Gummi ship wrong thruster direction

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The Future of Technology Management

and the Business Environment

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ptg16382014

The Future of Technology Management and the Business

Environment Lessons on Innovation, Disruption,

and Strategy Execution

Alfred Marcus

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Publisher: Paul Boger Editor-in-Chief: Amy Neidlinger Executive Editor: Jeanne Levine Development Editor: Natasha Wolmers Cover Designer: Alan Clements Managing Editor: Kristy Hart Senior Project Editor: Lori Lyons Copy Editor: Gill Editorial Services Proofreader: Debbie Williams Indexer: Erika Millen Senior Compositor: Gloria Schurick Manufacturing Buyer: Dan Uhrig © 2016 by Pearson Education, Inc. Old Tappen, New Jersey 07675 For information about buying this title in bulk quantities, or for special sales opportunities (which may include electronic versions; custom cover designs; and content particular to your business, training goals, marketing focus, or branding interests), please contact our corporate sales department at corpsales@pearsoned.com or (800) 382-3419. For government sales inquiries, please contact governmentsales@pearsoned.com . For questions about sales outside the U.S., please contact international@pearsoned.com . Company and product names mentioned herein are the trademarks or registered trademarks of their respective owners. All rights reserved. Printed in the United States of America. This publication is protected by copyright, and permission must be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. For information regarding permissions, request forms, and the appropriate contacts within the Pearson Education Global Rights & Permissions Department, please visit www.pearsoned.com/permissions/. Printed in the United States of America First Printing December 2015 ISBN-10: 0-13-399613-1 ISBN-13: 978-0-13-399613-5 Pearson Education LTD. Pearson Education Australia PTY, Limited. Pearson Education Singapore, Pte. Ltd. Pearson Education Asia, Ltd. Pearson Education Canada, Ltd. Pearson Educación de Mexico, S.A. de C.V. Pearson Education—Japan Pearson Education Malaysia, Pte. Ltd. Library of Congress Control Number: 2015951698

http://www.pearsoned.com/permissions/
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To my wife, my two sons, David and Ariel; to Massoud Amin, director of the Technological Leadership Institute (TLI) at the

University of Minnesota, who describes himself as “a happy geek on a mission with expertise in complex systems, energy, defense, pioneering smart self-healing grid,

CIP security, and resilience”; and to all among us who seek peace in a time of turbulence.

ptg16382014

Contents-at-a Glance

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PART I: TECHNOLOGY AND STRATEGY. . . . . . . . . . . . . . . . . . . . . . 9 Chapter 1 Technological Disruptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Chapter 2 Commercialization’s Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Chapter 3 Hedging the Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

PART II: MANAGING DANGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Chapter 4 Dealing with Danger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Chapter 5 Laws of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

PART III: THE ENVIRONMENT OF TECHNOLOGY . . . . . . . . . . . 85 Chapter 6 Old, Young, and Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Chapter 7 Rich, Poor, and Global Inequality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Chapter 8 Abundance, Scarcity, and Global Sustainability . . . . . . . . . . . . . . . . . 129

PART IV: COPING WITH TECHNOLOGICAL DISRUPTIONS . . 147 Chapter 9 Missing the Boat on Mobile Technology: Intel and AMD . . . . . . . . . 149

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

Chapter 11 Finding Growth and Profitability in Bookselling: Barnes & Noble and Amazon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

Chapter 12 Escaping the Middle: Best Buy and Charles Schwab . . . . . . . . . . . . . 209

Chapter 13 Content for a New Age: Disney and Time Warner . . . . . . . . . . . . . . . 229

Final Thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251

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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 Paths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

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Private Firms’ Failure to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Professional Endorsement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 FDA Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Lack of Enthusiasm from the User Community. . . . . . . . . . . . . . . . . . . . . . . . . . .23 High Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Safety and Efficacy Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Auxiliary Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 New Entrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

Genetics: Agricultural Productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Sustainability as a Corporate Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 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 Strategic 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 Bhopal: What Went Wrong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55

Highly Toxic 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

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Inherently Dangerous Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Dilemmas in Managing Dangerous Technologies . . . . . . . . . . . . . . . . . . . . . . . . .63 Individual Cognitive Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 Experts’ Cognitive Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 Organizations’ Cognitive Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 How Much a Life Is Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Inferences from Animal Studies to Humans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 Endnotes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66

