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5-7, rue de l'Ecole polytechnique; 75005 Paris http://www.librairieharmattan.com diffusion.harmattan@wanadoo.fr harmattanl @wanadoo.fr ISBN: 978-2-296-08311-0 EAN: 9782296083110


Towards a technology based sustainable competitive advantage

Victoire de Margerie


Towards a technology based sustainable competitive advantage

Collection Entreprises & Management Supervision: Ludovic François

Entreprises et Management Collection dirigée par Ludovic François
La collection Entreprises et Management est destinée à accueillir des travaux traitant des questions liées aux sciences de gestion et à l'entreprise. Les ouvrages publiés ont pour la plupart une vocation pratique. Certains d'entre eux sont issus de thèses professionnelles soutenues à HEC.

Dernières parutions

Emmanuelle WElLAND, Achats et développement durable: le cas du secteur tertiaire, 2009. Bruno OXIBAR, Communication sociétale, 2009. François BESANCENOT, Territoire et développement durable. Diagnostic, 2009. Aurélien PERRUCHE T, Le doctorat: un investissement rentable? Approches économiques et sociologiques, 2008. Yann RlV AL, Internet et performance de l'entreprise. Une analyse des stratégies Internet appliquée au secteur du tourisme,2008.
Carole LALONDE, Organiser la réponse à la crise. Études de neuf types de réponses à la crise, de I 'humaniste à l'aventurier, 2008. Lys VITRAL, Pouvoir et Ùifluence des Organisations Non Gouvernementales dans la régulation de l'économie mondiale, 2008. Philippe POIRIER, Don et management. De la libre obligation de dialoguer, 2008.

Françoise DUPUICH-RABASSE, Management et gestion des compétences, 2008. Jérémy MORVAN, L'investissement socialement responsable. Une nouvelle gouvernance d'entreprise ?, 2008. Denis BRULE, L'ADSL, Kasaa, l'iPod et la musique. La révolution numérique menace-t-elle la diversité musicale ?, 2008. Mustapha MOKAS S, Comment amorcer le marché mondial de l'énergie propre? Nouvelles énergies et climat: un destin lié, 2007.

I wish to thank Thierry Grange and Loïck Roche who have been supportive of this idea of a casebook dedicated to
strategy and technology from an early stage.

Very special thanks as always to Philippe Varin who shares with me a strong commitment to research, development and

innovation even in the times of necessary restructuring plans.

And finally, my gratitude goes to those who have made possible the writing of the business cases at Airbus (Pierre de
Beausset, Jean Marc Thomas), Peugeot Citroen (Robert Rhodia

Peugeot, Sylvie Blanco), Philips (Gerrit Klaassen),

(Laurent Schmitt, Séverine Le Loarne), STMicroelectronics (Jean Luc Jaffard) and Texas Instruments (Julie England)


Foreword: Thierry Grange



Strategy and Technology: Background
Management: traditional basics and current

1.1: Strategic trends

1.2: Technology and Strategy: two key tools (Porter analysis, Competitive Advantage Model)


Strategic Design: Revamping a product line or a product portfolio

2.1: Peugeot Citroen - The Diesel Particulate Filter: Business Case and Teaching Note. 2.2: Rhodia Organics - Competitive Segmentation:
Case and Teaching Note. Business


The Product Life Cycle Approach: a Combination of Strategic Design and Execution

3.1: STMicroe1ectronics - The Future of Digital Imaging:
Business Case and Teaching Note.

3.2: Airbus - The A380 project: Business Case and Teaching


Strategic Execution: M&A and Organic Growth

4.1: Post Merger Integration at Philips Medical Systems: Business Case and Teaching Note. 4.2: Industrial Restructuring at Texas Instruments: Business Case and Teaching Note.

Conclusion: Top managers' contribution is crucial in order to ensure the proper profitability/risk pattern required by the company' s shareholders.



Writing a book on the ever green topic of Strategy and Technology « to convince top executives to consider
technology as a key driver for creating value» challenge for an author. The first mindset Technology that the author has to acqUIre is that is an exciting

is not a science but a set of industrial practices to be transformed into a clinical of Strategy

that can be consolidated knowledge.

Studying the virtuous combination

with Technology

to generate economic value is a bottom up

process starting from "the shop floor reality before hitting the top floor of the headquarters at the world of technology accepted by experienced building". This way of looking in the business can only be

authors that have to deal regularly,

in companies, with this subject. Victoire de Margerie is one of the most representative of executives sharing

members of this precious community

their time between academic institutions

where they teach,

company boards where they decide on strategic options and

secret places where they write relevant and rigorous articles

and books on business administration.

