B885 Book 3 Part 2 – Technological Environment


10.1 What is technology?



Capital investment + hardware (invention) + social and other structures (innovative)


"Technology is the application of scientific and other knowledge to practical tasks"


Changes were interlinked and each fed from the other. Innovations in machinery played only a small part in the early agricultural and industrial revolutions, when compared to changed forms of organization of the production process; changes in technology and society were impossible to separate.


Technologists can be considered to be people who are concerned with solving problems and making things happen using scientific and other knowledge.


10.2 Historical development


To under the historical development of technology innovation, we need to consider the difference between science and technology. It is understand that sciences searches for a better understanding of the natural world, whereas technology aims to exploit natural resources in the interests if the human race.


10.3 Speed of change


Long term cycles P.163

According to the table 10.1, the rate of change is exponential. The gap between what is attainable and what is currently practicable is a feature of innovation in general. This is a good point at which to raise the distinction between invention and innovation.

Distinction between invention & innovation

We shall define invention as a new product, process or concept, it may or may not

enter widespread use. If it does, we shall call it an innovation.




10.4 Pattern of change


There are two different types of invention or innovation

The first is generic, the most fundamental, which cuts across old and new industries and produces many interrelated innovations. Steam power, for instance, activated a larger cluster of associated ideas and improvements.

Alternatively, there is the characteristic type, which does not cut across industries or spawn many related ideas – fluorescent lamp.


Generic innovations (e.g. steam power) give rise to long cycles and characteristic innovations (eg. fluorescent lamp) give rise to shorter ones. For the point of view of the technologist forecaster, the identification of a generic change is therefore the most important, since its influence will be very wide.


Schumpeter P.165

- suggested technological developments (i.e. diffusion) occurred in 3 stages:

1st : invention is made

2nd: if it is successful, it comes into practical useà innovation

3rd:its use is extended widely through a process called diffusion


Kelly and Krantzberg

The innovation process has several distinct characteristics:

l        It is a response to a need or opportunity

l        It depends on creative effort

l        If successful it results in the introduction of novel product

l        It induces the need for further change


Rogers P.167

-         defines diffusion as a process by which an innovation is communicated through certain channels over time among the members of a social system

-         proposes the perception by individuals or firms of the characteristics of innovations plays a major role in diffusion and identifies the following features:

i.      Relative advantage: what is the degree to which an innovation is perceived as better than the idea it supersedes?

ii. Compatibility: how consistent is it with existing values, experiences and needs:

iii.          Complexity: how difficult is it perceived to be to understand and use?

iv.         Trialability: can experiments be made on a limited basis?

v.   Observability: are the results of an innovation visible to others?

11 Cause of technology change


Technological Change


i.     use of new knowledge to do things better

ii. it is a principle driver of competition

iii.          it plays major role in industry structural change, creating new industries eroding the competitive advantage of even well-entrenched firms


11.1 Forces for change

a. 3 types of force (P.169)

i.      Demand-led change: market-pull (eg. desire for travel or movement à fundamental inventions such as automobile and aeroplane).

ii. Technology-led innovation: due to pressure from manufacturers, they wish to persuade customers to buy what the producers feel most competent to make (eg. computer industry, suppliers added numerous small changes to move consumers up-market)

iii.          Ideology-led change: becomes increasingly important (eg. need to reduce CFCs to save the ozone layer, use less fossil fuel to restrict global warming)


b. Explanation of Freeman’s 4 categories P.170

i.    Technological revolutions

ii.System changes (new technologies)

iii.          Radical changes (discontinuous events)

iv.        Incremental changes (low-level improvements)


Freeman sees the conditions for most changes likely to success :

è    Drastic reduction in costs of many goods creating investment opportunities

è    Dramatic improvement in technical characteristics of many products and processes

è    Social and political acceptability

è    Environmental acceptability

è    Pervasive economic effects



11.2 System changes and technological revolutions


The first two categories of Freeman may affect the whole of society. We call these major changes as "techno-economic paradigms" and they affect the structure of conditions for almost every branch of the economy, and lead to a new set of 'best practice' rules for designers, engineers and managers.


