.
in helping managing and growing these companies can be useful in all sorts of industries. And especially today where we have a lot of creative content required in all, every industry has their own, every company has its own website, has its own content that is interfaced with customers. Ideas and products are more and more diffused to
Channels like podcasts or vlogs or a lot of ways in which you should think about managing this type of interaction with consumers is about, you know, it's very similar to the insight that you should have when you think about generating new content in the sense of new product, new technology, new science, because, you know, the creative component of the business is
Sophia Matveeva (07:31.246)
There's a much more importance these days across all industries. So could you give us an example? Because, you know, every CEO wants their team to be more innovative. And I think, you know, all of us, we also want to think of ourselves as innovative and creative. I don't think anybody wants to think of themselves as just, you know, boring and doing rubber stamping work. So what are your suggestions for what we can do or for what companies can do?
to become more innovative. Yeah. So one, I think one important insights that you have from tech strategy, especially from the classic work that was done in past to think about pharmaceutical industry, to think about tech industry is that you put a lot of attention to the future. Technology is about the future. It's not about the products that are sold today. It's not about what company do today. It's about
you know, what is going to happen 5, 10 years from now? Because, you know, a lot of industry, you know, the roles of engineers and scientists is to think hard about the products that are going to be sold in the future and the technology that we're going to use in the future. The idea that thinking and thinking seriously about, you know, what are your expectations about the future and use those as guiding your monetary decision today.
is really good. So understanding consumer trends, you know, because yes, we need to understand what technology will allow us to do. So for example, what does 5G allow us to do that 4G doesn't and you know, what will 6G mean and so on. But also, what will people actually want? Because you know, as I'm sure in your house, you have some super modern things. And also you have some things that you know, people from the 18th century would have been familiar with, right?
Yeah, that's a really good point. One important, I think, insight from the literature -making technology strategy is that at the end of the day, for a technology to have an impact on a company or in general to society, there should be some value created for the customers and there should be a way for the organization that developed or produced the technology to kind of get part of this value.
Sophia Matveeva (09:55.214)
And this is important to mention in the sense that sometimes things are very exciting for your R &D department. Your engineers, your scientists, your coders are really excited about something. But not necessarily this is the technology you want to push forward because you may not have success with customers. You may not be able to
generate margins that are required to kind of recoup the investment that you do to develop the technology. Going back to your previous question, what innovative companies do, what managers that are great at technology strategies do, is to kind of find the right balance between what is exciting and cool from the technology perspective, but also what is something that can actually be used to
increase my presence with customers, something that can actually help the company grow and increase your kind of market share. So I guess this is why business leaders are necessary in the technology strategy space because, well, first of all, the thing needs to make money, right? So whatever the invention is for to the business, it's got to make money. And so that means that there's this collaborative approach. Yes, you need the water.
you know, whether it's gonna be engineers or data scientists, or whoever, they are indeed a book basically, so the technical people, then you also need the commercial people say, hey, how is how are we gonna sell this thing? Like, how much is it going to cost to make? And also, you would need consumer insight, so that probably sales in an enterprise organization, or
Consumer Insight specialists who will know, okay, this is what consumers are going to want. So this is why, and when you are thinking about this cross -disciplinary approach, you're speaking to business leaders or future business leaders. What misconceptions do they have? Like, do they all think you're going to teach them to code in your class? No, actually in my classes, in general in the business, we got to be able to teach them actually to code. You know, what we do is a lot of case studies.
Sophia Matveeva (12:12.494)
method, which we go over problems that companies faced with their technology or big decisions that they face, whether to explore one technology or the other and try to make the student think hard about what would you do? What would you have done in that situation? Can we have a kind of a summary version so we can all think about, okay, what would we have done?
