There are four phases in the life cycle of a technology, and for each there are appropriate ways of partnering with outsiders. Increasingly, the challenge for managers is to recognize which phase each of their products is in and decide what kinds of external partnerships are most likely to facilitate speedy development. Each product a company is juggling may be in a different phase, and because the partnerships developed for one phase of a given technology could serve a different purpose in another phase of another technology, partnerships must be handled with care. Despite the complexity that comes with the need to manage a variety of alliances, Microsoft Corp. and others are demonstrating that it can be done successfully.
The most dramatic change in global technological innovation — the movement toward externally oriented collaborative strategies that complement internal research-and-development investments — began more than a decade ago.1 Today companies use alliances, joint ventures, licensing, equity investments, mergers and acquisitions to accomplish their technological and market goals over a technology’s life cycle. How can companies decide when to use which form of partnership? In part, by understanding the externally focused technology-life-cycle model.2
The Technology-Life-Cycle Model of Alliances and Acquisitions
Understanding the role of alliances and acquisitions in the technology life cycle starts with understanding the cycle’s four stages: the fluid phase, the transitional phase, the mature phase and the discontinuities phase.3 The first three were identified in the 1970s by James M. Utterback. (See “The Utterback Model of the Technology Life Cycle.”) He later added a fourth, discontinuities, stage. Each stage is shaped by changes in the character and frequency of innovations in technology-based products and processes and by market dynamics. (See “Characteristics of the Four Technology Phases.”)
The Utterback Model of the Technology Life Cycle
Characteristics of the Four Technology Phases
The Fluid Phase
In the fluid phase, the earliest pioneering products enter the market for that technology amid a high level of product and market uncertainty.