Scale Intensive firms

In scale intensive firms technological accumulation is generated by the design, building and operation of complex production systems and/or products. Typical core sectors include the extraction and processing of bulk materials, automobiles in large scale, combined with the complexity of products and/or production systems, the risks of failure associated with radical but untested changes are potentially very costly. Process and product technologies therefore develop incrementally on the basis of earlier operating experience and improvements in components, machinery and subsystems. The main sources of operating experience are specialized suppliers of equipment and components. In these circumstances the main tasks of innovation strategy are the incremental improvement of technologies improvements in complex products or production systems, and the diffusion throughout the firm of best practices methods and design and production. Recent advances in the techniques of large scale computer and modeling now offer considerable opportunities for saving time and money in the building and testing of prototypes and pilot plant.

In science based firms technological accumulation emerges mainly from corporate R&D laboratories and is heavily dependent on knowledge skills and technical skills and techniques emerging from academic research. Typical core sectors are chemicals and electronics, fundamental discoveries (electromagnetism, radio waves, transistor effect, synthetic chemicals, and molecular biology) open up major new product markets over a wide range of potential applications. The major directions of technological accumulation in the firm are horizontal searches for new and technologically related products markets. As a consequence the main tasks of innovation strategy are to monitor and exploit advances emerging from basic research to develop technologically related products and acquire the complementary assets (e.g. production and marketing) to exploit them and to reconfigure the operating divisions and business units in the light of changing technological market.

Information intensive firms have begun to emerge only in the past 10 to 15 years, particularly in the service sector; finance retailing, publishing, telecommunications and travel. See, for example the surveys in The Economists on retailing (4 March 1995) and online finance (20 May 2000). The main sources of technology are in house software and systems departments and suppliers of IT hardware and of systems and applications software. The main purpose is to design and operate complex systems for processing information particularly in distribution systems that make the provision of a services or a good more sensitive to customer demands. The main tasks of innovation strategy are the development and operation of complex information processing systems and the development of related and often radically new services.

Specialized supplier firms are generally small, and provide high performance inputs in the complex systems of production, of information processing and of product development in the form of machinery components, instruments and (increasingly) software. Technological accumulation takes place through the design building and operational use of these specialized inputs. Specialized supplier firms benefit from the operating experience of advanced users, in the form of information skills and the identification of possible modifications and improvements. Specialized supplier firms accumulate the skills to match advances in technology with user requirements, which – given the cost complexity and interdependence of production processes – put a premium on reliability and performance rather than on price. The main tasks of innovation strategy are keeping up with users’ needs, learning from advanced users and matching new technologies to users’ needs.

Knowledge of these major technological trajectories can improve analysis of particular companies’ technological strategies by helping answer the following questions

1) Where do the company’s technologies come from?
2) How do they contribute to competitive advantage?
3) What are the major tasks of innovation strategy?
4) Where are the likely opportunities and threats and how can they be dealt with?

Source: Managing Innovation