CS443 Course Chapter on Technology Life Cycles

CS443 Course
Introduction To Entrepreneurship
p p
Spring 2009, Modern Science & Arts University

Chapter Four: Technology Life Cycles

Instructor:
Al-Motaz Bellah Alaa Al-Agamawi

Chapter Source, “chapter five: technology life cycles” from “customized management of
technology” book, by Tarek Khalil, 2000, McGraw-Hill Companies, Inc.

Technology Life Cycles Chapter 4 By: Motaz Al-Agamawi

The S-Curve of Technological Progress
2

A technology' s improvement
of performance follows th S-
f f f ll the S
curve.
When a technology
performance parameter (y axis)
is plotted against time (x axis),
p
the result resembles an s-shaped
diagram culled the S-curve.
Technological performance can
he expressed in terms of any
attribute, such as density in the
electronics industry (number of
transistors per chip) or aircraft
i hi ) i f
speed in miles per hour.

Technology Progress Life Cycle- TLC
3

(1) the new invention period, also known as the embryonic stage
The new invention period is characterized by a period of slow initial growth . This is
the time when experimentation and initial hugs are worked out of the system.
(2) the technology improvement period, also known as the growth stage
The technology improvement period is characterized by rapid and sustained
growth.
growth
(3) the mature-technology period . The technology becomes vulnerable to
substitution or obsolescence when a new or better-performing techno logy emerges.
Th mature-technology period starts when the upper limit of the technology is
The h l i d h h li i f h h l i
approached and progress in performance slows down, This is when the
technology reaches its natural limits as dictated by factors such as physical
limits .

Example
4

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 t
Th transistor t h l
i t technology started a new t h l
t t d technology life cycle and rendered
lif l d d d
the vacuum-tube technology obsolete.


Changes in Natural Limits of Technology
5

A technology may progress on
curve A or A' , depending on a
number of factors, including the type
of the technology itself and the cost
and time devoted to its
development. A newer technology
d l t t h l
(B) has a higher limit of performance
for the same parameter.


Changes in Natural Limits of Technology
6

When a technology reaches its natural limits it becomes a mature technology
vulnerable to substitution or obsolescence.
A technology s rate of performance improvement is dependent on the effort
technology's
devoted t0 its development.
It may progress at a faster rate and will influence the progression of the older
technology.
t h l


Example
7

Ceramics, which have higher operating temperatures and substitute for metals
used in internal combustion engines; the newer technology permits better
performance of the engines. The performance of the engines can continue to
improve as a result of a sequence of newer technologies, each with a higher limit of
the
th performance parameter of interest.
f t fi t t


Technology Life Cycle and Market growth
8

When technology reaches the market, it generates income.
Technology under development has no real income-producing value.
Technology on the shelf (i.e., not being marketed) provides no return.
As technology develops. following the recognized technology life cycle, market
penetration occurs and so does market growth, expressed as market volume
growth volume.


9

The x axis represents time and
th y axis represents th market
the i t the k t
volume expected at six
technology phases:
( I ) technology development
phase,
(2) application launch phase,
(3) application growth phase,
(4) mature-technology phase,
(5) technology substitution
t h l b tit ti
phase, and
(6) technology obsolescence
phase.

10

During the technology development phase the market does not recognize the
technology at all; it has zero response.
However, this is the important period in which scientists and engineers are
spending significant amounts of effort and money to create the technology,
develop prototypes, and test the new technology.
The goal of any R&D manager should be to reduce this time period as much as
g y g p
possible, since it is very expensive and does not produce revenue.
Once the first wave of the new technology application is launched into the
market,
market the market volume follows the path of technological progress. This is
progress
characterized by slow initial growth during the launching period, followed by
rapid growth.


11

During the growth phase of the technology penetration into the market will
technology,
depend on the rate of innovation and the market needs for the new technology.
The growth rate slows down as the technology approaches its maturity.
At some point, the market volume will peak and then start to decline.
This will happen when the technology matures and enters its substitution phase.
Companies that continue to use the old technology in this phase will be faced with
p gy p
a shrinking market share and a fall in revenues.
The final phase is technology obsolescence, during which the technology has
little or no value
value.


Multiple- Generation Technologies
12

Technology like all systems
Technology. systems,
has a hierarchy.
A system can consist of a
number of subsystems, and each
subsystem may have a number
of components.
p
Technology need not consist of
a single component or derive
from a single innovation
innovation.
Technology can consist of
multiple technologies and derive
from different generations of
innovation.

