Acquiring a technology is important since every business out there relies on some or the other technology. In this competitive business landscape, it is important to either develop or acquire a technology you need since you don’t want to lag behind just because of your technological laggardness. In addition, we live in a world filled with technological products & services so, technology management is highly important .
Every business in the world is using technology management tools like S-Curve, Roadmapping, etc. to carry out technology management activities in order to serve their customers better, automate their process flows, or to reduce cost and time. If you are not the inventor of that technology, then before using the technology you need to acquire it legitimately. Acquisition is the process of obtaining the technology needed for our business.
Any enterprise can either develop its technological products/services and processes or acquire them externally. In the real word, I know this can be a tedious process. Don’t worry. To make it easier for the people having a non-technical background, I will share 5 ways in which you can acquire a new technology for your business and harness the benefits from it.
What’s in it for me?
The first method is to leverage the Research and Development department of your organization. Keep in mind this is an internal acquisition method since you are using resources internal to your organization. The R&D department does research to generate new knowledge at technical ideas aimed at solving the problems your business faces. The goals should be shared with R&D department when the strategy is development phase. The R&D department chooses projects based on these goals to satisfy the strategic needs.
This is a continuous process and involves frequent ideation, prototyping, testing and finally commercialisation if the research is successful. Many larger firms have in-house R&D departments that work all year round to innovate existing products or create new products/services. The internal R&D method has various uses like new product/service development and new process development.
The R&D department can also foster innovative ideas to improve process flows and on-going operations in the organisation. R&D portfolio is essential to reduce uncertainty. We must also make sure that we protect our developed technology using the intellectual property protection methods to prevent problems in the future.
Example: Procter & Gamble has team of 8,000 researchers that work hard to link technology and generate new ideas to improve their products/services, processes and delivery mechanisms.
We outsource all the research and development activities in this method. Now, the outsourced third party may be a contract research organization, teams of consultants, researchers or experts.
In some cases, we also outsource the research work to universities. Many enthusiastic students, under the guidance of their professors carry our research work on innovative technologies. Hence, universities are also a good option for firms to acquire any new and innovative technologies. The only thing to keep in mind is that as the work is contracted out, the company has little managerial input in the process. Thus, regular feedback must be taken to keep goals and efforts aligned.
Example: Many companies have outsourced their research work to innovation cells in top engineering colleges and premier B-schools all around the world.
A license is a legal binding document which allows a third party firm to use the invented technology for a specific purpose. In this situation, we are the licensee company and the company that own the technology and is ready to license it is the licensor.
We should confirm that the licensor terms and conditions are not manipulative or unfair. In broader terms, the technology evaluation must be done meticulously. After that, negotiation on price must be done. This method acts as a catalyst in acquiring the technology and its adoption. It also reduces the risk and cost of developing the technology.
Example: Qualcomm licensed it’s 3G 4G and 5G technology to HMD Global (under Nokia brand). It is an American MNC which develops technologies that helps us connect through our devices (like 5G, chipset for modems etc.). Specifically, on May 2019 they signed a royalty-bearing license to develop their 3G,4G and 5G single mode and multi-mode complete devices to HMD Global under the Nokia brand.
Ad-hoc partnerships formed to solve specific problems. Complex alliances and joint ventures are formed, to complete acquisitions. Ad-hoc alliances are flexible and are normally used to develop a technology that is critical to two or more businesses. Forming a consortium is another flexible alliance form, where many partners come together for pre-competitive R&D with no equity relationship involved.
More complex alliance forms are used, when two or more businesses are operating in different sectors to pool their resources. In addition, it helps them generate synergy so that the companies can gain access to a critical technology in which they are weak. Joint venture is vital when the area of cooperation is well defined. A joint venture shares the risks and acquisition costs between the partners and this method is highly valuable when these are high.
Example: While developing the iPod music player, Apple did not develop the player in-house but created an alliance. It used a Toshiba disk drive. The iPod software was based on a platform developed by Portal Player. Pixo was responsible for developing the music management software.
Mergers & Acquisitions
Acquisition of a company is the most certain way of securing a technology and preventing others from acquiring it. But if the two companies are of roughly equivalent size, a merger may be appropriate. The goal in all M&A activity is to acquire and integrate an external entity into the existing company. Acquisition is the fastest way of transferring the required external critical capabilities and resources.
However, the post acquisition/merger of two companies can be slow and difficult. Particular challenges induced potential organizational culture clashes and managerial problems that might result in a failure of the merger. Example: Google acquires many promising technology startups. On November 1, 2019 Google acquired Fitbit, one of the best known wearable fitness tracker manufacturer for 2.1 billion dollars.
Example: Google acquires many promising technology startups. On November 1, 2019 Google acquired Fitbit, one of the best known wearable fitness tracker manufacturer for 2.1 billion dollars.
Each acquisition method has its own merits and demerits. In the diagram below, I have summarised all the methods for your perusal. A good Technology Manager can help you in taking such kind of decisions.
I hope, now you will be able to make the right decision when it comes to acquiring a new technology. If you want to learn more about how to use your technology effectively, you can check out my blog on Ways to gain Competitive Advantage. You can also check out my blog on Advanced technologies VS Popular technologies.