The Future of Technology

Management and the Business

Environment

Lessons on Innovation, Disruption,

and Strategy Execution

Alfred Marcus

Contents

Introduction 1 The Next Set of Breakthroughs 2

The Information Revolution 2 Medical Technologies 2 Genetics 2 Alternative Energy 3 Artificial Intelligence 3 Material Sciences and Nanotechnology 3

What This Book Is About 3 Part I: Technology and Strategy 4 Part II: Managing Danger 5 Part III: The Environment of Technology 5 Part IV: Coping with Technological Disruptions 6

Endnotes 8

PART I: TECHNOLOGY AND STRATEGY 9

Chapter 1 Technological Disruptions 11 The Powers of the Mind 11 Information Technology (IT) 12 Medical Technologies 13 Genetics 15 Alternative Energy 16 Artificial Intelligence, Material Sciences, and Nanotechnology 16 The Challenge of Commercialization 18 Endnotes 18

Chapter 2 Commercialization's Obstacles 19 Fumbling the Future at Xerox: IT 19 Medical Technology: Cochlear Implants 20

Basic Research in Diverse Labs 21 Breakthroughs in Other Disciplines 21 A Highly Committed Champion 22 Multiple Developmental Raths 22

Private Firms' Failure to Cooperate Professional Endorsement FDA Approval Lack of Enthusiasm from the User Community 23

23 High Costs Safety and Efficacy Concerns 23

Auxiliary Services 24

Withdrawal 24

74 New Entrants Genetics: Agricultural Productivity 24

Sustainability as a Corporate Goal 2-s

Opposition 25

Rapid U.S. Market Penetration 25

More Promised Progress 26

Government Restrictions 26

Environmentalists'Criticism 26 Competition from DuPont 27

Alternative Energy: The Electric Car 27 Less Pollution and Foreign Oil 28 Range and Fossil Fuels 28 1990s'Failure 29 Hybrid Successes 29 Weak Plug-in Sales 29 Battery Subsidies from the U.S. Government 29 A Solution from Tesla and Panasonic 30 Not Yet Affordable 30 A New Business Model 31 The Slow and Arduous Path to Commercialization 31

Why Xerox Missed Its Opportunity: Game Theory 32 Setbacks at Many Points 33 Uncertain Government Support 34 Project Management Insufficient to Overcome These Problems 35 The Inclination to Undertake Safe Projects 36 Technologies Push and Markets Pull 36 Determination, Will, and Persistence 37 Endnotes 37

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Chapter 3 Hedging the Uncertainty 39 Trends 40 Expert Opinion 40 Historical Analogies 41 Industry Analysis 42 Scenarios 42

Surprises 43 Taking Notice of the Periphery 43 Romances, Tragedies, and Comedies 44 The Narrative Details 44 Applying Scenario Logic to Technology Commercialization 45 Strategie Adjustments 46

Hedging 47 Gamble on the Most Probable Outcome 47 Take the Robust Route 48 Delay Until Further Clarity Emerges 49 Commit with Fallbacks 49 Shape the Future 50

Conclusion 50 Endnotes 50

PART II: MANAGING DANGER 53

Chapter 4 Dealing with Danger 55 ßhopal: What Went Wrong 55

Highly T oxic Chemicals 55 Weak Infrastructure 56 An Uncontrolled Explosion 56 Nonfunctioning Backups 57 Trapped Victims 57 Organizational Shortcomings 57 Warnings Ignored 58 The Price of the Accident 58

The Deepwater Horizon Oil Spill: What Went Wrong 59 Beyond Petroleum 59 Tar Sands Processing 59 Explosion in Texas City and Oil Leaks in Alaska 59 The Spill 60 The Many Mistakes 60

Acknowledgments ix

Inherently Dangerous Technologies Dilemmas in Managing Dangerous Technologies Individual Cognitive Limits Experts' Cognitive Limits Organization' Cognitive Limits ^ How Much a Life Is Worth ^ Inferences from Animal Studies to Humans ^

Conclusion Endnotes

Chapter 5 Laws of Liability 69

Vioxx: What Went Wrong? 69

Merck's Positive Reputation 70 The Search for a Blockbuster Drug Without Gastrointestinal Complications 70

Early Warnings 70 Failure to Communicate 71 The FDA's Required Warning 71 More Criticism 72 Voluntary Recall 72 Thousands of Suits 72 Criminal Charges 73

Johnson & Johnsons Hip Replacement: What Went Wrong? 73 A Paragon of Social Responsibility 74 The Acquisition of DePuy 74 All-Metal Replacements 74 Design Problems 75 FDA Investigations 75 A Voluntary Recall 75 Suits Against the Company 76 The Reimbursement Plan 76

The Laws of Liability 77 Evolution of the Law 77 Classic Tort Law Assumption of Risk Punitive Action Strict Liability 79 The Justification for Strict Liability 79

X About the Author

Further Movement from a Fault-Based System 80 Refinements of the Laws of Liability 81

Conclusion 81 Endnotes 82

PART III: THE ENVIRONMENT OF TECHNOLOGY 85

Chapter 6 Old, Young, and Global Security 87 The Rise of the Elderly 87

Declining Fertility 88 Economic Impacts 90 Technology to Assist the Elderly 91 A Cure for Alzheimer's 91 Reversing Aging 93