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 & Johnson’s 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 Assumption of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 Punitive Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 Strict Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79 The Justification for Strict Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79

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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 Meaningful Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97 What Next . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 Diminishing Youth Bulges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102 Technology to Combat Terror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108 Endnotes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108

Chapter 7 Rich, Poor, and Global Inequality . . . . . . . . . . . . . . . . . . . . . . . . . .111 Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111

Within Country Gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .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

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Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .125 Critiques. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .125

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .126 Endnotes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .127

Chapter 8 Abundance, Scarcity, and Global Sustainability . . . . . . . . . . . . . .129 Fossil Fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130

Oil Price Declines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130 Hydraulic Fracking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132 Tar Sands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .133 Offshore Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134

Cleaner Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .135 Building Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .136 Industrial and Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .138 Solar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .138 Wind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140 Energy Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .142 Biofuels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145 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 Battles Between Intel and AMD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152

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

Searching for New Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .158 ARM Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159 Mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159 Gaming. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159

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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 Acer’s Acquisition of Gateway. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .176 Dell’s Plans for a Recovery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .177

The Enterprise Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .181 Becoming a Private Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .182

Acer’s Efforts 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

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Barnes & Noble’s Decision to Split Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .198 Spinning Off the Nook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .198 Spinning Off the College Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .199

How Attractive Was Bookselling?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .200 Sales Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .200 Reading Habits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .201 Leisure Time Choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .201 Digital Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .202

The Publishers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .202 Wholesale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .203 The Big Five. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .203 The Spat with Amazon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .204

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .205 Endnotes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .205

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

Concept One: 1983–1989. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .211 Concept Two: 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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xvContents

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: Lessons on Innovation, Disruption, and Strategy Execution . . . . . . . . . . . . . . . .249

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .251

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xvi Acknowledgments

Acknowledgments

I would like to acknowledge my colleagues and my students. At the University of Min- nesota Carlson School of Management, I have learned about innovation from Andrew Van de Ven; about strategy from Aks Zaheer, Myles Shaver, Mary Benner, Aseem Kaul, and Anne Cohen; about entrepreneurship from Shaker Zahra, Harry Sapienza, and Dan Forbes; about the environment of business from Iain Maitland, Sri Zaheer, Joel Waldfogel, Paul Vaaler, Gurneeta Singh, Jiao Luo, Russel Funk, and Sunasair Dutta; and about timing from Stu Albert. My sincere hope is that the timing of this book is right.

At the Technological Leadership Institute, which is part of College of Science and Engi- neering at the University of Minnesota, I have learned from the director, Massoud Amin, to whom this book is dedicated, and from Lockwood Carlson, Kirk Froggat, Steve Kel- ley, and Brian Isle. At the Technion in Haifa, where I teach in the spring mini-semester in the MBA program, I have learned from Eitan Naveh, Mia Erez, Dovev Lavie, Ella Meron-Spektor, Erev Ido, Avi Shtub, and Ella Glickson. The many outstanding MBA and Masters of Technology students at the University of Minnesota and the Technion have inspired me to think deeply about technology. I am also indebted to the colleagues with whom I have done research in areas related to technology, including Ari Ginsberg at NYU Stern, Joel Malen at Hitotsubashi University of Innovation Research Japan, Adam Fremeth at Ivey Business School Canada, Mazhar Islam at Tulane University, Susan K. Cohen at the Katz School of Business University of Pittsburgh, J. Alberto Aragon-Correa at University of Surrey, and Hans Rawhouser and Michael Cummings at University of Nevada Las Vegas.

I have had the good fortune of living full time in Minnesota, with its thriving established business sector, and part-time in Israel, with its aspiring entrepreneurial business sec- tor. The great companies in both these places have provided me with many of my ideas about technology. Merav Lefkowitz, who helped me edit this book, deserves a very spe- cial thanks for the superb work she did. My wife, Judy, always inspires me with her care for my physical, psychological, and intellectual well-being, her patience, and her insights about current affairs. My son, David, who is co-editor of Dissent and teacher of history at Columbia, and my son Ariel, who is a Spotify data scientist, have brought me fresh views about technology’s promise and pitfalls. The world in which they live is so different from the world in which I grew up largely because of technology. I also want to thank Jeanne Levine of Pearson for encouraging me to do this project, Natasha Wolmers of Pearson for commenting on earlier drafts, and Lori Lyons for moving the manuscript through the production process.