I can give you an example of a case that is a Harvard Business School case that I wrote with a coder from Harvard Business School. Her name is Hong Wu. We were looking at a big issue that took place in 2010 in the CT scanner industry. Quite unexpectedly, a few hospitals in California, there was an issue with the CT scanner machines, this machine that you know.
was actually very precise X -ray to patients. Sorry, CT scanners. I thought you were talking about like scanners in cities. No, CT scanners. yes, like with tube things. Or I thought you were talking about like a Google Maps kind of situation. No, before, some technicians put the settings of these machines wrong. Not a patient does.
They take very high level of radiation. And these are machines that already by themselves give very high level of radiation. So they receive very high level of radiation. These patients came back with losing hair and eventually they realized that some of these machines, the settings were... the poor, terrifying. Yeah. And on top of that, it was very bad for the consumer, for these patients, with also some journalists
noticed that and they started a massive media campaign writing articles about the dangers of over -radiation exposure for diagnostic radiation devices. So we pushed the students to say, okay, what would you have done now if you were a company, a leading company in that industry, in which you see out of the blue many news articles
Sophia Matveeva (14:37.262)
saying that your technology is a problem. Consumers getting a kind of change complete in the intersection of a technology that is very valuable because these are technologies that can save a lot of lives. These are technologies that are really important to diagnose possible health issues. You have changed your technology strategy. How would you have given up, for example, the technology field? So what do students normally come up with?
So there is a lot of discussion. Some students say maybe we should give up. For some of these companies, it was not a big part of the business. We should kind of give up working in this technology area. Others say, OK, we should wait and see how, for example, legislation is going to evolve and whether standards in the industry are going to change. Others instead saying, OK, we should double down on our innovation activity and try to
push hard our R &D department to come up with a newer technology. Eventually, what happened in this industry is that this led to substantial improvements in the technology. The machines that we have now provide much, much less radiations in order to generate images. So there were some very quick innovation responses, for example, changes in codes to...
a lot require more passwords to change the setting, but also much more substantial changes in the way these images were constructed using much, much less radiation. And this was something great for patients, for society, but also something quite good for these companies because then in a hospital had to replace their machine with a newer machine. So it's not something that generated
some negative, you know, such a negative. So then I guess from this, the moral of the story is if there is an issue, don't run away, but see if you can improve the product because within that there is, you know, you can, you can save lives, but also there's a market opportunity. Exactly. You know, it's all about, you know, the, the, the caveat that you are is really important, like if there is an opportunity. So here is, is really important.
Sophia Matveeva (16:59.95)
What one message from this, from this example is that this was a situation which was possible. There were technological path. They were kind of considering the past, but nobody really really took them to the market. So it was kind of, there was a technological opportunity to develop something. There was a lower radiation. In some cases it's not possible or it's possible at
costs that are not realistic in terms of like, you know, having a product on the market. But to look at these opportunities, to think about, you know, are there possible changes to the technologies, strategies we're developing is really important. What is, you know, not good is to react. To just say, okay, we have, you know, we should give up, we should not operate in this area.
But to really consider all the opportunity and the possible options on the table is very important. Also, this to me looks like a case for being a late adopter, you know, as a customer or as a client. Okay, you want if there's a new invention, maybe don't be the first person to use it. Wait until people have used it because inevitably things will go wrong. And then
Most of the time the product will be improved and then you can start using it. And we can actually see this with chat GPT. Like I always think about that poor unfortunate lawyer whose name I mentioned on the show before, but I forgot his name, who basically decided to ask chat GPT for case law.
And Chad GPT made it all up. And I think he was quite a well -paid lawyer, you know, well -paid like litigation attorney. And Chad GPT made up all the cases and made up all of the evidence. And he didn't think to check because he didn't know. He didn't know that generative AI could hallucinate. So he presented this in court and basically he was thrown out of court by the judge because the judge said this is complete nonsense. This obviously made huge headlines. I mean, I don't know if...