Her remarkable

education, her professional experience and her talent to describe with simplicity sophisticated concepts, are the constituents for the great quality of this book.

It is true that "integrating


in the overall strategy

in the company" is a recent issue.

This concern for executives is definitely younger than the systematic use of technology as a resource by the industrial companies. Very few authors in the field of Strategy have described the major contribution of technology in their
models. The formal demand for integration of technology

goes back only twenty years ago when a study made for the National Science Foundation, in 1988, in the USA, concluded that it was a key issue to restore competitiveness companies challenged in western The

by their Japanese competitors.

way to succeed in this integration

process is hard to walk

because of the risks that have to be faced. Since the eighties there have been more technologies

available for the industrial world than necessary. This excess

in the offer of technologies to tackle the same problem can


lead to a wrong choice: the one which is not adapted to the socioeconomic context of the company. This fabulous quantity of technologies is due to exceptional investment in research that the western countries have done since the thirties, for military purpose, for medicine, for aeronautics, for agriculture, etc. We continue to harvest the
outcome technology of this tremendous investment by organizing

transfers and by combining problems. is another of

different knowledge

to solve pluri-disciplinary Technology rationality systematically forecasting of the

source of risk, as the forecasting does not


align with the uncertainty of human behaviour

in its demand for new products and services.

The other side of the coin is less dark, it represents all the new opportunities for product and for process innovation brought by new technologies, both the organizational

oriented ones and the hard science generated ones. The way to create economic value is comparable to the one to generate

energy. It is all about a difference between two situations. The most efficient method to generate value with technology consists in pouring it into an industrial system that is a very poor techniques user. The examples given by Victoire de Margerie to back up her excellent conceptual analysis are

perfect illustrations technology input.

of her pledge for a better strategy with

Strategic design is the very first step to combine the two main ingredients of this book.

The secret to draw the right strategic design is to keep permanently in mind the corporate goals of the company. To achieve the process of integration of technology in the overall strategy of the firm three sequential steps have to be climbed. - Acquisition of the relevant technology to generate the expected economic value and if possible a marketing differentiation. This is the place where choosing the wrong technology takes place. This is the moment where human resources can drag their feet because they are afraid of the consequences on their future or simply because they haven't been prepared for the managerial change.
- Appropriation executives) innovation the users. by all the stakeholders technologies, (including to transform the the

of the acquired

into a basic managerial It is a question

process mastered by all between new

of ergonomy

technologies and old business process techniques.


- Valorisation

of the new skills induced by the appropriation

by accessing to new market segments, new products and new

services, new image and new brand value that will give access to new pricing policies.

Product life cycle approach is "an old trick for new dogs".

Alfred Sloan, at General Motors in the thirties, has been a pioneer of this strategic innovation when he decided to
change the design of the cars almost each year. What is new today is that product life cycle management is a concern for

all sectors and for all companies on one hand and that the life cycles are shorter on the other hand. The new rules for

competition are based on speed and delays after being earlier based on cost and quality. Outrunning a competitor by imposing a quick pace for change is another way to use product life cycle in the strategic way. Technology plays a
double role in this new competition. It provides more rapidly of the new

the "techno goodies" to upgrade the performance product and it accelerates process. the revamping

of the production









and strategy is all about answering properly the

question: Make or Buy?

Buying technology goes beyond acquisition of technologies. It means getting access to the whole technology system: the

image, the customers, the suppliers, the skills of the human resources and the social networks necessary to maintain the

performance of the given technology. This is the reason why M & A is probably a more efficient way to acquire a global technology system. Organic growth is more an incremental
strategy for leading companies that have been able to

maintain their technology knowledge and portfolio.

This book gives an outstanding message to the leaders of the 21 st century who will have to deal with the content, the pace of change technologies. concentrated and The the social representation to these issues of industrial


is no more

in optimizing the management

of technology to

feed the business process as it has been the story with the

other resources. Technology has now a representation for all of us because of its contribution to our daily comfort. This representation has generated its own techno-language and its

own revolutionary creation

status: it is the third variable to explain the value with labour and capital. The

of economic

combination of representation, language and value has been defined by some sociologists as a culture. Victoire de Margerie is right to conclude that technology is so important that it has to be kept in the hand of executives and that it should not be delegated even to technologists.