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xviiAbout the Author

About the Author

Alfred A. Marcus is the Edson Spence Chair of Strategy and Technological Leadership at the University of Minnesota, Carlson School of Management and the Center for Tech- nological Leadership. He is the author or co-author of many books, including Innova- tions in Sustainability published by Cambridge University Press; Management Strategy , published by McGraw Hill; Strategic Foresight , published by Palgrave MacMillan; and Big Winners and Big Losers , published by Pearson. His articles have appeared in the Stra- tegic Management Journal , Academy of Management Journal , Academy of Management Review , California Management Review , Business and Politics , Business and Society , and Organization Science , among other places.

His Ph.D. is from Harvard, and he has undergraduate and graduate degrees from the University of Chicago. Besides teaching in the Carlson School and Technological Leader- ship Institute at the University of Minnesota, Professor Marcus teaches in the Industrial Engineering Department in the MBA program in the Technion in Israel. He also has taught management courses in France, Norway, Hungary, the Czech Republic, Romania, and Costa Rica.

Professor Marcus has consulted or worked with many corporations, including 3M, Corning, Excel Energy, Medtronic, General Mills, and IBM. He was involved in a mul- tinational research project sponsored by the NSF involving companies in the United States, Finland, Israel, and India. He did a sabbatical year at the MIT Sloan School in Boston. Prior to the joining Minnesota’s faculty, he taught at the University of Pittsburgh Graduate School Of Business and was a research scientist at the Battelle Human Affairs Research Centers in Seattle, Washington.

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Introduction

T echnology is both the cause of many of the world’s problems and the best hope for their cure. All the classical economists of the late 18th and early 19th cen-turies, including Adam Smith, David Ricardo, and John Stuart Mill, stressed the importance of technological changes. Thomas Malthus’s pessimism that runaway population growth would lead to increasing misery as the world’s population expanded more rapidly than the food supply proved wrong because technological changes stayed ahead of population growth.

Prosperity is closely linked to technological advances. Technology is critical to the world’s continued economic growth. It provides the knowledge to convert the factors of production into goods and services. It also gives rise to an efficient division of labor, improves productivity, and permits the accumulation of capital. In his book The Long Wave Cycle , the Russian economist Nikolai Kondratiev (1892–1938) maintained that economic progress took place not linearly, but in long waves, each of them lasting about half a century. 1 Each wave had periods of prosperity, recession, depression, and recovery.

In Capitalism, Socialism, and Democracy , the Austrian economist Joseph Schumpeter connected technological innovations to the waves of economic growth. 2 Schumpeter’s argument was that technological change was a series of explosions in which one set of technologies replaced another (see Exhibit 1.1 ). The first period (l782–1845) was marked by major innovations in steam power and textiles; the second (1845–l892) was marked by major innovations in railroads, iron, coal, and construction; and the third period (1892–1948) was characterized by major innovations in electrical power, automobiles, chemicals, and steel.

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2 The Future of Technology Management and the Business Environment

Exhibit I.1 Waves of Innovation 1845–1892 Railroads, iron, coal, construction 1892–1948 Electrical power, automobiles, chemicals, steel 1948–1973 Aerospace, pharmaceuticals, petrochemicals, synthetic and composite materials 1973–present Information technology, medical technology, genetics, alternative energy, artificial

intelligence, the material sciences, and nanotechnology

The Next Set of Breakthroughs From where will the next set of breakthroughs come? The American sociologist Daniel Bell has proposed, in his book The Coming of Post-Industrial Society: A Venture in Social Forecasting , that the period since 1973 has been one of post-industrialism, 3 in which ideas are more important than the material forces that dominated previous periods of economic growth. In this era, information technology (IT), medical technology, genetics, alternative energy, and advances in artificial intelligence, material sciences, and nano- technology are dominant forces.

The Information Revolution The information revolution has made it possible to disseminate knowledge instanta- neously around the globe, which gives the rise to virtual communities that create and enable an expanded international economy. With massive digitization, almost limitless storage in the cloud, and ubiquitous mobility, the information revolution has trans- formed how people learn, communicate, shop, travel, and socialize. The colossal data analytic capabilities called big data now promise degrees of reliability, productivity, and system optimization that have never before been experienced in history.