11.3 Radical technological change


Size of the companies is irrelevant and its size related to the amount of innovation are not clearly related.

The large organization of Japanese and MNE appear to have a six-point system which helps the process:

è    global scanning for technological insights

è    organizing study teams to other countries

è    attending conferences and trade shows

è    scrutinizing foreign publications

è    sponsoring R & D in foreign universities

è    closely linking R & D with commercial production


11.4 Incremental change

Stalk (Time Based Advantage p.175) Time – the next source of competitive advantage

-         Traditional strategy based on low wages, scales or focus, these tactics reduce costs but at the expense of responsiveness.

-         In contrast, strategies based on the cycle of flexible manufacturing, rapid response, expanding variety, and increasing innovation are time-based. Factories are close to the customers they serve. Organisation structures enable fast response rather than low costs and control.

-         Today’s time-based competitors are Japanese, eg. Sony, Matsushita, Sharp, Toyota, Hitachi, NEC, Toshiba, Honda, and Hinno, while time-based Western companies include Benetton, The Limited, Federal Express, Domino’s Pizza, Wilson Art, and McDonald’s.

-         By reducing the consumption of time in every aspect of the business, these companies also reduce costs, improve quality and stay close to their customers.

-         Breaking the planning loop + Time-based manufacturing +Time-based sales & distribution + Time-based innovation + Time-based strategy (indirect attack / lower cost)

11.5  Flexible manufacturing (p.182)

-         It offers major advantages in terms of the resources (and time) needed to bring on-stream new models.


-         It demands the existence of the following conditions:

à JIT (Just In Time)  - almost essential prerequisite

à Design – products can and should be designed for ease of production

à Quality – a commitment to a zero-defects philosophy


à Training / education – demands a workforce able to take totally new demands in its stride, this typically derives from a high level of knowledge and skills developed over time by training and education.


à Culture – corporate culture, in terms of its impact on attitudes of the shop-floor workforce. If they welcome change and want positively to contribute to it, then the pace of change can be much faster and change itself quite painless.


Bond of trust between workers and management is important too (Human Resource Strategy).

-         Other elements which have been developed to ease rapid response to innovation include:

à Incremental-ism

à Variety of inputs to development – including customer demands, along with suggestions from quality circles, in addition to traditional scientific inputs.

à Location of R&D – R&D team can be located close to the production facility.

à Multi-disciplinary teams – includes representatives from all the functions involved – from purchasing through to production – rather than just scientists and engineers.

à Close involvement of suppliers

à Parallel development – with one already working on the next generation of product while another is still completing the introduction of the current one.

-         Flexible manufacturing culture – to create rapid response – it may take years before these are smoothly integrated. But once developed, it offers immense advantages, not least in the dramatic reductions in development times.


11.6  Process model


Technological forecasting (p.187)

-         Trend analysis or extrapolation

-         Makridakis & Wheelwright:

i.     Interaction of technologies (cross-impact matrices)

ii. Concepts of substitution (material and methods)

iii.          Modification of future trends


-         Makridakis and Wheelwright also point out that a forecast of technical feasibility does not guarantee commercial success.


-         Many other factors can affect technological forecasts:

i.      Environmental concerns (e.g. may affect the design of vehicles, increasing information and publicity about the high energy cost and the difficulty of disposal may affect the way we think about plastics.)

ii. Social concerns (e.g. may lead to the development of more productive and pest-resistant crops)


iii. Political instability (e.g. may be influenced by the availability of information through global television)



12      Effect of technological change: input


Impact of technology on inputs/process/outputs (p.191)

We shall examine some of the effects of technological change first on the inputs to organizations, then on the conversion process and finally on the outputs. A change in one component may well affect the other components.


-          We must determine what types of technological change, whether it is a technological revolution, a radical innovation or an incremental one.