Example
13

The personal computer is a technology and has a technology life cycle. It consists of
several sub technologies, One such sub technology is the microprocessor, 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. For
example, the microprocessor technology developed by a company such as Intel has
undergone several generations of changes (8088, 286. 386, 486, Pentium). Each of
these generations of innovation helped boost the technology life cycle of the
microprocessor and, in turn. that of the PC.
The same concept applies to software technology, Any software developed for a
major application undergoes several generations of change. The changes improve the
change
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 wilt fi d it lf unable 10 compete with Ih l tt 's newer
ti th f ilt find itself bl t ith Ihe latter
generation technology.

Technology and Market Interaction
14

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.
ff d h d l i i b di i i l


Science-Technology Push
15

we can say that science provides the base for the technological push. Innovations
that ensued from the technologies caused major industry upheavals and totally
changed the markets
markets.
They brought major economic growth.
Radical innovations of products within a technology area create similar effects.
An
A example of a radical innovation that created a major change in the way we
l f di l i i h d j h i h
do business is xerography. When the Xerox machine was developed, it was dubbed
an invention with little promise and a product concept without a mark et (Mort,
1990). Observe where this copying industry is today. Radical innovations create new
markets and expand existing markets.


Market Pull
16

Technological development is also stimulated by market pull. Technology is often
g p y p gy
developed to meet a market need or demand.
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.
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.
p p y p
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.
Both mechanisms push and pull . contribute to stimulating innovation and
mechanisms,
technological change.

Integrating Technology Push and Market Pull
17


The Product Life Cycle
18

A product life cycle closely
resembles the profile of the
technology life cycle and its
associated market-growth profile.
A product emerges from a
concept. Which is translated into an
engineering design and usually
illustrated through an engineering
drawing.
A prototype is developed and
tested to make sure that the product
specifications are met and the
performance parameters achieved.
f t hi d


The Product Life Cycle
19

I thi i iti l d i
In this initial design-and-prototype- d l
d t t development phase. th product h not yet met
t h the d t has t t t
the market and has no wealth value to the company.
The second phase is the product-launching phase. followed by the growth phase.
whose profile depends on the market response to the product.
Typically, sales start slow and then accelerate as the product becomes known and
accepted in the marketplace.
As the product is diffused in the market and the market becomes saturated with a
well-established mature-technology product, the growth rate is likely to slow down.
New
N products threaten mature-technology products and may substitute for them and
d t th t t t h l d t d b tit t f th d
eventually render them obsolete.


Competition at Different Phases of Technology
20

In the early stage of the technology life cycle, also known as the embryonic or
emerging technology stage, competition is based o n innovation. In this stage, the
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
bas is of competition.
In the
I th early phase of th growth stage of th technology life cycle , th i t d d
l h f the th t f the t h l lif l the introduced
technology helps expand the market size for the product or service offered. The
technology becomes a pacing technology in that it has the potential for changing the
basis of the competition. In this stage a company must be able to balance its growth
strategies with its marketing strategies.


Competition at Different Phases of Technology
21

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.
When the t h l
Wh th technology reaches a stage of maturity and the rate of innovation
h t f t it d th t fi ti
declines, it becomes a commodity, available e 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.


Competition With Product and Process Innovation
22

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 ti
O time, th rate of i
the t f innovation of new products or processes increases, reaches a
ti f d t i h
plateau, and then decreases, creating the inverted V-shaped curve shown.
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.
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.


Competition With Product and Process Innovation
23

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.
One approach is 10 rely on process innovation to reduce cost. Another is to rely o n
complementary assets. such as, name recognition, to increase market share .
l t t h iti t i k t h
Yet another is to use marketing innovation and improve customer service to lure
customers away from competitors .


Competition in Mature Technology
24

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
edge.
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.
ff
Only firms with dominant markets tend to survive. This 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
multilayered. Such a structure often impedes innovation and is a threat to sustainable
success.

Competition in Mature Technology
25

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 t h l
M t technology i continuously th t d by substitution of newer technology.
is ti l threatened b b tit ti f t h l
Management must be alert to emerging or competing technologies.

A company's success in introducing a product innovation gives it a leading edge but
'
does not guarantee sustained competitive advantage.
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.


Diffusion of Technology
26

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 t members or a social system
t i h l to b i l t
Adoption of a certain type of technology is usually based on the possible efficacy
of that technology in solving a perceived problem.


27

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