Technology Life Cycles

1
Technology Life Cycles
2
Primary Learning Point

• The performance of a technology has a recognized
  pattern over time that, if properly understood,
  can be of great use in strategic planning.
• Neglecting the pattern as a key factor in the
  planning process may prove very costly to the
  competitive position of a corporation.

3
The S-Curve Of Technological Progress
4
The S-Curve Of Technological Progress

• A technology's improvement of performance follows
  the S-curve
• When a technology performance parameter (y axis)
  is plotted against time (x axis), the result
  resembles a s-shaped diagram called the S-curve.
• Technological performance can be expressed in
  terms of any attribute, such as
• Density in the electronics industry (number of
  transistor per chip)
• Aircraft speed in miles per hour.

5
Technology Life Cycle (TLC)

• New invention period (Embryonic stage)
• Technology improvement period (Growth stage)
• Mature-technology period

6
New Invention Period

• Characterized by a period of slow initial growth.
  
• Experimentation and initial bugs are worked out
  of the system.

7
Technology Improvement Period

• Characterized by rapid and sustained growth.

8
Mature Technology Period

• Starts when the upper limit of the technology is
  approached and progress in performance slows
  down.
• Technology reaches its natural limits as dictated
  by factors such as physical limits.
• The technology becomes vulnerable to substitution
  or obsolescence when a new or better-performing
  technology emerges.

9
Three-stage Technology Life Cycle (TLC)

• What are some examples of technologies that have
  followed this path?
•  Example
• The vacuum tube technology was limited by the
  tube's size and the power consumption of the
  heated filament. Both of these factors were
  natural barriers to electron conduction in a
  vacuum tube.
• Electronic engineers could not overcome these
  limitations. The arrival of the solid-state
  technology, or transistor, which permitted
  electron conduction in solid material, changed
  the physical barriers of size and power.
• The transistor technology started a new
  technology life cycle and rendered the
  vacuum-tube technology obsolete.

10
Learning Point from S-Curve of Technological
Progress

• When a technology reaches its natural limits it
  becomes a mature technology vulnerable to
  substitution or obsolescence.
• What are some examples of technologies that have
  reached their natural limits?

11
A technology's rate of performance improvement is
dependent on the effort devoted to its
development.
Changes in Natural Limits of Technology The rate
of performance improvement is shown for twp
technologies
12
What are some examples of technologies that have
been delayed based on the amount of effort
devoted to its development?

• Ceramics - have higher operating temperatures and
  substitute for metals used in internal combustion
  engines
• Medications for disease
• Fuel cells
• Solar power

13
The Technology Life Cycle and Market Growth

• As technology develops, following the recognized
  technology life cycle, market penetration occurs
  and so does market growth, expressed as market
  volume.
• The market-growth changes at different phases of
  the technology life cycle.

14
Market Growth At Different Stages of the
Technology Life Cycle
15
Six Technology Phases

• Technology development phase
• Application launch phase
• Application growth phase
• Mature-technology phase
• Technology substitution phase
• Technology obsolescence phase

16
Technology Development Phase

• Market does not recognize the technology at all -
  it has zero response.
• Important period in which scientists and
  engineers are spending significant amounts of
  effort and money to
• Create the technology
• Develop prototypes
• Test the new technology
• Why would an RD Manager want to reduce this time
  period?

17
Technology Development Phase

• Why would an RD Manager want to reduce this time
  period?
• It is very expensive
• Does not produce revenue

18
Application Launch Phase

• Once the first wave of the new technology
  application is launched into the market, the
  market volume follows the path of technological
  progress.
• This is characterized by slow initial growth
  during the launching period, followed by rapid
  growth.

19
Application Growth Phase

• During the growth phase of the technology,
  penetration into the market will depend on
• Rate of innovation
• Market needs for the new technology

20
Mature-Technology Phase

• The growth rate slows down as the technology
  approaches its maturity.

21
Technology Substitution Phase

• Market volume will peak and then start to
  decline.
• Companies that continue to use the old technology
  in this phase will be faced with a shrinking
  market share and a fall in revenues.
• Why will companies using mature technology face a
  shrinking market share and fall in revenues?

