4.

TECHNOLOGY LIFE CYCLE

The Technology Life Cycle

The technology life cycle is a predictable pattern followed by a technological innovation, from its inception and development to market saturation and replacement.

TECHNOLOGY PORTFOLIO ANALYSIS

 In broad terms the "s" curve suggests four phases of a technology life cycle - emerging, growth, mature and aging. These four phases are coupled to increasing levels of acceptance of an innovation or, in our case a new technology. In recent times for many technologies an inverse curve - which corresponds to a declining cost per unit - has been postulated. This may not prove to be universally true though for information technology where much of the cost is in the initial phase it has been a reasonable expectation.

 Role of technology management function in organization is understand the value of certain technology for the organization. Continuous development of technology is valuable as long as there is a value for the customer and therefore technology management function in organization should be able to argue when to invest on technology development and when to withdraw.

TECHNOLOGlCAL INNOVATION
CONTRIBUTION OF TECHNOLOGY IN ECONOMIC AND SOCIAL PROGRESS Technology is Practical value of the applied sciences Science And Technology Technological Progress The Competitive Advantage of Nations Technological Innovations to gain competitive advantage Technological strengths among nations

FACTORS AFFECTING GROWTH AND QUALITY

Population growth Shortage of food production Adverse consequences of industrialisation Environmental degradation Consumption of non-renewable natural resources

DEVELOPMENT OF TECHNOLOGY
Development process Technology Assessment Development Team Development stages
o o o o o o Knowledge acquisition Concept(s) investigation Basic Design Prototype building or modelling Pilot Plant Test Marketing

TECHNOLOGY SOURCING
Technology Sourcing Sourcing can be done in two was internal external

Sourcing Methods for external Outright purchase Licence Collaboration Joint ventures Sponsored R & D

NEED FOR TECHNOLOGY IMPORT

Non availability of suitable technology Risk aversion Perceived brand image benefit Asset building strategy Global ambitions

Technology Transfer Model

Intellectual Property rights Documentation Publicity Selection of entrepreneur Licencing Technology transfer

Technology Transfer
Components of Innovation Monitoring System Organisational Structure Paradigm Shifts Interfacial Contracting Independent Technology Transfer Organisation Technology Transfer Manager Portfolio of different technology transfer services Active marketing approach Technology transfer to SMEs Financial Support

Management of Intellectual Property Rights

Forms of IPRs

Patents Designs Trademarks Copyrights

LONG WAVE CYCLE

THE KONDRATIEV CYCLE

Simple Patterns of Technological Change

Kondratief = Long waves in technological innovation Abernathy & Utterback = Study of how product innovation gives way to process innovation and the concomitant changes that occur in firms/industries Foster = Studies the performance of technology as it matures, concept of dominant design Tushman & Rosenkorpf = Cycle Christensen = Value Networks

Kondratief Waves
Cycles of economic expansion about 50 years long Based on historic observation of 3 cycles since late 18th century Kondratief postulated that the cycles were caused by capital investment (and subsequent wearing out) in Capitalist economies, Schumpeter postulated that they were caused by the innovation process Schumpeter says: Innovation begets more innovation Innovation attracts investment Thus strengthening the cycle Schumpeter does not explain: What stops the cycle Why the clustering Not particularly useful theory as timeline too long and uncertain.

 The Kondratieff Cycle is a theory based on a study of nineteenth century price behavior which included wages, interest rates, raw material prices, foreign trade, bank deposits, and other data. He, like R.N. Elliott, Kondratieff was convinced that his studies of economic, social, and cultural life proved that a long term order of economic behavior existed and could be used for the purpose of anticipating future economic developments. He observed certain characteristics about the growth and contractionary phase of the long wave. Among them, he detailed the number of years that the economy expanded and contracted during each part of the half-century long cycle, which industries suffer the most during the downwave, and how technology plays a role in leading the way out of the contraction into the next upwave. The fifty to fifty-four year cycle of catastrophe and renewal had been known and observed by the Mayans of Central America and independently by the ancient Israelites. Kondratieff's observations represent the modern expression of this cycle, which postulates that capitalist countries tend to follow the long rhythmic pattern of approximately half a century.

 In the idealized long wave model, which is illustrated in the diagrambelow, the cycle (which averages 54 years in length) begins with the "upwave" during which prices start to rise slowly along with a new economic expansion. By the end of a 25-30 year upwave period, inflation is running very high. Its peak sets the stage for a deep recession that jolts the economy. The recession, which begins about the time commodity prices break from their highs, is longer and deeper than any that took place during the upwave. Eventually, though, prices stabilize and the economy recovers, beginning a period of selective expansion that normally lasts nearly a decade. Referred to as the secondary plateau, the expansion persists, giving the impression that "things are like they used to be," but its anemic nature eventually takes its toll as conditions within the economy never reach the dynamic state that occurred during the upwave. The secondary plateau ends with a sudden shock (financial panic/stock market crash) and the economy rolls over into the next contractionary phase, which is characterized by deflation and the start of an economic depression. The current revolution of the Kondratieff Wave began after the global economy pulled out of a deflationary depression in the 1930s. Prices began to accelerate upward after World War II, and reached the commodity price blowoff stage in 1980. Since that time, and then after the recession of 1990-1991 (much longer in some locations such as California and Japan, the latter of which has never really recovered from economic contraction), the global economy has been treading the secondary plateau. During this period, consumers and investors become aware that inflation is not accelerating Kondratieff Wave upward, and disinflation becomes the buzz word. Paper assets such as stocks and bonds do well since neither inflation nor deflation-both of which are damaging to stock