Sophia Matveeva (19:14.67)
like how his career is doing, but he's probably not known as the brilliant lawyer. His reputation has definitely taken a hit, but so has the reputation of Chad GBT. And since then they have improved it. And so, you know, we are all benefiting from, you know, this poor lawyer's case. And so I also had similar examples just in my own business.
when we've worked with tools or we've worked with coding languages that were very new languages and they hadn't yet had enough problems uncovered. And so what do you think of this? Like, should we be early adopters or is it smarter to wait? Like, is there a case for being an early adopter, would you say?
Technology strategy is really a balance between these two things, like very strong second -mover advantage. You can learn from the failure, but also it's much easier to kind of copy and develop something a bit better than something that you've already seen, then come up with something else. On the other hand, there is another big area of technology strategy, which is intellectual property strategy. If you are the first
you can claim protection on something and then block anybody else to work in your technology period. So, technology studies is about the models between these two things. There are advantages in being second because you can understand the problems, you can understand what consumer wants, you can come up with a better version of something that already exists, but there are also advantages in being first because if you are first and you get into the property of something, you have the right to
remain the only one that operates in a technology area, you can prevent others to work closely to you. And IP strategy is really an important part of that strategy to be sticked. So I guess it's about knowing what your strengths are. So if you have an amazing R &D department and your R &D, your science, like that's where you shine, then yes, you are going for first -leaver advantage. But
Sophia Matveeva (21:27.854)
If that's not your forte, but maybe understanding the consumer and marketing is your forte, that is that second move advantage. Because here I'm looking, I'm thinking of Apple. Apple is never the first mover, but when they come into a market, it's brilliant. And what they're really good at is branding and marketing and create and design, right? So it gets not so much the technology, but the actual design which people want. And interesting. So when you are.
teaching, one of the things I want to deal with today is how can a founder or a business leader make the company they work in more innovative? So, yeah, it's a big question. One thing I like usually to say is this idea of the value of interliferate property. I think this is something that sometimes people forget is a really important
aspect of being successful as an innovator to be able to generate value of your technology. And this is something that I think has also changed dramatically in the past 20 years. Intellectual property patents in particular has been used for a long time, but has been seen usually as something important for large, large players. If you were a Texas instrument, it was really very important. If you were a Motorola, it was really important.
But about 20 years ago, things started changing. There was a big interview of Bill Gates that really exactly 20 years ago in 2004 said, we should stop thinking about intellectual property IP as something for lawyers. It should be really one of the most important thing to consider for top executive companies. This is the way you can protect your differentiation,
difference with other firms is the way you can share your technology with other firms, but this crucial for the growth of firm and for the competitive advantage of firm. Moreover, a lot of research in the past 10 years have shown that intellectual property is also fundamental for small firms, for technology entrepreneurs and startups. Getting right to your first patent application, your first patent portfolio, the first couple of patents,
Sophia Matveeva (23:56.078)
huge effects on the survival of firm. Their estimate is that you are 60 % more likely to receive an investment from VC if your first patent application is done in a way that makes it successful. It's useful for the investors in our audience because we probably don't have so many people who are filing patents in the Tech for Nanteque's audience because this is Tech for Nanteque so it's mostly business leaders.
But we do have quite a few investors in the audience and said this is useful because in your book, so I've got your book here, the management of innovation and in your book, you talk about the fact that yes, a startup was more likely to raise early stage funding, but also a startup was more likely to have a successful IPO if they have patents. So, you know, investors are always asking, so investors are always asking me, okay, if I want to invest in the early stages and
I don't really understand the technology. What should I be looking at? And so from what you're saying is that, okay, if there is something patentable and it's patented, that is a good thing. But the thing is not everything is patentable because if it's a kind of a technical invention than it is, but copyright is much harder to work with. Is that right? So, that's
You're raising a very good point. So first of all, the EES is becoming more and more important for investors and even in general for like startup founders to understand that especially these days, we should have startups in which products can be on the market three, four, five years from now. ID is probably the only thing that you have, the only asset that you have. It's an asset that can be used as collateral. It's an asset that can be traded.