22
Technology Obsolescence Phase

• Technology has little or no value
• List Several Technologies ask groups to put
  these technologies into phases

23
Multiple-Generation Technologies

• Technology, like all systems, has a hierarchy.
• A system can consist of a number of sub-systems,
  and each subsystem may have a number of
  components.
• Technology can consist of multiple technologies
  and derive from different generations of
  innovation.
• What are some examples of multiple-generation
  technologies?

24
Multiple-Generation Technologies

• Example Computer Production
• Micro-processor - which can also be defined as a
  technology with a technology life cycle all its
  own. In turn the microprocessor has its own
  multiple-generation technologies or sub-
  technologies.
• The microprocessor technology developed has
  undergone several generations of changes (8088,
  286, 386, 486, and Pentium I, II, III).
• Each of these generations of innovation helped
  boost the technology life cycle of the
  microprocessor and, in turn, that of the PC.

25
Multiple-Generation Technologies
Multiple Generation Technologies Subtechnology
Life cycles in multiple generations of innovation
shape the overall technology life cycle
26
Multiple-Generation Technologies

• Example Software Production
• Any software developed for a major application
  undergoes several generations of change.
• The changes improve the software and extend its
  useful life.
• If a company developing software stops its
  development after one generation and another
  company continues to develop new generations, the
  former will find itself unable to compete with
  the latter's newer-generation technology.

27
Technology And Market Interaction

• A very strong dynamic relationship exists between
  technological innovation and the marketplace.
• The presence of a market or the creation of a new
  market represents the reward for technological
  development.
• It is only when technological developments find a
  market that scientific research pays off and the
  development cost is reimbursed in economic or
  social terms.

28
Science-Technology Push

• Most of the recent technological breakthroughs
  are based on earlier scientific discoveries.
• Science provides the base for technological
  development, which in turn creates new markets.

29
Science-Technology Push

• Examples
• Bayraktar (1990) cites several examples of
  technologies that owe their bases to scientific
  discoveries
• The field of electronics is based on Maxwell's
  theory of electromagnetism
• Nuclear energy is based on Einstein's 1905 paper,
  which established the famous E MC2 equation
• The transistors are based on A. H. Wilson's 1931
  paper on the theory of semiconductors
• Genetic engineering followed the discovery of the
  structure of DNA by Watson and Crick in 1952.
•  

30
Science-Technology Push

• Science provides the base for the technological
  push.
• Innovations that ensued from technologies cause
  major industry upheavals and totally changed the
  markets. They bring major economic growth.
• Radical innovations of products within a
  technology area create similar effects.
• Example
• A radical innovation that created a major change
  in the way we do business is xerography. When the
  Xerox machine was developed, it was dubbed an
  invention with little promise and a product
  concept without a market (Mort, 1990). Observe
  where this copying industry is today. Radical
  innovations create new markets and expand
  existing markets.
•  

31
Market Pull

• Technological development is also stimulated by
  market pull.
• Technology is often developed to meet a market
  need or demand.
• This is the most effective way to connect
  technology with the market.

32
Market Pull Is Stimulated By Consumers

• In the majority of cases, market pull is
  stimulated by consumers.
• Consumers may or may not know whether a new
  technology exists or is being developed, or if
  they do, they may not understand the technology.

33
Market Pull Technologies Are Incremental
Improvements

• Most of the technological developments stimulated
  by market pull are of an Incremental nature, or
  represent improvements to existing technologies.
• Incremental technological improvements have a
  cumulative effect, and they can have a tremendous
  impact on productivity and competitiveness.

34
Market pull (with strong collective demand) may
provoke major breakthroughs

• When there is a strong collective demand for a
  solution to a specific problem (such as a vaccine
  for AIDS), market pull may provoke major
  breakthroughs.

35
Integrate Push and Pull

• Both mechanisms, push and pull, contribute to
  stimulating innovation and technological change.
  Integrating them accelerates the change.
• Munro and Noori (1988) proposed that commitment
  to technology adoption is dependent on an
  integrative approach to technology push and
  market pull combined with management's attitude
  toward technology and the firm's technical and
  financial resources.
• What are examples of market-pull technologies?