KONDRATIEV LONG WAVE CYCLE

Kondratiev Long term cyclical changes Time span: 50 years 4 Phases

Recovery

Prosperity

Recession

Depression

 Recovery:

THE 4 PHASES

Discoveries are developed in to new innovations that create entirely new opportunities Uncertainty variety of competing product configurations
Prosperity

Innovations diffuse Band-wagon effect Over ambitious and unrealistic plans

THE 4 PHASES
Recession

Limits of technological advance become evident price competition becomes intense New technology spills into process applications Transformative capacity of technology

Depression
Declining profitability Mergers and acquisitions Discoveries, breakthroughs and inventions

THE 5 CYCLES
Date 1780 - 1830 1830 - 1880 1880 - 1930 1930 - 1980 1980 - ??? Cycle First Second Third Fourth Fifth Technology Cotton, Iron, Water Power Railways, Steam Power, Steamship Electricity, Chemicals, Steel Cars, Electronics, Oil, Aerospace Computers, Telecommunications and Biotechnology

Abernathy & Utterback 1

Looks at How a company responds to innovative ideas as it grows How the nature of innovation changes as a technology matures How the nature of a firm changes as a technology matures How the nature of an industry changes as a technology matures Unit of analysis is a single technology productive unit Does not explain the birth or death of that technology

A&U - Innovation patterns

Rate of major Innovation
Product Innovation Process Innovation

Product change from Radical to Incremental Industry change from Product to Process Competitive change from High to Low Margins Firm change from Product to Process

Dominant Design emerges?

Time from introduction of new technology

A&U Productive Unit patterns

Compete on Source of innovation Type of innovation Product line Production Equipment Materials Plant Organisation Fluid Function User & technical Major product changes Diverse, custom Flexible General Purpose Off the shelf Small, near user Small, virtual, loose Transitional Product variation Diversification Major process changes At least one cash cow Stepped investment Islands of automation Semi-specific General purpose to semi-specialised Formal, alliances Specific Cost Cost drivers Incremental process changes Standard Capital intensive, rigid Specific, automated Purpose made, vertical integration Large scale Rigid, controlled, tight, integrated

A&U - Implications
Organizational Flexibility/Rigidity
Small, loose R&D lab not appropriate for Specific Stage Large productive unit unlikely to be creative and flexible enough for Fluid Stage May need to split if there is a strategic requirement to do both product and process development
Watch out for the Dominant Design! Some industries (e.g. power generation) move from Fluid to Specific immediately because of enormous economies of scale Huge specific (cannot be used for any other purpose) investments in Specific Stage result in incumbents myopia failure to be able to forecast the emergence of new technologies

Foster S Curve I

Axes of figure

Horizontal time Is vertical axis = technical performance/price?? This addition to the model adds in the improvements from process innovation (which are largely cost reducing)

New technology Technology Performance

Old technology

Last gasp increase in old technology

Resources used in R&D

Curves can be constructed at many levels of analysis e.g. Pistons, Engines, Cars, Transportation systems

Foster S Curve description

Start competing approaches, accumulation of irrelevant knowledge, establishing organizational linkages Region of maximum progress dominant design, little duplication and wasted effort, cash flows positive. Finish fundamental technical limits (e.g. speed of light), slowing returns to effort. Sailing ships & the power of the wind Copper wire & transmission capability Semiconductors & the speed of the electron

Thesis of Tushman and Rosenkopf

Technologies evolve through Random events Actions by organizations shaping standards Effect of multiple competing organizations Combination of technical, economic, social, political and organizational processes The greater the uncertainty, the greater the influence of nontechnical factors in the technology trajectory Uncertainty is driven by: The stage of the technology trajectory The complexity of the technology itself Technology evolves through breakthroughs followed by periods of incremental change

Tushman & Rosenkopf

Four stage cycle of technological change
Occurrence of a Technological Discontinuity Era of Ferment Establishment of a Dominant Design Era of Incremental change
Technological Discontinuity Era of Incremental Change Dominant Design Era of Ferment

Christensens Thesis
Differences between sustaining and disruptive innovations Sustaining innovation moves technological progress (through incremental or radical innovation) along S-curves having existing dimensions of merit Disruptive innovation moves technological progress (through incremental or radical innovation) to new set of S-curves having new dimensions of merit Move to new disruptive innovation is based on the rate of increase of market needs being slower than the rate of increase in technological performance - thus eventually the users needs are over-satisfied by existing technical performance - hence they look to new dimensions. Companies invest rationally in new technology - and thus favour sustaining rather than disruptive technologies

Changing dimension of competition over product lifecycle

Windermere Associates Model states that customer needs move down dimensions below as each need is satisfied: Technical performance Reliability Convenience, and then lastly Price Any one of these steps could signal move to new value network and represent a disruptive technology Correlates with Crossing the Chasm (Moore) predication of product diffusion