Thierry GRANGE Dean & Managing Director Grenoble Ecole de Management



The French army nearly lost the First World War, because continued it hadn't seen that artillery an all-out would dominate offensive using and the

to recommend

bayonet (and confused "retreat" with "dishonour"...). More recently, numerous companies that forgot to invest in their core business finance external technology and instead preferred to

diversification have disappeared

(Vivendi-Universal, in a few months, after


having been the blue chips of French industry for dozens of years. Certain criteria of financial profitability, such as the

return on capital, that are incidentally very efficient over the medium term, can also result in irrational behaviour short term (lower investment reduces the denominator increases the numerator in the and

with an immediately

visible "two-

fold" increase in performance), other indicators that are

if they are not coupled with more representative of the

company's advantage.

ability to maintain

a long-lasting


So, how do we make technology an efficient ally rather than a costly burden? Some recent high-technology Google's successes (cf. are

share price since its stock market flotation)

impressive, but perhaps not as impressive as the continuity in

the performance make continuous

of companies investments

with company directors that in technology such as Air

Liquide or Essilor. In their work published in 1998, "Management and

Technology", Thierry Grange and Loïck Roche recall that the Grenoble Management School was created in 1984 with the aim of teaching Technology Management, "understanding the impact of technology defined as: on company

management in order to generate better products, more quickly and more cheaply, and ensure the durability of the company by managing innovation". In their speech at the 2000 Louis Jeantet Medical Forum
dedicated to the theme "Medical research and society: what type of dialogue?" Arnaud Perrier and Marc André Raetzo efforts, very naturally, focus on

stated, "That companies'

ensuring their financial success in the middle and long term." In order to do this, they must act at different levels. They therefore need to identify durable consumer markets, as well as "mega-trends" (urbanisation, stress, birth control,

protection of the environment) and they need to accurately anticipate their research results and the resulting profits. As
part of this strategy, companies also try to anticipate (or to 26

influence?) both the changes in consumer behaviour and the environment in which these consumers organize their lives.

For example, health therapies must now cope with several precise conditions, in order to be marketed in the future: on the one hand, they have to respect safety and efficiency equation, on

criteria and reach an acceptable cost/efficiency the other hand, product development

time has to be reduced

to the minimum in order to enable companies to benefit from

a period of legal protection (licence, patent) which is sufficiently long and so allow proper return on invested capital" . With regard to the speed criteria which have characterised the transformation in industrial competition over the last 20 years and by adding competition based on time to more traditional
competition related to costs or differentiation, we can also

quote Souad Latorre who, in a collective work published in 2002 under the direction of A Cadix & JM Pointet in2002 and dedicated changes", to "Management in times of technological strategies

mentions what she calls "obsolescence

that require being first on the market with an innovative offer in order to displace the existing offer. Not only does the company have to be able to follow a versatile demand, but it 27

also should know how to stimulate changes that are favourable to the company by being the first to offer the
customer what he or she might want", We can go as far back as the 5th century B.C, when Sunzi stated, "Speed is the soul of an army in operation. Take advantage of the fact that the enemy is not ready yet, and take a road that the enemy would not expect in order to attack where he is not on the alert",

So, today, how do compames

work when they focus on

technology and optimise its utilisation?

For example, announced by PSA in 1998, presented to the press in 1999 and launched as a world first in 2000 on the Peugeot 607, the Diesel Particulate Filter (DPF) offered, for the first time in diesel engine history, a level of particulate emissions of almost zero; this new technology enabled the diesel engine to combine its low fuel consumption and low level of C02 emissions with performance never seen before in terms of particulate emissions, going well beyond present and future European regulations. The strategic objective was clear: allow further market growth for diesel engines and give PSA a sustainable competitive advantage on this same 28

market. In June 2003, PSA CEO, J.M. Folz was able to announce the sale of the 500,000th vehicle equipped with this device.. .and all analysts recognise that PSA has regained the leadership of the European market that they had lost 6 years beforehand to Volkswagen. By the end of 2004, 1 million
vehicles were equipped with the DPF mechanism still holds successful today because his market it combined leadership. and PSA was


all aspects

of optimum

technology management: - CEO strategic vision, - DPF patent protection - Use of direct injection technology previously developed by

the group for other applications, - Technology partnerships with subcontractors (Faurecia), suppliers (Faurecia or Rhodia) or even competitors (Ford, as part of a cooperation agreement for diesel engines), - Ambitious marketing policy (standard device offered with no extra price and on all car models), - Efficient lobbying (support from the German car drivers association in the German media and support from the German government with tax reductions for those who purchased a vehicle equipped with DPF). 29