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Lecture 4
Technology Life CyclesTechnology Life Cycles
TLC vs PLC vs MLC• Product Life Cycle (PLC) illustrates the fluctuations of the product
sales revenue over time, from the beginning of its design to the last phase of its ramp down. While, Technology Life Cycle (TLC) demonstrates the cumulative product development projects of a technology or technology performance over time, which could represent the technology maturity level in various periods of time. Subsequently, Market Life Cycle (MLC) represents appearance and developments of various market segments to market area of a technology.
• Apparently, each Technology life Cycle could contain various Product life cycles and each Market life cycle could include different technology and product life cycles. Therefore Market life cycle has more comprehensive view point and Product life cycle is more detailed with specific product centric insight.
TLC Implication• Recognizing at the late stages of market maturity the potential threat of a
new technology as early as possible, and to develop the appropriate strategic response (a radically new technology or making improvements in the old technology to keep it competitive).
• To invest in any product development project or any new product production, the company has to find out its technology stage in the life cycle. When the company is implementing any new technology, platform or even new product based on new technology should recognise if the technology is growing or disappearing to other trade-offs in accordance with technology future (Gao et al., 2012), mostly the S-curve of technology life cycle is based on Technology performance over time or cumulative development activities (Gao et al., 2013) Technology performance could be measure by various factors and indicators but some studies have suggested that different technology indicators should be taken into account and one single factor is not enough to build the S or double- S curve of Technology Life Cycle (Erst, 1997; Lee and Nakisenovic, 1989).
• Therefore, if any technology development causes a life cycle, it will cause number of Product Life Cycles (Christensen and Rosenbloom, 1995). Apparently, PLC is based on an individual or limited series of Products while TLC points out life cycle of different platforms that each of them could introduce various products; therefore Technology life cycle is more based on macro level data than PLC (Kim, 2003). Moreover, PLC starts with the product introduction to the market, while TLC starts with the Idea creation of a new concept. Apparently, lots of ideas could not move from the first stage into the second, because the teams could not build the concept or some times when introduction stage takes a long time the team made to leave the whole technology or suspend it for future. (Callon, 1980; Abernathy and Utterback, 1978).
Static Models• Incremental vs radical innovation• Abernathy-Clark• Henderson-Clark• Innovation Value-added Chain• Strategic Leadership• Familiarity Matrix• Quality and Quantity of New Knowledge• Appropriability and Complementary Assets• Local Environment• Strategic Choice
Dynamic Models• Foster S-curve• Barras Reverse product life cycle• Utterback-Abernathy• Tushman Rosenkopf• Tushman-Anderson• Rogers Typology of Adopters
Technology Life Cycle• There are various procedures to find out the technology life cycle stages in
an industry and the stage of any technology, as an example FTA (Future –oriented Technology Analysis) (Martino, 1993) which has been applied from 1950, or the procedures of calculating Technology Readiness Level Which is very popular in US military. Different authors (e.g. Achilladelis, 1993 and Andersen, 1999) find out the models based on patent application in each technology, which could provide good information about not only various aspects of the technology life cycle but also it can lighten up the future product life cycles which came from the technology.
• According to the Patent based Technology Life Cycle, the stages of the life cycle is the same as PLC and the x axis of the diagram is time as well, but the y axis is patent index. Moreover, founded patent based TLC has S-shaped in accordance with different studies in different technologies and industries almost the same as PLC Achilladelis, 1993 and Achilladelis et al., 1990) so the whole structure of stages is almost the same as PLC with introduction, growth, maturity and decline stages.
1. Emerging• Introduction(Emerging): most of the product developments belong to fundamental
definition of the technology rather than applicable ideas for products in real market, the scientist or other R&D teams are just trying to find out the concept of the technology, and they have long way still to be applicable. Therefore the application is low and as the risk of investment is apparently high there are not numerous companies who want to be inside of the circle. (Haupt et al., 2007) thus, the competitiveness is low and product integration does not exist (Little, 1981).
