The Art of High-Technology Management

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Over the past fifteen years, the world’s perception of the competence of U.S. companies in managing technology has come full circle. In 1967, a Frenchman, J.-J. Servan-Schreiber, expressed with alarm in his book, The American Challenge, that U.S. technology was far ahead of the rest of the industrialized world.1 This “technology gap,” he argued, was continually widening because of the superior ability of Americans to organize and manage technological development.

Today, the situation is perceived to have changed drastically. The concern now is that the gap is reversing: the onslaught of Japanese and/or European challenges is threatening America’s technological leadership. Even such informed Americans as Dr. Simon Ramo express great concern: In his book, America’s Technology Slip, Dr. Ramo notes the apparent inability of U.S. companies to compete technologically with their foreign counterparts.2 Moreover, in the best seller The Art of Japanese Management, the authors use as a basis of comparison two technology-based firms: Matsushita (Japanese) and ITT (American).3 Here, the Japanese firm is depicted as a model for managers, while the management practices of the U.S. firm are sharply criticized.

Nevertheless, a number of U.S. companies appear to be fending off these foreign challenges successfully. These firms are repeatedly included on lists of “America’s best-managed companies.” Many of them are competitors in the R&D intensive industries, a sector of our economy that has come under particular criticism. Ironically, some of them have even served as models for highly successful Japanese and European high-tech firms.

For example, of the forty-three companies that Peters and Waterman, Jr., judged to be “excellent” in In Search of Excellence, almost half were classified as “high technology,” or as containing a substantial high-technology component.4 Similarly, of the five U.S. organizations that William Ouchi described as best prepared to meet the Japanese challenge, three (IBM, Hewlett-Packard, and Kodak) were high-technology companies.5 Indeed, high-technology corporations are among the most admired firms in America. In a Fortune study that ranked the corporate reputation of the 200 largest U.S. corporations, IBM and Hewlett-Packard (HP) ranked first and second, respectively.6 And of the top ten firms, nine compete in such high-technology fields as pharmaceuticals, precision instruments, communications, office equipment, computers, jet engines, and electronics.

The above studies reinforce our own findings, which have led us to conclude that U.S.

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1. See J.-J. Servan-Schreiber, The American Challenge (New York: Atheneum Publishers, 1968).

2. See S. Ramo, America's Technology Slip (New York: John Wiley & Sons, 1980).

3. See R. Pascale and A. Athos, The Art of Japanese Management (New York: Simon & Schuster, 1981).

4. See T. J. Peters and R. H. Waterman, Jr., In Search of Excellence (New York: Harper and Row, 1982). For purposes of this article, the high-technology industries are defined as those which spend more than 3 percent of sales on R&D. These industries, though otherwise quite different, are all characterized by a rapid rate of change in their products and technologies. Only five U.S. industries meet this criterion: (1) chemicals and Pharmaceuticals; (2) machinery (especially computers and office machines); (3) electrical equipment and communications; (4) professional and scientific instruments; and (5) aircraft and missiles. See National Science Foundation, Science Resources Studies Highlights, NSF81-331, December 31, 1981, p. 2.

5. See W. Ouchi, Theory Z: How American Management Can Meet the Japanese Challenge (New York: John Wiley & Sons, 1980).

6. See C. E. Makin, "Ranking Corporate Reputations," Fortune, 10 January 1983, pp. 34-44. Corporate reputation was subdivided into eight attributes: quality of management, quality of products and services, innovativeness, long-term investment value, financial soundness, ability to develop and help talented people, community and environmental responsibility, and use of corporate assets.

7. See: M. A. Maidique and B. J. Zirger, "Stanford Innovation Project: A Study of Successful and Unsuccessful Product Innovation in High-Technology Firms," IEEE Transactions on Engineering Management, in press; M. A. Maidique, "The Stanford Innovation Project: A Comparative Study of Success and Failure in High-Technology Product Innovation," Management of Technological Innovation Conference Proceedings (Worcester Polytechnic Institute, 1983).

8. A similar conclusion was reached by Romanelli and Tushman in their study of leadership in the minicomputer industry, which found that successful companies alternated long periods of continuity and inertia with rapid reorientations. See E. Romanelli and M. Tushman, "Executive Leadership and Organizational Outcomes: An Evolutionary Perspective," Management of Technological Innovation Conference Proceedings (Worcester Polytechnic Institute, 1983).

9. One of the authors in this article has employed this framework as a diagnostic tool in audits of high-technology firms. The firm is evaluated along these six dimensions on a 0—10 scale by members of corporate and divisional management, working individually. The results are then used as inputs for conducting a strategic review of the firm.

10. General Electric evidently has also recognized the value of such concentration. In 1979, Reginald Jones, then GE's CEO, broke up the firm into six independent sectors led by "sector executives." See R. Vancil and P. C. Browne, "General Electric Consumer Products and Services Sector" (Boston, MA: Harvard Business School Case Services 2-179-070).

11. Personal communication with David Packard, Stanford University, March 4, 1982.

12. After only eighteen months as Geneen's successor as president, Lyman Hamilton was summarily dismissed by Geneen for reversing Geneen's way of doing business. See G. Colvin, "The Re-Geneening of ITT," Fortune, 11 January 1982, pp. 34-39.

13. See "RCA: Still Another Master," Business Week, 17 August 1981, pp. 80-86.

14. See "R&D Scoreboard," Business Week, 6 July 1981, pp. 60-75.

15. See R. Stata, Analog Devices Quarterly Report, 1st Quarter, 1981.

16. See: "Why They Are Jumping Ship at Intel," Business Week, 14 February 1983, p. 107; M. Chase, "Problem-Plagued Intel Bets on New Products, IBM's Financial Help," Wall Street Journal, 4 February 1983.