Medical Technologies Advances in medical technology are easing pain, eliminating many childhood diseases, and prolonging life. They facilitate the early detection and treatment of infectious dis- eases, the tracking of chronic diseases, the prevention of medical errors, and increased health care accuracy. The hope is that they will be able to lower health care costs as well.

Genetics The new genetics, including the Human Genome project, provide the foundation for medical advances and for greater agricultural biotechnology that should allow the world to feed the nine to ten million people projected to inhabit the planet by 2050 using less land.

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3Introduction

Alternative Energy Renewable resources from the sun, wind, and plant material are starting to replace finite energy sources from coal, oil, and natural gas. Progress involving electric and other alternative vehicles has been made toward greater energy efficiency. On the horizon are smart appliances as well as a smarter electric grid.

Artificial Intelligence With massive amounts of computational power, artificial intelligence is making deep inroads into machine learning and speech recognition. Because of biomimetic sensors, many tasks formerly carried out by human beings can be more reliably performed by computer–assisted machines.

Material Sciences and Nanotechnology Advances in material sciences and nanotechnology have helped to produce computer memory that has greater speed. They also have generated designer alloys, ceramics, and polymers that provide for materials with super strength and other desirable properties.

Combined, and with their offshoots, these technologies offer great promise for bringing into being new economic growth and prosperity. Among other innovations, they enable wearable computers, the Internet of Things (IOT), targeted drug delivery, rapid bioas- says, fuel cell cars, energy storage, advanced robotics, and 3D printing. These innova- tions may be the engines of growth and the sources for fulfilling employment for millions of people, or they may not be.

What This Book Is About Their potential is what this book explores. These innovations face obstacles to their commercialization that must be managed by business firms and societies. From a com- mercial point of view, let alone a scientific and technical point of view, their success is not guaranteed. Their introduction involves risky decision-making.

As an unintended by-product of their introduction, these technologies can and do cause harm. Their widespread penetration, for example, does not guarantee job creation. They are likely to wipe out jobs as well as create them. They have both environmental and social costs. The servers that sustain the cloud are huge consumers of energy. Even the most well-intentioned new medical technology often has unforeseen side effects. This harm must be anticipated and prevented to the degree that it is possible without com- promising society’s willingness to take risks and make progress.

New technologies also offer tremendous potential for dealing with the most important societal challenges of this era. This era is characterized by cleavages between young and

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4 The Future of Technology Management and the Business Environment

old, rich and poor, and scarcity and abundance. These technologies can address these issues constructively. They can play a role in easing these tensions, but they also can exacerbate them.

This book is about the foresight and strategic actions that are needed for technologies to play a positive rather than a negative role. It is about the pathways that have been taken to commercialize some of these technologies, how some of these pathways have been blocked, and how some of them have been opened. It is about the disruptions that organizations have faced as a result of technological innovations they did not expect and how they have dealt with these disruptions by altering their business strategies and executing novel strategies. This book depicts the stories of many companies and how they have confronted these issues. The purpose is to learn lessons from the experience of these companies.

The book is divided into four sections: Technology and Strategy, Managing Danger, The Environment of Technology, and Coping with Technological Disruptions. It is meant for practitioners and students, for those already well versed on the issues in the book and novices. The juxtaposition of the material found in this book is designed to generate new insights. Reflection on the material will yield takeaway lessons on innovation, disrup- tion, and strategy execution, technology management, and the business environment for executives, practicing managers, and students. The sections in the book are best read in their entirety, but they can also be read separately. The five paired case studies in the last section of the book are ideal for executive, MBA, and undergraduate instruction in management of technology courses.

The material in this book is based on my more than thirty years of writing, teaching, and consulting in the areas of business strategy, ethics, and technology. I owe a great deal to my colleagues and to my students at the Technological Leadership Institute and Carl- son School of Management at the University of Minnesota and the Technion Faculty of Industrial Engineering and Management.

Part I: Technology and Strategy Chapter 1 , “Technological Disruptions,” starts with Schumpeter’s idea that technology is a series of explosions and Bell’s idea that the current era is one of post-industrialism. It discusses leading-edge technologies that may sustain economic growth in a post- industrial world.