So it's really a crucial asset that the company has. It's not simply something that you do for a legal perspective. There's also just been some kind of trends these days in which more and more things can become patentable. So people, firms across multiple industries tend to be patenting all sorts of things, particularly the software space. But you're right also in
Sophia Matveeva (26:17.902)
The importance of copyright has been increasing a lot. Also, the historically copyright was considered something important if you were a producer of movies, if you were a book publisher, if you were in the music industry. Nowadays, it's really important for managers to understand copyrights in all industries. As we were discussing before, every company these days has a webpage, is a main interface with your customers.
You need to know what you own in that web page, what you don't own, what permission you need, what don't. All sorts of businesses now tend to use apps to do commerce, and apps are software. They can be protected by copyrights. So to really understand how to make sure you know what can be protected and what is not is crucial. So the importance of copyrights is increasing dramatically in the economy.
We've got quite a few lawyers who listen to this show and I think this is going to be just another case for lawyers learning about digital strategy and digital technology because actually this is a great opportunity for lawyers to do interesting and lucrative work, right? Yeah. So that is another thing that I would try to push in the courses here in the business school. Think about, so as we were talking before, you need the right balance between engineering and the science.
kind of expertise of a company and the business side, there is also the right balance between the legal expertise in the company and the business side. Like the way you structure your IP strategy, for example, really, really depends on how what you want to do with a company. Like you want to be a company that becomes the next big leader in your industry. Do you want to be the next Metrony, the next big medical advice company? Or do you want to be someone that, for example, is a
supplier, all of it by the pedo -wise company. Depending on that type of intellectual property that you want, the approach that you ask, the intellectual property, all the teachers, for example, you want to be our dresser, you want to be really depends on that. Important thing to remember is something that I, you know, tend to make as a crucial component of my courses is that data on intellectual property can be
Sophia Matveeva (28:42.958)
very important data for managing your decision making. We across MBAs, you did your MBA in Chicago probably, also in your courses they were saying you need to use data for your decision making, for exactly your manager to take decisions just following your instinct. If you have some data it will be useful to look at the data before taking a decision. And this is something that
It's easy to say, but it's not. In practice, how do you do it, especially if you're a startup that has no resources, no product, no sales record. What data do you use? Patent data are very easy to access. There are portals in which you just do searches and you get information on what are the firms that operate in that technology area, what are the patents that have been filed, and super useful information.
because it's about food, it's about the products that are going to be sold in the next five, six years, it's about the expertise of companies. It's about... It's coming up. I don't know if you've seen this, but there's a newsletter called CB Insights, and it's run by this hilarious and very smart guy called Anand Sanwal. I love his newsletter. So for all of the people watching this, listening to this, definitely sign up.
You probably won't read each one because you get a daily email, but he does have this patent watch and he basically says, okay, we evaluate the patents being filed in a particular industry. And based on our evaluations, this is where we think the market is going. And there are people who actually genuinely use this to make investment decisions. He's not paying me to say this, but I do genuinely think it's a useful way to think about whether you are investing your
money, but also where you are investing your time, right? Because all of us, like whether we're investing capital or not, we're investing our time and effort and you only live once, right? So you want to work in a company that's innovative, whether it's innovative in its marketing or whether it's an innovative in its products, but a company that's going to carry on surviving and not basically just going to be a really boring place, just waiting to die. So aside from, this is my last question for you. So aside from
Sophia Matveeva (31:07.95)
Looking at patent data, say somebody is going for a job interview or they want to change their jobs. And, you know, we are doing this interview in the second half of 2024. So I think people are a bit like, I had all these plans in January. Okay. Like I need to get on it like now. And so, you know, there are, I know some of my listeners really identify with this. So people are like, okay, I need to go to this really cool innovative company now. So how can people.
