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Nature of the Technology

Some types of technologies can be exploited more effectively through hierarchical modes of exploitation—that is, a single company owning product development, manufacturing and distribution—whereas others can be exploited more effectively through contractual modes (things like licensing or strategic alliances). In particular, researchers have identified crucial dimensions of technologies that make them more appropriate for one mode versus another. Contractual modes of exploitation are more effective when technologies are discrete (things that can be used alone, such as a drug), while hierarchical modes are more effective when technologies are systemic (things that can only be used in conjunction with other things, such as computer software). Because systemic technologies require coordination across the different components, hierarchical modes of opportunity exploitation, which help to ensure that the entities producing the components are coordinated, are useful. For example, if you plan to develop a video game that has both hardware and software components, you probably want to use a hierarchical approach in which your company owns both the production of the hardware and the software. If you only owned the hardware portion and contracted with someone else to produce the software, you might have trouble ensuring that the software fit the hardware correctly.[4]

Stop! Don’t Do It!

  1. Don’t try to exploit your opportunity on your own if you have worse capabilities than existing firms.

  2. Don’t license the opportunity when the key skills to exploit the new product or service are tacit and so reside only in your own head.



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