Chapter 2 , “Commercialization’s Obstacles,” goes into detail about the obstacles in com- mercializing leading-edge technologies. It provides stories of attempts to commercialize IT technologies, a medical technology to assist the hearing impaired, genetic technol- ogy with the aim to increase agricultural productivity, and an electric car to move the planet away from its dependence on fossil fuels. This chapter comments on the slow and arduous path to commercialization, the setbacks at many points, the uncertainty of

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5Introduction

government support, the inclination to undertake safe projects, and the need for deter- mination, will, and persistence.

Chapter 3 , “Hedging Uncertainty,” is about how business organizations can manage the uncertain outcomes described in the previous chapter. It considers the use of trends, expert opinion, industry analysis, and historical analogies, and it elaborates on the value of using scenarios, the topic of one of my previous books, Strategic Foresight: A New Look at Scenarios . 4 It goes on to put forth a series of hedging strategies that organizations can use to deal with the uncertainty: gamble on the most probable outcome, take the robust route, delay until further clarity emerges, commit with fallbacks, and shape the future.

Part II: Managing Danger The next part of this book deals with unanticipated consequences and the need to man- age danger.

Chapter 4 , “Dealing with Danger,” focuses on two major industrial accidents—Bhopal and the Deepwater Horizon oil spill—and what went wrong. It highlights dilemmas in managing dangerous technologies, such as the cognitive limits of individuals, experts, and organizations. It expounds upon the issue of determining the value of a human life and extrapolating and making inferences from animal studies to humans.

Chapter 5 , “Laws of Liability,” focuses on major mishaps in introducing new medical technologies—Merck’s Vioxx and Johnson and Johnson’s DePuy all-metal hip replace- ment. In both instances, despite ample warning, these companies failed to inform patients about risks and danger and failed to recall the technology before patients had suffered immense damage. Both companies were sued and had to compensate the vic- tims as well as pay large fines. Their reputations, as a consequence, suffered. This chapter examines the laws of liability in light of these two cases and traces its evolution toward harsh punitive actions and strict liability.

Part III: The Environment of Technology Part III of the book highlights the way business organizations have responded to the challenges of the following three global divisions: those between (i) young and old, (ii) rich and poor, and (iii) energy scarcity and abundance. These fractures, among the most important features of the business environment, affect whether there will be global secu- rity, inequality, and sustainability. They provide opportunities for technologies and com- panies as well as presenting threats.

The topics discussed in Chapter 6 are “Old, Young, and Global Security.” The rise of the elderly has led to efforts to find cures for Alzheimer’s and other diseases, to reverse aging, and to improve quality of life during aging. A changing economy and changing job mar- kets have made technology important for youth. They have given rise to a significant

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6 The Future of Technology Management and the Business Environment

population of people who do not work in traditional jobs; they work from home and do freelance jobs. Conversely, the disillusion found among many young people in the world who do not have meaningful work has contributed to global violence and terror. It has stimulated companies that have developed counterterror methods that can assist in preventing the bloodshed.

Chapter 7 , “Rich, Poor, and Global Inequality,” discusses the technological opportunities that have been opened up at the top and at the bottom of the pyramid. Global inequal- ity also has produced opportunities for companies. On the one hand, there are end- less opportunities to develop technologies that serve the wealthy, protect their wealth, and perpetuate their standing in society. On the other hand, there are opportunities to develop technologies to uplift the poor by providing them with better housing, more drinkable water, enhanced access to health services, improved nutrition, employment, and business opportunities. At the top, hedge funds have developed sophisticated algo- rithms for trading that have enjoyed remarkable success but are only available to those who are already wealthy. At the bottom, on the other hand, many companies, often in collaboration with nonprofit organizations and governments, have heeded to call to introduce products and technologies that can help the poor.

Chapter 8 , “Abundance, Scarcity, and Global Sustainability,” considers the possibility of energy abundance brought about by advances in both finite fossil fuels and renewable energy as well as the issue of energy scarcity brought about by the failure to innovate in these areas. 5 It also considers in-between states in which the most dependable path to the future relies on either fossil fuels or renewable fuels, to the exclusion of the other. On the one hand, a review of technologies like fracking and unconventional methods of oil exploration and development demonstrates the continued promise of fossil fuels. On the other hand, major advances in energy efficiency, solar, wind, energy storage, and biofuels are also considered.