• BUG: as mentioned there is a huge amount of uncertainty: the customers are not familiar with the whole idea, the technology cost is high and there is not a consolidated shape of derivative product from the technology. in the introduction stage, sometimes it takes long time for a technology to move from concept into application so it is decided to be decline or suspended (Callon, 1980; Abernathy and Utterback, 1978), additionally when the suspension happens the shape of TLC in accordance with the patent indices become double S shape that in a period of time the number of patents comes down and again it come up. The Bug existence is very similar to the chasm in Market Life Cycle which will be discussed in the next chapter.
2. Growth & 3. Maturity• Growth: when the concept is discovered, and the tendency of findings went
from radicals to applicable market useable products, the applications will increase. Risk of investment decrease and more companies will enter to the completion. And technology will enter to the growth stage (Haupt et al., 2007). Additionally, some more competitors are joining to the game and technology becomes “pacing”, but still there is not integration for products and processes. (Little, 1981).
• Maturity: when the number of patent applications does not change any more, and the new patents belong to mostly major and minor enhancement instead of new products and features the technology arrived into its maturity. The risk of investment in the stage is low but the number of competitors is in its peak point (Haupt et al., 2007). The companies are still competing as the previous stage but the technology is integrated into new products completely. Moreover, the “Pacing Technology” is known as “key technology”. (Little, 1981).
4. Decline• Decline (Saturation): spontaneously, at the time that the patent
applications take minus trend the technology left its climax point. The developments belong to minor and major enhancements and the direction of technical improvement (Haupt et al., 2007), the competitiveness decreases and the “Key Technology” will become “Base Technology”. (Little, 1981). But this procedure is not applicable for all industries, because firstly all the innovations does not become patent and secondly lots of private innovations in private companies does not release (Filson, 2002).
• The result of any development for discovering new technology is finding out a “Paradigm” (Dosi,1982), each paradigm or concept could bear various Technology standards; and the standards could make different technology platform. Consequently, different products are plan, design and produce base on a technology platform (Kim, 2003). As the technology has a limited life cycle, it is develops, comes to the market, becomes popular , then a better technology replaces it and it dies, which is a similar story with product, the Technology Life Cycle classified similarly with Product Life Cycle (Rhyne, 1996).
12
Time (Effort)Time (Effort)
NEW NEW INVENTIONINVENTIONPERIODPERIOD
EmbryonicEmbryonic
MaturityMaturity
Per
form
ance
par
amet
erP
erfo
rman
ce p
aram
eter
AgingAging
Growth Growth
TECHNOLOGY TECHNOLOGY IMPROVEMENTIMPROVEMENTPERIODPERIOD
Physical LimitPhysical Limit
MATURE MATURE TECHNOLOGYTECHNOLOGYPERIODPERIOD
Foster’s S Curve With Variations
Chart
Physical limitCurve is not smooth because of variance ineffort and resources
Effort
16
Changes in Natural Limits for Old and New Technologies
Time
Limit of Technology A
Technology A’
Technology B
Technology A
Per
form
ance
Par
amet
er
Limit of Technology B
Performance Differential
17
Overall Technology Cycle Composed of Subtechnology Lifecycles
Time
Subtechnology IILife Cycle
Overall TechnologyLife Cycle
Subtechnology IIILife Cycle
Subtechnology ILife Cycle
Per
form
ance
Par
amet
erLimit of Technology
Distribution of Adopters
• Normal distribution is the most common pattern of adoption of new products and services
2-19
The Normal Distribution of Adopters
Groups of AdoptersInnovators: adopt new technology immediately
Early adopters: follow the innovators
Early majority: adopt new technology just before the average for the market