36
Competition At Different Phases Of The Technology
Life Cycle

• 1. Technology Development
• Competition is based on innovation.
• Technology is still developing and has not been
  fully accepted.
• Companies depend on their innovation to add value
  to products and services they bring to their
  customers.
• The introduced technology has not yet
  demonstrated its potential for changing the basis
  of competition.

37
Competition At Different Phases Of The Technology
Life Cycle

• 2. Application Launch Phase
• Technology helps expand the market size for the
  product or service offered.
• Technology becomes a pacing technology in that it
  has the potential for changing the basis of the
  competition.
• Company must be able to balance its growth
  strategies with its marketing strategies.
• Attention to growth must not distract the company
  from continuing innovation.

38
Competition At Different Phases Of The Technology
Life Cycle

• 3. Application Growth Phase
• Once the innovation has proved itself in the
  market, it permits its owner to take a patented
  position or to define the industry standard.
• A dominant design of the product emerges, and the
  technology has a major impact on the value-added
  stream of performance, cost, and quality.
• Technology in this phase of the growth stage is
  known as key technology, and a company should
  increase its capabilities in this area to
  compete.

39
Competition At Different Phases Of The Technology
Life Cycle

• 4. Mature-technology phase
• When the technology reaches a stage of maturity
  and the rate of innovation declines, it becomes a
  commodity, available to all competitors.
• Technologies in this category are also recognized
  as base technologies and have little ability to
  give a company a strong competitive edge.

40
Competition Product and Process Innovation

• The rate of product and process innovations
  follow a general pattern. 
• This pattern can be used to formulate policies
  and procedures to better manage the process of
  technological innovation.

41
Competition Product and Process Innovation
42
Competition Product and Process Innovation

• When a new product or process is introduced to
  the market, it creates certain energy within the
  innovation community, triggering a series of
  changes to the product or process.
• Over time, the rate of innovation of new products
  or processes increases, reaches a plateau, and
  then decreases, creating the inverted U-shaped
  curve.
• At the early stages of product development,
  competition in innovation and improvement delays
  agreement on a standard design.
• A leader in innovation has the opportunity to set
  the standard.

43
Competition Product and Process Innovation

• A company should strive to be in such a position
  because once a dominant design is established in
  the market by another company, it will be too
  late for the company to set a different industry
  standard based on its own product.
• It may have to settle for being a follower, in
  which case it will have to develop another
  strategy to obtain a leading position in the
  marketplace.

44
Strategies for obtaining a leadership position in
the market without setting the standard for the
technology

• Rely on process innovation to reduce cost.
• Rely on complementary assets, such as name
  recognition, to increase market share.
• Use marketing innovation and improve customer
  service to lure customers away from competitors.

45
Competition in Mature Technology

• As the technology approaches the maturity stage,
  the rules for competition change, as follows
• The competition switches from being based on
  innovation to being based on price and quality.
• Process innovations tend to dominate, and they
  assume greater importance in achieving a
  competitive edge.
• Companies compete by introducing product lines
  into segmented markets.
• Companies rely on economy of scale to reduce
  price.
• Specialization and production efficiency within
  companies assume greater importance.

46
Competition in Mature Technology

• Only firms with dominant markets tend to survive.
  
• Favors large companies.
• Mergers and acquisitions of companies assume
  greater importance in companies' strategies.
• Large organizations with mature technology tend
  to be rigid, bureaucratic, and multi-layered.
• Such a structure often impedes innovation and is
  a threat to sustainable success.

47
Competition in Mature Technology

• Companies with mature technology become subject
  to increased competition by those who have lower
  production costs, lower labor rates, or lower
  overheads.
• This introduces international competition as a
  major factor.
• Mature technology is continuously threatened by
  substitution of newer technology.
• Management must be alert to emerging or competing
  technologies.