Part IV: Coping with Technological Disruptions The final Part of the book focuses on pairs of companies operating in overlapping busi- ness segments that are confronted by technological disruptions. It discusses how they have coped and the challenges they still face in dealing with the threats to their businesses.

These chapters are presented as open-ended case studies that are meant for considering what these firms should do next. Most of these companies were pioneers in the IT revolu- tion. They were early movers who did well with innovations they introduced or helped to introduce, like the microprocessor, the PC, Internet commerce, the sale of electron- ics, and the creation of content that can be viewed on the Internet. This Part includes chapters on Intel and AMD, Dell and Acer, Barnes & Noble and Amazon, Best Buy and Charles Schwab, and Disney and Time Warner.

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7Introduction

A second wave in the IT revolution has gained momentum, threatening the business models that once made these firms very successful. This second phase is characterized by growing digitization; mobility; the commoditizing of older technologies; a move toward smartphones, tablets, and e-readers; increased reliance on the cloud; greater competition between Internet and brick and mortar sales venues; and streaming. These developments have led to the near-obsolescence of once-vibrant business segments like PCs, bookselling, electronic showrooms, movies, and cable television. Given this disrup- tion, how should companies cope? How should they adjust their business models to new conditions they face, conditions brought about by these rapidly changing technologies?

Chapter 9 , “Missing the Boat on Mobile: Intel and AMD,” covers the consequences of these companies not responding to the challenge of mobile technologies. It asks the ques- tion of where they should turn to next.

Chapter 10 , “From Mass Customizing to Mass Commodity: Dell and Acer,” deals with the issue of the growing commoditization of PC sales, long the mainstay of these com- panies’ business. What options do they now have?

Chapter 11 , “Finding Growth and Profitability in Bookselling: Barnes & Noble and Ama- zon,” explores the issue of declining profits and revenue in bookselling in light of the rise of digital devices like e-readers and changes in people’s reading habits and bookselling practices. If these firms remain committed to bookselling, how can they innovate to stay profitable?

Chapter 12 , “Escaping the Middle: Best Buy and Charles Schwab,” delves into the uncom- fortable positions in which Best Buy and Charles Schwab find themselves—not leaders in the high end of their businesses, a role other firms like Apple and Morgan Stanley have seized, yet also not leaders in the low end, a role they deliberately ceded to the likes of Walmart and e*Trade. How can they survive the dual threat of technological leaders above and below them?

Chapter 13 , “Content for a New Age: Disney and Time Warner,” deals with the conse- quences of the decline of cable TV channels, the most profitable divisions of Disney and Time Warner, in the face of increased preference for Internet streaming services, such as Netflix and Amazon Prime. How do these companies deal with this technological disruption?

In sum, this book takes up some of the most important problems in the future of technol- ogy management and business environment and provides important lessons on innova- tion, disruption, and strategy execution.

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8 The Future of Technology Management and the Business Environment

Endnotes 1. Nikolaĭ Kondratiev, The Long Wave Cycle . New York: Richardson & Snyder, 1984.

2. Joseph Schumpeter, Capitalism, Socialism, and Democracy . New York and Lon- don: Harper & Brothers Publishers, 1947.

3. Daniel Bell, The Coming of Post-Industrial Society: A Venture in Social Forecasting . New York: Basic Books, 1999.

4. Alfred Marcus, Strategic Foresight: A New Look at Scenarios . New York: Palgrave MacMillan, 2009.

5. Alfred Marcus, Innovations in Sustainability: Fuel and Food . Cambridge, UK: Cambridge University Press, 2015.

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Part I TECHNOLOGY AND STRATEGY

Chapter 1 Technological Disruptions

Chapter 2 Commercialization’s Obstacles

Chapter 3 Hedging the Uncertainty

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1 Technological Disruptions

T echnological changes, according to Schumpeter, are like a series of explosions with innovations concentrating in specific sectors, or leading-edge industries that provide the momentum for future prosperity replacing each other in a reg- ular, periodic way. Leading sectors propel economies forward; without them, economic growth would not be possible. According to Schumpeter, the process of technological transformation should be called “creative destruction,” 1 given that a set of superior tech- nologies supplants inferior technologies and becomes dominant at their expense. The lagging sectors fall behind, and their time passes, while the new set of technologies surge ahead and, according to Schumpeter, spur economic renewal and revitalization.