identify from the outside that the company that they are targeting, that they're thinking of going to, is an innovative company that's going towards the future or is just going to carry on going to go down? That's a very good question. But there are a lot of things that you can look at. One thing, for example, that came up in the
in research, especially in the management and management of innovation. Is the idea that companies that are truly innovative are companies that invest a lot in learning the new scientific development in your field? So for example, in an asking question where you have a job interview about the opportunity not just to use the latest equipment that the company may have,
but to keep track of the last scientific development. Things like, do you send your engineers and scientists to conferences? Is there any partnership with universities in which you can either take courses or go to seminars or work with joint projects? The technical term of this is called absorbative capacity. Is the company investing
in not just developing their own things, but also absorbing new and key development. This is really quick. This also applies not just to, you know, companies where they're scientific, but say to a law firm, you know, are they on their lawyers being, are their partnerships with the top law schools in the world? Are they going to conferences? Also, are the lawyers say, for example, going to tech conferences because
Sophia Matveeva (33:30.382)
You know, there is going to be so much upcoming regulation, AI regulation and tech regulation. And there being, being just someone who doesn't understand any of the digital stuff is not going to be enough. So essentially what you're saying is look at how much a company wants to learn from the outside and how many tentacles it's got to the outside world. And if the company is very
instead of when they're like, we've got our own training center, we're fine. We've got our centers of excellence. We've got our own conferences. We're the best. Then that company is probably stale. Exactly. And the lesson is that it can be a red flag. It can be a red flag. Sometimes, unfortunately, the fact that the company is very successful and you have a lot of sales and engineers and scientists then are really focused on maybe solving problems related to the
current products that they have on the market or to focus too much on the current technologies and that creates issues because then you lose track. You lose track on the new developments in your industry, your new developments in your field and that can be a problem for the firm. So this idea of like, I think it's a natural question to ask in a time interview and also can give you some...
Yeah, well, it's also useful for us, I think, for us to think about when if we can pretend that we are that company, because it's so easy to just focus on your career, what you know, all for all of us, our email inbox is a nightmare. Like I'm afraid to open it up to this interview, right? and to do this is never ending and is just so tempting to just get the stuff done that you've got done and then just be like that's it.
And then, you know, I would invite listeners to think about, okay, what is your absorptive capacity? Have you gone to conferences that you haven't been sent to? Like, do you know what the key conferences are in your industry? Like, you can just go, you don't have to wait for somebody. And, you know, what about, obviously, you're listening to this, so your absorptive capacity is probably higher than a lot of your colleagues, so well done. But you know,
Sophia Matveeva (35:50.798)
Are you, are you networking? Are you doing things to interact with the wider world outside of your company? Exactly. Or can you, do you devote enough time to kind of learning and studying the new things that are coming out in your field? Like even sometimes it's easy to say, but are you really putting something in your calendar and you know that that particular day in the morning you go to that conference or is it something that is not a real
commitment that the last minute if an email comes, you're saying, no, I need to deal with this and the other stuff. So those are, you're making a very, very good point. This is something that is important for organization, but even at the individual level to be really important. Awesome. Well, thank you so much. This has been a pleasure. Audience, check out the book, The Management of Innovation.
I found it quite useful both from a startup point of view and also from a big company point of view. And definitely if you want to invest in technology, there's some useful stuff there. So basically that you can kind of use as a checklist. And obviously this is not investment advice, so don't sue me. Any new knowledge you can get basically makes you smarter money, right? Okay. So thank you very much and have a wonderful day. Thank you. Thank you so much, Grona.
Wasn't that interesting? Now you know what technology strategy is and it's not that daunting. See? And if you enjoy this episode, don't forget to leave the show a rating and review. This really does help other smart people like you to discover this show. And if you're not yet a subscriber, then become one. This show is all about helping you succeed in the digital age.
And now my dear smart listener, I wish you a wonderful day and I shall be back in your delightful smart ears next week. Ciao!
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