Late majority: adopt after other customers have adopted the technology successfully
Laggards: prefer to avoid adoption as long as possible
S-Curves of Adoption• The S-shaped pattern indicates that there is an
acceleration point at which a market “takes off” by: Pointing out that different groups of customers adopt
new products at different points in time for different reasons
Providing information about the right promotional strategy
Indicating appropriate pricing strategy Providing estimated demand growth over time Providing information about the financial
attractiveness of a market at different points in time
The Adoption S-Curve
Crossing the Chasm
• The need to sell to the mass market to achieve an adequate return on investment
• For companies to segment the early majority of the market and focus on the portion of the majority that is underserved by existing products
Crossing the Chasm
Identifying the Take-off Stage
• If there is an accelerated rate change in demand
• When the customer base begins to shift away from the innovators and early adopters
How to Cross the Chasm
• Need to show how it provides value to customers
• Need to develop a complete solution to customers’ problems
• Need to pursue a vertical marketing strategy rather than a horizontal marketing strategy
Choosing the Customer
• Concentrate on a single vertical market Target the one that has the greatest need for
the new product by estimating the product’s value to different markets
Estimate the time it takes to payback the cost of the product
Beachhead Strategy
• Segment the early majority of the market and focus on the portion of the majority that is underserved by existing products
The Technology Life Cycle
Drivers of industry evolution:• demand growth• creation and diffusion of knowledge
Introduction Growth Maturity Decline
Indu
stry
Sal
es
Time
Product and Process Innovation Over Time
Time
Rat
e of
inno
vatio
n
Product Innovation
Process Innovation
How Typical is the Life Cycle Pattern?
• Technology-intensive industries (e.g. pharmaceuticals, semiconductors, computers) may retain features of emerging industries.
• Other industries (especially those providing basic necessities, e.g. food processing, construction, apparel) reach maturity, but not decline.
• Industries may experience life cycle regeneration.
Sales Sales
1900 50 90 07 1930 50 70 90 07 MOTORCYCLES TV’s
• Life cycle model can help us to anticipate industry evolution—but dangerous to assume any common, pre-determined pattern of industry development
ColorB&W
Portable
HDTV ?
Evolution of Industry Structure over the Life Cycle
INTRODUCTION GROWTH MATURITY DECLINE DEMAND Affluent buyers Increasing Mass market Knowledgeable,
penetration replacement customers, resi- demand dual segments
TECHNOLOGYRapid product Product and Incremental Well-diffused innovation process innovation innovation technology
PRODUCTS Wide variety, Standardization Commoditiz- Continued rapid design change ation commoditization
MANUFACTURING Short-runs, skill Capacity shortage, Deskilling Overcapacity intensive mass-production
TRADE -----Production shifts from advanced to developing countries-----
COMPETITION Technology- Entry & exit Shakeout & Price wars, consolidation exit
KSFs Product innovation Process techno- Cost efficiency Overhead red- logy. Design for uction, ration- alization, low cost sourcing
The Driving Forces of Industry Evolution
Customers become more knowledgeable
& experienced
Diffusion oftechnology
Demand growthslows as market
saturation approaches
Customers become more price conscious
Products become more standardized
Distribution channels consolidate
Production shifts to low-wage countries
Price competition intensifies
Bargaining power of distributors
increases
BASIC CONDITIONS INDUSTRY STRUCTURE COMPETITION
Excess capacity increases
Production becomes less R&D & skill-intensive
Quest for new sources of differentiation
0
50
100
150
200
250
1895 1905 1915 1925 1935 1945 1955
No. of firms
Changes in the Population of Firms over the Industry Life Cycle: US Auto Industry 1885-1961
Source: S. Klepper, Industrial & Corporate Change, August 2002, p. 654.
1912 $ bn. 2006 $ bn.