In the world’s industrial nations, a dynamic growth phase existed after the Second World War. However, by the start of 1970s, global growth slipped. The post-World War II boom in advanced industrial nations lost momentum. The need existed for a new set of advanced technologies.

The Powers of the Mind Sociologist Daniel Bell has described the shift away from the technologies that dominated the postwar boom as post-industrialism. In this period, theoretical knowledge formed the source of innovation, while technically trained professionals became dominant and technological assessment played a leading role.

The powers of the mind gained ascendance over the brute force of things. Previously, economic activity was centered on physical labor, natural resources, and capital. Now, wealth in the form of physical resources is losing ground to wealth in the form of ideas. An example is the microchip, the key element in the emergence of information technol- ogy (IT); (see Chapter 9 , “Missing the Boat on Mobile Technology: Intel and AMD”), where material costs constituted just 2 percent of production costs and most of the value came from the ideas for the design of the microchips. Other examples include medical

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12 The Future of Technology Management and the Business Environment

technologies, genetics, alternative energy, artificial intelligence, material sciences, and nanotechnology. The main value is not in the materials, but in the ideas. This chapter briefly discusses the promise of these technologies, whereas the next chapter considers concrete examples of efforts to commercialize such technologies and the problems they have encountered.

Information Technology (IT) The IT revolution has touched nearly every human endeavor. Internet usage has grown 183 percent since 2000 (see Exhibit 1.1 ). The number of Internet users increased tenfold from 1999 to 2013. In 2015, around 40 percent of the world’s population had an Internet connection, and a wireless hotspot existed for each 150 persons.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

1990 1995 2000 2005 2010 2015

Exhibit 1.1 Growth in Percentage of People in the World Who Regularly Use the Internet Data source: http://www.internetlivestats.com/internet-users/

The Internet changes the ways in which people socialize, relate, and do business. It has created virtual communities, via email, Facebook, LinkedIn, Twitter, and others. It has made telecommuting possible. Shopping, entertainment, and education are being done from people’s homes. Opportunities exist for increased involvement in politics. Online dating is common. Interactive medicine has become common as well.

Smartphones are ubiquitous. In just one device, they integrate phones, personal data assistants, MP3 players, cameras, voice recorders, watches, calculators, and other

http://www.internetlivestats.com/internet-users/
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functions. Computer use is expanding to many areas in which human intelligence pre- viously was applied, such as driverless cars and automated medical procedures.

Thanks to enhanced computer power and performance, it has become possible to auto- mate increasingly complex tasks. Manufacturing efficiencies are being accelerated as result of computerized controls. Although software that runs computers is not as cre- ative as human beings, its reliability is greater and less mistake prone, which makes it preferred for routine tasks. The use of computers is growing as the programs that run them are becoming better at learning, adapting, and self-correcting.

The full promise of the IT revolution, however, has not yet been tapped. Among the trends that continue to be important are these:

■ The ongoing digitization of audio, video, and film

■ The spread of fiber optics that carry television, telephone, radio, and computer signals simultaneously and make rapid communications possible

■ Expansion in the use of optical memory systems, such as disks, film, and barcodes

■ Parallel processing, which permits many computers to be used simultaneously

■ The evolution of chip technologies, which opens up the possibility for even more accelerated and powerful computers

It is not obvious which firms will take advantage of these opportunities. Their societal impact is considered in Chapter 6 , “Old, Young, and Global Security,” which covers the role they play in the fight against terror and in Chapter 7 , “Rich, Poor, and Global Inequality,” which portrays the role they play in perpetuating the world’s wealth gaps.

Chapter 2 , “Commercialization’s Obstacles,” discusses the case of Xerox, which failed to exploit technologies it had developed and missed out on the promise of the IT revolu- tion. There are other examples that could be cited. Kodak, for instance, missed out on the digital revolution despite accumulating the technical skills to be a part of it. The inability of established businesses to take advantage of technologies they have mastered and know are coming is considered in Chapter 2 .

Medical Technologies Medical technology includes the procedures and equipment by which medical care is delivered. It has affected many medical fields. A prime example is the treatment of heart disease. Each decade from the 1970s to the present has seen successive treatment improvements:

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14 The Future of Technology Management and the Business Environment

■ The 1970s introduced cardiac care units, lidocaine for irregular heartbeat, beta- blockers for lowering blood pressure, clot busters, and coronary artery bypass surgery.