48
Competition in Mature Technology

• A company's success in introducing a product
  innovation gives it a leading edge but does not
  guarantee sustained competitive advantage.
• A company that leads with product innovation,
  establishes the industry standards, and follows
  through with incremental and process innovation
  can sustain success.
• It is important to maintain control over products
  and their domination of the market throughout the
  product life cycle.
• It is also important to take a proactive approach
  to developing or dealing with technological
  disturbances.

49
Competition in Mature Technology

• Migrating to the emerging technology in a timely
  manner keeps a company's products competitive.
• Managing technological innovation requires that
  an organization continue to introduce incremental
  innovations and forecast future changes in order
  to ensure continued existence in the face of
  discontinuous innovation.
• Companies that have been able to do this
  successfully are 3M, General Electric, Sony, and
  Microsoft.
• These companies compete with innovation and work
  hard to be leaders in technology.

50
Diffusion Of Technology

• A technological innovation, a new idea, or a new
  system is considered to be successful when it is
  adopted by users and diffused through the user
  population.
• Diffusion is the process by which an innovation
  is communicated, over time, through certain
  channels to members of a social system (Rogers,
  1995).
• The term "innovation" is frequently used in the
  diffusion literature as being synonymous with
  "technology."

51
Diffusion Of Technology

• Adoption of a certain type of technology is
  usually based on the possible efficacy of that
  technology in solving a perceived problem.
• Information about an innovation reaches a
  potential adopter through communication channels.
  
• There are many channels for communicating new
  ideas to potential users, including interpersonal
  channels and mass media.

52
Diffusion Of Technology
53
What factors influence the rate of adoption of a
new technology?

• The rate of adoption of an innovation by members
  of a social system is dependent on the following
  factors
• The degree to which the innovation is perceived
  to be offering better advantage than does
  existing practice.
• An example is an innovation that offers a less
  expensive method of producing a product.
• The degree to which the innovation is compatible
  with the values and needs of the users.
• An example of an incompatible innovation is a new
  product that may produce pollution in an
  environmentally sensitive community.
• The degree to which the innovation is considered
  complex and difficult to use.
• An example is a new process that requires a great
  deal of effort in retraining employees and has a
  high cost of implementation.

54
What factors influence the rate of adoption of a
new technology?

• The degree to which the innovation can be
  introduced on a trial basis before users must
  fully commit to its adoption
• An example is a new drug that physicians can use
  on a limited trial basis before prescribing it to
  all patients. Free samples of drugs given to
  physicians permit them to do so.
• The degree to which the innovation is seen, and
  its results are observed, by potential adopters
• An example is a small satellite dish for
  television viewing. As people see it in use and
  observe their neighbors' satisfaction with its
  performance, they are more likely to be willing
  to use it.
• Innovations that are perceived by individuals as
  having greater relative advantage, compatibility,
  and less complexity and that can be tried and
  observed will be adopted more rapidly than other
  innovations (Rogers, 1995).

55
The Diffusion-Communication-Channel Relationship

• Mahajan et al. (1990) suggest that adopters of an
  innovation are influenced by two types of
  communication channels
• Interpersonal word of mouth
• Mass media channels.
• Mass media influence is greatest in the early
  phase of diffusion but occurs continually
  throughout the diffusion process.
• In contrast, the number of users who adopt a new
  innovation as a result of interpersonal
  communication expands during the early phase of
  the diffusion process and declines during the
  second half of the process.

56
The Diffusion-Communication-Channel Relationship

• The decision to adopt an innovation by an
  individual or an organization takes a certain
  period of time and consists of several stages
• Gaining knowledge of the innovation
• Forming a favorable opinion about it
• Making the decision to adopt it
• Implementing the innovation
• Following up on its performance.

57
The Diffusion-Communication-Channel Relationship

• Innovative organizations that are considered
  technology leaders require a shorter time period
  than others to go through the innovation-decision
  process.
• Followers take longer to effect the same process,
  and laggards take much longer to make a decision
  for technology adoption.
•  
• What are the indicators of the technology life
  cycle?
•  
• At what levels of these indicators will decisions
  be made regarding technology?