US Steel 0.74 Exxon Mobil 372
Exxon 0.39 General Electric 363
J&P Coates 0.29 Microsoft 281
Pullman 0.20 Citigroup 239
Royal Dutch Shell 0.19 BP 233
Anaconda 0.18 Bank of America 212
General Electric 0.17 Royal Dutch Shell 211
Singer 0.17 Wal-Mart Stores 197
American Brands 0.17 Toyota Motor 197
Navistar 0.16 Gazprom 196
BAT 0.16 HSBC 190
De Beers 0.16 Procter & Gamble 190
The World’s Biggest Companies, 1912 and 2006 (by market capitalization)
0
5
10
15
20
25
ROI (%)
Growth Maturity Decline
Real annualgrowth rate <3%Real annualgrowth rate 3-6%Real annualgrowth rate >6%
ROI at Different Stages of the Industry Life Cycle
0
2
4
6
8
10
12
RO
I
Valu
eA
dded
/Rev
enue
Tech
nica
lC
hang
e
New
Pro
duct
s
% S
ales
from
New
Pro
duct
s
Prod
uct
R&
D/S
ales
Age
of P
lant
&Eq
uip.
Inve
stm
ent/S
ales
Adv
ertis
ing/
Sale
s
GrowthMaturityDecline
Note: The figure shows standardized means for each variable for businesses at each stage of the life cycle.
Strategy and Performance across the Industry Life Cycle
Preparing for the Future: The Role of Scenario Analysis in Adapting to Industry Change
Stages in undertaking multiple Scenario Analysis:
• Identify major forces driving industry change• Predict possible impacts of each force on the industry
environment• Identify interactions between different external forces• Among range of outcomes, identify 2-4 most likely/ most
interesting scenarios: configurations of changes and outcomes• Consider implications of each scenario for the company• Identify key signposts pointing toward the emergence of each
scenario• Prepare contingency plan
1880s 1920s 1960s 2000
Mail order, catalogueretailinge.g. Sears Roebuck
ChainStores
e.g. A&P
DiscountStores
e.g. K-MartWal-Mart
“CategoryKillers”
e.g. Toys-R-Us,Home Depot
InternetRetailers
e.g. Amazon;Expedia
WarehouseClubs
e.g. Price ClubSam’s Club
Innovation & Renewal over the Industry Life Cycle: Retailing
?
Gary Hamel: Shaking the FoundationsGary Hamel: Shaking the Foundations
OLD BRICK NEW BRICKTop management is responsible for setting strategy
Everyone is responsible for setting strategy
Getting better, getting fasteris the way to win
Rule-busting innovationis the way to win
IT creates competitive advantage Unconventional business conceptscreate competitive advantage
Being revolutionary is high risk More of the same is high risk
We can merge our way to competitiveness
There’s no correlation between size and competitiveness
Innovation equals new products and new technology
Innovation equals entirely new business concepts
Strategy is the easy part, Implementation the hard part
Strategy is the easy only if you’re content to be an imitator
Change starts at the top Change starts with activists
Our real problem is execution Our real problem is execution
Big companies can’t innovate Big companies can become gray-hairedrevolutionaries
BCG’s Strategic Environments Matrix
Small BigSIZE OF ADVANTAGE
Many
Few
SOURCESOF
ADVANTAGE
FRAGMENTED SPECIALIZATION
apparel, housebuilding pharmaceuticals, luxury cars
jewelry retailing, sawmills chocolate confectionery
STALEMATE VOLUME
basic chemicals, volume jet engines, food supermarkets
grade paper, ship owning motorcycles, standard
(VLCCs), wholesale banking microprocessors
BCG’s Analysis of the Strategic Characteristics of Specialization Businesses
high low
ENVIRONMENTAL VARIABILITY
ABILITY TOSYSTEMATIZE
low
high
CREATIVE EXPERIMENTAL
fashion, toiletries, magazines
general publishing food products
PERCEPTIVE ANALYTICAL
high tech luxury cars, confectionery
paper towels
Reference:
•©2009 Prentice Hall
•Marzieh et. al (2015). Product Life Cycle, Technology Life Cycle And Market Life Cycle; Similarities, Differences And Applications, Joint International Conference 2015, Bary, Italy.
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