For
this post, I am going to build on our recent series of articles on technology
forecasting and technology scouting elsewhere on this blog (see here, here, and here) and speak
about how to incorporate the results of your technology forecasting and
scouting efforts in the organization’s strategic technology planning efforts.
Recognizing that technological change is a principal
driver of competition, an important concern of corporate CEOs and Chief
Technology Officers (CTO) is managing the firm's technology development or
acquisition effort to support overall company objectives. Given the accelerating pace of technological
progress, managing this effort is becoming increasingly difficult but also
increasingly important. Not too long ago, much of this discussion centered on
the question of whether a firm's technology strategy should be predominantly
market-pull or technology push. But, it
is more than that. It is as basic as
deciding what business(es) the firm is in now and determining those in which it
should participate in the future.
The most radical such decision I know of occurred several
years ago when Boulder, Colorado based Cell Technology exited the biotech
field and reinvented itself as an air ambulance company. A more interesting example today might be Big
Oil. Are they oil companies? Energy companies? Or, recognizing that over 70% of petroleum is
destined for use as fuel – and over 90% of transportation fuel is derived from
petroleum – are they really transportation companies? How you see yourself now and in the future
impacts the current and future technology portfolio and the skill set that your
business must have. If I were an oil
company and concerned about my long term business, it isn’t just oil markets
that I would be concerned with. Nor
would staking out a position in electric vehicles or electrical power generation
necessarily be where I would focus.
But, before we get there let’s start with the
basics. Webster's New Collegiate
Dictionary defines technology as "the
totality of the means employed to provide objects necessary for human
sustenance and comfort." Fair
enough, but in this context, we must define "objects" to include both
services and goods. Going further, Martino notes that technology may also
include "know-how" and software [1]. I like that better, but would extend it even
further to include systemic technologies such as management processes and
systems. Thus, when referring to a given technology we really mean an entire
family of technical approaches that have some major characteristic in common
or that perform the same function. For
example, internal combustion engine vehicles represent a class of transportation
technologies as distinguished from electric vehicles or fuel cell vehicles. Each can be further aggregated or disaggregated
according to our needs.
Essential to making strategic decisions concerning
technology is an understanding of the dynamics of technological change. Historical data from many fields demonstrate
that progress is not random and discontinuous, but follows a fairly regular
pattern when some performance attribute is tracked over time. Just as products and processes follow a life
cycle, so do technologies. The resulting
Technology S-curve (figure 1) is similar in form to product or process
life cycle curves and is at the heart of our earlier discussions on technology
trend analysis mentioned earlier. As we noted
then, utilizing various forecasting techniques, a firm can do more than
simply monitor technology – it can estimate where the Technology S-curve will
lead it and what the likely impact will be on its future lines of
business.
Figure 1 - Technology s-curve.
As shown in figure 1, technology begins with an
invention or discovery and initially grows rather slowly as shown by the flat
initial portion of the S-curve. As the
diffusion of technology proceeds and the potential for its use becomes known,
continued work leads to increasing levels of performance, shown by the steep
part of the curve. Beyond the inflection
point, increases in the technology's performance come harder. Of particular importance is the recognition
that no technology can be advanced without limit. There has always been found to be some
natural upper limit beyond which a technology cannot progress – though we may
not necessarily know what that is at first.
Increases in performance beyond this point require shifting to a new
S-curve associated with a new technology or a breakthrough associated with the
old one. More on that in a moment.
Eschenbach and Geistauts defined strategy as a "... fundamental approach for
gaining long-term advantage over both competitors and [the] environment
..." They note that "strategy explicitly considers and
tries to control the impact of uncertainty."[3] In this context,
technology can be viewed as either an opportunity or a threat. The aggressive,
technology‑oriented firm they conclude will wield its technology as a
competitive weapon to offer unique or superior products or services,
significantly lower production costs, or make substantive improvements in
management processes.
A firm's technological skills, although difficult to
inventory, are some of its most important assets, even though they don't
appear on the bean counter’s balance sheet. Given that technology is a
corporate resource, the idea of a technological audit has been proposed to
assess a firm's ability to compete on the strength of its technological assets
[2]. To aid in this endeavor, table 1
shows the various stages in a technology's life cycle and the importance of
each stage to a firm's competitive advantage.