■ In the 1980s, there was increased use of blood-thinning agents and minimally invasive surgery.

■ The 1990s saw drugs that were effective in inhibiting the formation of clots, stents to keep vessels open, and the implantation of defibrillators for irregular heartbeats.

■ Since then, better tests for diagnosis are available, drug-eluting stents are in com- mon use, and new drug strategies are centered on cholesterol-lowering statins.

Many doctors have replaced their stethoscopes with inexpensive, hand-held ultrasound scanners to detect heart problems. In the past, emergency room doctors had trouble distinguishing between bouts of heart failure and pneumonia. Now they have a blood test for B-type Natriuretic Peptide (BNP) secreted by a weakened heart muscle, which enables them to distinguish between these maladies. Although heart disease remains the leading cause of death in the U.S., overall mortality rates have fallen by almost half.

Another example of advances in technology that have changed outcomes is the treatment of preterm babies. In the 1950s, little could be done for them. However, by 1990, there were special ventilators, artificial pulmonary surfactants, and new methods of intensive care, which helped decrease mortality to a third of 1950s levels.

Surgery, too, has seen tremendous improvements. Advances have been made in surgical procedures such as angioplasty and in hip and joint replacements. Microwave scalpels equipped with lasers are replacing metal scalpels. Less invasive laparoscopic techniques have become common. Devices like MRIs and CT scanners are used commonly today. Enhanced electronic medical records systems now exist, facilitating the recording and transfer of information.

For humans with severed bones and defective hearts and lungs, bioelectricity has the potential to speed healing rates. Nerves, muscles, and glands can be stimulated to pro- mote, repair, and restore healthy functioning, and the technique can be used as an alter- native to addictive painkillers.

On the horizon are devices to provide individuals with instant health information and allow them to continuously monitor their health status. Blood sugar can be checked, sleep patterns analyzed, and people empowered with the tools to personalize their treat- ments and behavior on a real-time basis. Despite the advances in technology, their spread is often halted and takes longer than expected. Chapter 7 discusses the potential for

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finding a cure for Alzheimer’s and reversing aging. The next chapter shows how hard it is to fully commercialize some of these technologies. Not all innovations are instanta- neously and fully adopted, as illustrated by the story of cochlear implants.

Genetics Genetic technology refers to efforts to understand gene expression, take advantage of genetic variation, and modify and transfer genes. Passed from one generation to another and found in all living organisms, genes are the coded instructions that organisms use to make proteins, which are the structures of all living things and which perform the func- tions that make life possible.

The genetic code of living organisms has been mapped for ongoing gene restructur- ing and remodeling. Genomics and molecular biology are laying the foundation for many advances. The integrated use of genetic diagnostics and treatment can help guide therapy. For example, diabetics who have problems making and secreting insulin can be distinguished from diabetics who react poorly to insulin and can be given custom treat- ments. Identifying genes and their functions can lead to the more efficient breeding of plants and animals, such as marker-assisted breeding, as the identification of desirable trait markers in genes speeds the selection process.

As scientists map the genome, they can discover and isolate disease-causing genes and identify treatments for inherited diseases like Alzheimer’s and muscular dystrophy. It also gives them the ability to both predict diseases and create the treatments to fight them.

The genetic code also can be mapped to improve existing crops and create new ones. Sci- entists have developed seeds that resist pests and increase the nutrient content of foods, making them better for human and animal consumption. There are nearly 50,000 genes in a grain of rice. With this knowledge, scientists are trying to alter the nature of the rice so that it will be less sensitive to drought and disease. Using their knowledge of genetics, they can breed insects that attack the rice’s main predators. Genetic technology has the promise to better feed the world’s population.

Agricultural biotechnology may also be used to find ways to convert plant material into energy. Scientists are working on biogenetic material that can consume carbon dioxide. However, genetic technology is also controversial, and in some quarters it is met with stiff resistance that has slowed the pace of adoption. The case of Monsanto discussed in the next chapter illustrates this point. The dangers of technology and the ways societies and companies have evolved to manage these dangers are the main topic of Chapters 4 and 5.