17. These SAPPHO findings are generally consistent with the results of the Stanford Innovation Project, a major comparative study of U.S. high-technology innovation. See M. A. Maidique, "The Stanford Innovation Project: A Comparative Study of Success and Failure in High Technology Product Innovation," Management of Technology Conference Proceedings (Worcester Polytechnic Institute, 1983).

18. See: Maidique and Zirger (in press); Several other authors have reached similar conclusions. See, for example, Peters and Waterman (1982).

19. Personal communication with Tom Jones, chairman of the board, Northrop Corporation, May 1982.

20. See W. R. Thurston, "The Revitalization of GenRad," Sloan Management Review, Summer 1981, pp. 53-57.

21. See: T. Wise, "IBM's 5 Billion Dollar Gamble," Fortune, September 1966; "A Rocky Road to the Marketplace," Fortune, October 1966.

22. See A. P. Sloan, My Years with General Motors (New York: Anchor Books, 1972), p. 401.

23. Personal communication with Ken Fisher, 1980. Mr. Fisher was president and CEO of Prime Computer from 1975 to 1981.

24. At Genentech, Cetus, Biogen, and Collaborative Research, four of the leading biotechnology firms, a top scientist is also a member of the board of directors.

25. See, for example, J. A. Morton, Organizing for Innovation (New York: McGraw-Hill, 1971).

26. Jimmy Treybig, president of Tandem Computer, Stanford Executive Institute Presentation, August 1982.

27. See: D. A. Schon, Technology and Change (New York: Dell Publishing, 1967); Peters and Waterman (1982).

28. See S. Myers and E. F. Sweezy, "Why Innovations Fail," Technology Review, March-April 1978, pp. 40-46.

29. See: Texas Instruments (A), 9-476-122, Harvard Business School case; Texas Instruments Shows U.S. Business How to Survive in the 1980's, 3-579-092, Harvard Business School case; Texas Instruments "Speak and Spell Product," 9-679-089, revised 7/79, Harvard Business School case.

30. Arthur K. Watson, Address to the Eighth International Congress of Accountants, New York City, September 24, 1962, as quoted by D. A. Shon, "Champions for Radical New Inventions," Harvard Business Review, March-April 1963, p. 85.

31. Personal communication with Tom Jones, chairman of the board, Northrop Corporation, May 1982.

32. Personal communication with Bob Hungate, general manager, Medical Supplies Division, Hewlett-Packard, 1980.

33. Personal communication with Richard Frankel, president, Kevex Corporation, April 1983.

34. Personal communication with Herb Dwight, president and CEO, Spectra-Physics, 1982.

35. Personal communication with Alexander d'Arbeloff, cofounder and president of Teradyne, 1983.

36. Personal communication with Ray Stata, president and CEO, Analog Devices, 1980.

37. Personal communication with Bernie Gordon, president and CEO, Analogic, 1982.

38. Personal communication with Paul Rizzo, 1980.

39. Personal communication with Tom McAvoy, president of Corning Glass, 1979.

40. Personal communication with Milt Greenberg, president of GCA, 1980.

41. See Wise (September 1966).

42. See L. R. Sayles and M. K. Chandler, Managing Large Systems: Organizations for the Future (New York: Harper and Row, 1971).

43. See R. A. Burgelman, "A Model of the Interaction of Strategic Behavior, Corporate Context and the Concept of Corporate Strategy," Academy of Management Review (1983): 61-70.

44. See S. Zipper, "TI Unscrambling Matrix Management to Cope with Gridlock in Major Profit Centers," Electronic News, 26 April 1982, p. 1.

45. See M. Barnfather, "Can 3M Find Happiness in the 1980's?" Forbes, 11 March 1982, pp. 113-116.

46. See R. Hill, "Does a 'Hands Off' Company Now Need a 'Hands On' Style?" International Management, July 1983, p. 35.

47. See Barnfather (March 11,1982).

48. Quotations from Chairman Mao Tse Tung, ed. S. R. Schram (Bantam Books, 1967), p. 174.

49. See: D. G. Marquis, "Ways of Organizing Projects," Innovation, August 1969, pp. 26-33; T. Levitt, Marketing for Business Growth (New York: McGraw-Hill, 1974), in particular, ch. 7.

50. Charles Ames, former CEO of Reliance Electric, as quoted in "Exxon's $600-million Mistake," Fortune, 19 October 1981.

51. See, for example, W. J. Abernathy and J. M. Utterback, "Patterns of Industrial Innovation," Technology Review, June-July 1978, pp. 40-47.

52. See T. Kuhn, The Structure of Scientific Revolutions, 2d ed. (Chicago, IL: University of Chicago Press, 1967).

53. After reviewing an early draft of this article, Ray Stata wrote, "The articulation of dynamic balance, of ying and yang,... served as a reminder to me that there isn't one way forever, but a constant adaption to the needs and circumstances of the moment." Ray Stata, president, Analog Devices, letter of 29 November 1982.

54. Quoted in "Some Contributions of James E. Webb to the Theory and Practice of Management," a presentation by Elmer B. Staats before the annual meeting of the Academy of Management on 11 August 1978.

55. See Romanelli and Tushman (1983).

56. See J. Bartlett, Bartlett's Familiar Quotations, 14th ed. (Boston, MA: Little, Brown), p. 471B.

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