Table 1 - Technology life cycle and
competitive advantage [2].
Technology Life Cycle Stage
|
Importance to Competitive
Advantage
|
I Emerging
Technologies
|
Have not yet
demonstrated potential for changing the basis of competition.
|
II Pacing
Technologies
|
Have demonstrated
their potential for changing the basis of competition.
|
III Key
Technologies
|
Are embedded
in and enable product/ process. Have a major impact on value added stream (cost, performance, quality). Allow
proprietary/patented positions.
|
IV Base Technologies
|
Minor impact
on value added stream. Common to all
competitors – commodity.
|
By determining the level of the technologies that it
relies upon, and doing the same for its competition, a firm can assess its
competitive standing vis-a-vis its competitors.
Such is the foundation of science & technology intelligence. A firm that wishes to adopt an offensive
technological strategy should have strong positions in pacing and key
technologies while being at the forefront of emerging technologies. One that finds itself dependent primarily on
base technologies is by default going to be a follower in the market place.
A critical determinant in establishing technology
strategy is to select the right technology and the right time to pursue it
[4]. Returning to figure 1, since the
slope of the S‑curve represents technological progress per given level of
input, it can also be considered to be a measure of R&D productivity. Richard Foster, formerly of McKinsey, notes
that "you cannot improve the
performance of one laboratory over another by a factor of twenty through better
organization and project management. You
can only do it by picking the right technologies."[4]
The position of a technology on the S-curve determines
the potential that remains to be developed in that technology. If performance improvement, which may be
considered a measure of R&D productivity, has been stagnating after having
reached a previous high, the only way to improve it is to get onto a new
S-curve where the rate of productivity growth (i.e. performance improvement) will
be higher (see figure 2). Faced with the
technological discontinuity shown here, management must then decide whether to
exploit the potential remaining in the present technology or shift to a new
technology and, if so, when to make that move [4].
Figure 2 - Transitioning from an old
technology (declining growth rate) to a new technology (increasing growth
rate).
In deciding which technology to exploit, firms must
exercise some foresight as it will take some time after shifting to the new
technology to travel down a new learning curve to the point where the new
technology becomes profitable.
Considering development lead times, this often means thinking about
switching to a new technology just as the current technology is maturing and
business is going well. Foster notes
that:
"The time to begin exploring technological alternatives is when roughly half of the full potential of the present technology has yet to be exploited. Yet this is precisely the time when it is most difficult to get management to think about new technologies. ....conventional management systems, with their emphasis on short term measurements and rewards, work against the correct diagnosis of the technological situation."[4]
Here is where some capability at opposite ends of the
same coin can be important. Forecasting
both technological trends and market trends is a skill that is – or should be –
instrumental to strategic technology planning.
How well do you do this? In spite
of our best efforts, no firm can be right 100% of the time. This is where flexibility and the ability to
respond rapidly to a changing environment can help create and sustain a
competitive advantage, especially for the entrepreneurial firm that must compete
against better endowed competitors.
Finally, a well thought out strategic technology planning
effort will include both near and far term components. Strategic plans, although forward looking,
must be grounded in the present. In this
regard, a quote from Peter Drucker concerning long range planning seems
especially apropos to strategic technology planning:
"Decisions exist only in the present. The question that faces the long-range [technology] planner is not what we should do tomorrow, it is: What do we have to do today to be ready for an uncertain tomorrow?"
References
1. Martino,
J.P., 1983, Technological Forecasting for Decision Making, 2nd ed.; Elsevier,
1983, 385p.
2. Burgelman,
R.A., and Maidique, M.A., 1988, Strategic Management of Technology and
Innovation; Irwin, 1988, 604p.
3. Eschenbach,
T.G., and Geistauts, G.A., 1987, Role of technology in strategic management:
Engineering Mgmt Int'l, v.4, p.307-318.
4. Wolff,
M.F., 1981, Picking the right technology should be first priority: Research Mgmt.,
July 1981, p.7-8.
