AT 6001 Fundamentals of Management of
Technology
Lecture 2
Technology Life Cycles
Dr. Manzila Islam Tuheen
Assistant Professor
Institute of Appropriate Technology (IAT)
Bangladesh University of Engineering and Technology (BUET)
5 Technology Life Cycle
Learning objectives
The S-curve of technological progress
Technology life cycle and market growth
Multiple-generation technologies
Technology and market interaction
Product life cycle
Competition at different phases of technology life cycle
Diffusion of technology
Diffusion-communication-channel relationship
5.1 THE S-CURVE OF TECHNOLOGICAL PROGRESS
The performance of a technology has a recognized
pattern over time that, if properly understood, can be of
great use in strategic planning.
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
an s-shaped diagram called the S-curve.
Technology progresses through a three-stage technology life cycle (TLC): (1) the new invention period, also known
as the embryonic stage; (2) the technology improvement period, also known as the growth stage; and (3) the
mature technology period. The technology becomes vulnerable to substitution or obsolescence when a new or
better-performing technology emerges.
5.1 THE S-CURVE OF TECHNOLOGICAL PROGRESS (CONT.)
The S-curve of technology progress is a very useful
model in technological forecasting, as shown by
Fisher and Pry (1971).
A technology's rate of performance improvement is
dependent on the effort devoted to its development. A
technology may progress on curve A or A', depending
on several factors, including the type of the technology
itself and the cost and time devoted to its
development.
A newer technology (B) has a higher limit of
performance for the same parameter. It may progress
at a faster rate and will influence the progression of
the older technology. At a certain point in time, it will
replace the earlier technology (A).
An example is 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 because of a sequence of newer technologies, each with a higher limit of the
performance parameter of interest.
5.2 TECHNOLOGY LIFE CYCLE AND MARKET GROWTH
When technology reaches the market, it generates income.
Technology under development has no real income-producing
value.
Figure 5-3 shows the market-growth pattern at different phases of
the technology life cycle. The x axis represents time, and the y
axis represents the market volume expected at six technology
phases: (1) technology development phase, (2) application
launch phase, (3) application growth phase, (4) mature-
technology phase, (5) technology substitution phase, and (6)
technology obsolescence phase.
During the technology development phase, the market does not recognize the technology. 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 as much as possible, since it is very expensive and does not produce revenue.
5.2 TECHNOLOGY LIFE CYCLE AND MARKET GROWTH (CONT.)
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.
During the growth phase of the technology, penetration into the
market will 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 a shrinking market share and a
fall in revenues. The final phase is technology obsolescence, during which the technology has little or no value.
5.3 MULTIPLE-GENERATION TECHNOLOGIES
Technology has a hierarchy. A system can consist of several subsystems, and each subsystem may
have several components.
Technology can consist of multiple technologies and derive from different generations of innovation.
The personal computer is a technology and has a technology
life cycle. It consists of several subtechnologies.
One such subtechnology is the microprocessor. The
microprocessor has its own multiple-generation
technologies or subtechnologies. The same concept applies
to software technology. 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.
5.4 TECHNOLOGY AND MARKET INTERACTION
A very strong dynamic relationship exists between technological innovation and the marketplace. 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.
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.
Science provides the base for the technological
push.
Innovations that ensued from the technologies in
Exhibit 5-1 caused major industry upheavals and
totally changed the markets.
5.4 TECHNOLOGY AND MARKET INTERACTION (CONT.)
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.
Market pull is stimulated by consumers.
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 technological change. Integrating
them accelerates the change (Figure 5-7).
5.4 TECHNOLOGY AND MARKET INTERACTION (CONT.)
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. Figure 5-8 depicts how opportunities for technology push and market pull can be
integrated to stimulate innovation.
5.5 PRODUCT LIFE CYCLE
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. The product has not yet met the market and
has no wealth value to the company.
The second phase is the product-launching phase, followed by
the growth phase. 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 products threaten mature-technology products and may substitute for them and eventually render them
obsolete. Obsolete products have little or no monetary value.
5.5 PRODUCT LIFE CYCLE (CONT.)
New products emerge in the embryonic phase of a technology
and many product innovations occur. As the rate of product
innovation reaches its peak and starts to decline, a dominant
product design emerges, and the industry standard is defined
accordingly.
Process innovations are important for the different
generations of products. Process innovations increase
product's life cycle and help maintain competitiveness.
For a single product, the technology life cycle and the product
life cycle coincide.
Technological discontinuity ends one product's life cycle and starts a new product life cycle. Technological
discontinuities used to be few and far between. In the technology age this is no longer the case. The digital age, for
example, has created very rapid rates of innovation for components and products. A microprocessor's design and
manufacturing process change almost on a yearly basis. Software is changing at a faster pace. The product life
cycle is certainly much shorter than it was in the nineteenth and twentieth centuries.
5.6 COMPETITION AT DIFFERENT PHASES OF THE TECHNOLOGY
LIFE CYCLE
In the early stage of the technology life cycle, competition is based on 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.
In the early phase of the growth stage of the technology life cycle, the introduced technology helps expand the
market size for the product or service offered. In this stage a company must be able to balance its growth
strategies with its marketing strategies. Attention to growth must not distract the company from continuing
innovation.
Once the innovation has proved itself in the market, it permits its owner 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 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.
5.6 COMPETITION AT DIFFERENT PHASES OF THE TECHNOLOGY
LIFE CYCLE (CONT.)
Competition with Product and Process Innovation
When a new product or process is introduced to the market, it creates certain energy within the innovation
community. Over time, the rate of innovation of new products or processes increases, reaches a plateau, and
then decreases, creating the inverted U-shaped curve shown in Figure 5-10.
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.
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 to rely on process innovation to reduce cost. Another is
to rely on complementary assets, such as name recognition, to increase market share. Yet another is to use
marketing innovation and improve customer service to lure customers away from competitors.
5.6 COMPETITION AT DIFFERENT PHASES OF THE TECHNOLOGY
LIFE CYCLE (CONT.)
Competition in Mature Technology
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.
Only firms with dominant markets tend to survive. This favors large companies.
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.
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.
5.7 DIFFUSION OF TECHNOLOGY
Diffusion is the process by which an innovation is communicated, over time, through certain channels to members
of a social system (Rogers, 1995).
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
The degree to which the innovation is compatible with the values and needs of the users
The degree to which the innovation is considered complex and difficult to use
The degree to which the innovation can be introduced on a trial basis before users must fully commit to its
adoption
The degree to which the innovation is seen, and its results are observed, by potential adopters
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).
5.8 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 and 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 an innovation because of interpersonal communication
expands during the early phase of the diffusion process and declines during the second half of the process.
This behavior results in a cumulative S-shaped diffusion curve (Figure 5-12).
