Technology Strategy in a Software Products Company

Abstract

An overly narrow focus on core competencies and technologies may cause a firm to miss market opportunities. On the other hand, a firm's ongoing success depends on its ability to recognize and nurture the technologies necessary for the continual refinement and extension of its product families. This process of product renewal requires effective management of technological innovation, which in turn requires a clear understanding of the technological basis for a product family–that is, the product platform from which derivative or follow‐on products are created.Using a software company as an example, Marc H. Meyer and Luis Lopez present a method for understanding the relationship between the nurturing of core technologies and the evolution of a product family. At the foundation of this method is the concept of a product platform–the core technologies that are common to all members of a product family. In other words, a platform provides the basic technological architecture for a series of derivative products. From an initial platform, a product family can evolve in two ways: through platform extensions or platform renewals. Platform extensions may involve changes to existing subsystems or the addition of new subsystems without altering the primary subsystems and interfaces in the existing design. Platform renewal is the redesign of a product to create an entirely new platform.To provide a basis for evaluating the effects of the software company's allocation of R&D expenditures, the authors created a product family map that differentiated between platform improvements and derivative product developments. Using the product family map, they examined R&D budgets and identified the allocation of spending among the core technologies embodied in the firms's products. The visual presentation of the product family maps and core capability investments were particularly useful for helping company management understand and learn from the consequences of past decisions.The analysis of the product family maps and R&D expenditures also provides a guideline for future decision‐making. Specifically, to achieve desired amounts of technical and commercial leverage, successive product platforms in a product family must provide both balance and strength in the embodied core technologies. For market applications involving more than one core technology, a firm must pursue a balanced, inclusive technology strategy. In such cases, overemphasis on one core technology typically results in poor market performance.