Among the Young: Hope and Disillusion 96 MeaningfuI Work 97 What Next 100 Diminishing Youth Bulges 102 Technology to Combat Terror 106

Conclusion 108 Endnotes 108

Chapter 7 Rieh, Poor, and Global Inequality 111 Trends 111

Within Country Caps 112 Between-Country Gaps 112 The U.S. Wealth Gap 113 The Rise of Neoliberalism 115

Technology at the Top of the Pyramid 117 Sophisticated Models 117 What Hedge Funds Do 118 Only for the Already Wealthy 119 Renaissance Technologies 120

Technology at the Bottom of the Pyramid 121 Telecommunications 122 Potable Water 123 Health Services 124 Nutrition and Crop Protection 124

Contents xi

Chapter 8 Abundance, Scarcity, and Global Sustainability

Fossil Fuels Oil Price Declines Hydraulic Fracking Tar Sands Offshore Recovery

Cleaner Energy Building Energy Industrial and Commercial

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Solar 138

Wind 140

Energy Storage I42

Biofuels 143

Conclusion I45

Endnotes 145

PART IV: COPING WITH TECHNOLOGICAL DISRUPTIONS.. 147

Chapter 9 Missing the Boat on Mobile Technology: Intel and AMD 149 The Mobile Revolution 149 The Batties Between Intel and AMD 152

Memory 152 Microprocessors 153 The Sub-Zero Segment 153 Speed and Continued Price Wars 154 BranchingOut 155 The Hammer 156 Global Antitrust 157 Graphics and Other Products 157 Divesting Manufacturing 158

Searching for New Markets 158 ARM Architecture 159 Mobile Gaming

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Mounting Mobile Losses 160 New Leadership at AMD 160 Field Programmable Gate Array (FPGA) 162 The Internet of Things (IOT) 162 Smart Glasses and Augmented Reality 163 Risks Ahead 164

Conclusion 164 Glossary of Computer Terminology 165 Endnotes 165

Chapter 10 From Mass Customizing to Mass Commodity: Dell and Acer... 167 Financial Woes 168

An Industry in Decline 170 The Fat Years: Dell's Ascent 170

A Competency in Mass Customization 171 Gateway Abandons the Direct Model 173

The Lean Years: Michael Dell's Resignation 174 Acers Acquisition of Gateway 176 Dell's Plans for a Recovery 177

The Enterprise Market 181 Becoming a Private Company 182

Acer's Efferts at Revitalization 183 Notebooks 183 Smartphones 183 Free Cloud 185 IOT 185

Conclusion 185 Endnotes 186

Chapter 11 Finding Growth and Profitability in Bookselling: Barnes & Noble and Amazon 189 Barnes & Noble and the Superstore 189 Amazon and Internet Commerce 191

Amazon's Reinvention 192 Barnes & Noble's Focus on Books 194

Sinking Profits 195 Amazon's Fluid Identity 195

Profiting from the Cloud 197

Contents xiii

198 Barnes & Noble's Decision to Split Up

SpinningOfftheNook Spinning Off the College Division

How Attractive Was Bookselling? ^ Sales Trends Reading Habits Leisure Time Choices

2()~> Digital Devices

11)7 The Publishers

Wholesale 21)3

The Big Five 203

The Spat with Amazon 2(14

Conclusion 2(^ Endnotes 2Ü-S

Chapter 12 Escaping the Middle: Best Buy and Charles Schwab 209 The Evolution of Best Buy 210

Concept One: 1983-1989 211 ConceptTwo: 1990-2001 211 Concept Three: 2002-2007 212 The Aftermath of the Financial Meltdown 214

The Evolution of Charles Schwab 214 Discounting 214 High Net Worth Clients 215 A Category of One 215 The Affluent of the Future 216 Following Customers 216

New Challenges 217 Competition in Consumer Electronics 217 Online 217 Showrooming 218

Competition Among Discount Brokers 218 Innovation Dilemmas 219 Major Industry Players 219

Best Buy's Comeback Plans 220 Transforming E-Commerce 220 Cost Savings and Product Innovation 221

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Enhancing the Internet Platform: Charles Schwab 222 Ranking the Platforms 223 The Robo-Advisor 223

Conclusion 224 Endnotes 225

Chapter 13 Content for a New Age: Disney and Time Warner 229 Vertical Integration: Disney 230 Vertical Integration: Time Warner 231 Mergers, Acquisitions, and Divestitures 232 The Disney-Capital Cities Merger 235

ABC 236 The Iger Era 237

The AOL-Time Warner Merger 237 Trying to Revive AOL 238 Slimming Down 239 HBO's Edginess and Success 240

Disney's Dominance 241 Cable Channels 241 The Studios 242

Internet Initiatives and Cable's Abandonment 243 Losing Young People 244

Conclusion 245 Endnotes 246

Final Thoughts 249 The Future of Technology Management and the Business Environment: Lessens on Innovation, Disruption, and Strategy Execution 249

Index 251

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