-          Immense system changes occur so infreq that we need spend little time on time.

-          Radical innovations act like smaller earth tremors, can cause greater problems, are weaker in character and often neglected by organizations, which expect to survive shocks of lower magnitudes.

-         Incremental innovations are those which can have widespread and sometimes insidious effects which occur regularly and frequently enough to be significant.


12.2 Framework for discussion

Figure 12.3 (p.191) shows pressure for changes in the inputs may originate from the market, from the process itself or from the outputs.(Eg. by providing lower cost or higher quality, or by being more suited for their purpose)

-         The use of an input may become subject to legal restrictions, or the result of social pressure, such as customer reaction against natural fur products.


12.3  Materials (p.193)

-         Materials can be improved in following ways:

à lower unit cost

à easier or less costly to convert

à able to produce a better output

à give less waste

à be more environment-friendly


  1. Material substitution

à One material for another (e.g. copper has been replaced in electricity distribution cables by aluminium on occasions when the price of copper increased significantly).


à Substitute other input factors for material (e.g. increasing use of labor).

à trade off quality for materials (e.g. by lowering the quality levels of the outputs – use of non-returnable drinks bottle (thinner than returnable one) avoids the cost and inconvenience of return), this strategy may be self-defeating if the quality is no longer acceptable by customers. 

à Inter-product substitution (e.g. fax is displacing ordinary mail and are now being rapidly displaced by e-mail)

à technological substitution (eg. steel can is displacing glass bottles)


  1. Value analysis

e. g. examine the design of parts or the whole to see if costs can be reduced by changing the specification.


12.4  Implications for human resources


People in organizations are affected by technological change in several ways:


a.       Levels and patterns of employment

à Reduction of employment created by technical change

Unemployment rate in western countries has risen in recent years, the reasons are:

-  technical change (e.g. information revolution-> home-working (supplying word processors and electronic mail facilities), use of sub-contractors, employers have greater control over the type of work, and greatly reduce labor cost through saving on overheads)

-  Oil crises

-         General shift of manufacturing to developing countries (gain competitive adv).


b.      Changes in skills

- e. g. the need for new skills is the use of computers – computer aided design (CAD) is useful for automobile, engineering world as well as textile design; word processing; VDU screens and keyboards.



13      Transformation Systems (p.202)


13.1   Effectiveness & Efficiency


Technical change is associated with improvements in either

1. Effectiveness: achieving the objectives of the organization better in some way such as à to react to customer demand quickly, to achieve a high standard of qualityà the use of IT is probably the most important factor in speeding up reaction times (e.g. portable computer can produce the quotations on the spot in front of customer).


2. Efficiency: using fewer inputs for the same outputs or having fewer resources, and minimizing waste. Technology à reduction in human resource input, can improve efficiency by allowing better control over what is used because IT’s inherent capacity for speedy communication and high volume data handling can allow quicker processing.


13.2   Obsolescence and survival

Any technology has a life-cycle, the more complex the technology, the shorter the life. If it become obsolete, introducing a successor is essential to long-range planning.



13.3   Variety reduction and variety increases

George Stalk, JR: “Time – the next source of competitive advantage”

à Following WWII, Japanese companies used their low labor costs (textile, shipbuilding, steel) to gain entry to various industries. As wage rates rose and technology became more significant, the Japanese shifted first to scale-based strategies (60s) and then to focused factories to achieve advantage. The advent of JIT production brought with it a move to flexible factories, as leading Japanese companies sought both low cost and great variety in the market.

Scale-based strategy: using capital investment to boost workforce productivity – adapting fabrication techniques form mass production processes and using automatic and semi-automatic equipment, revolutionized the shipbuilding industry

Focused strategy: cutting variety yields higher productivity, lower costs and reduced break-even point

Flexible strategy:

-  When markets are good, companies tend to edge toward increased variety in search of higher volumes, this will mean increased cost.

-   When times are tough, companies pare their product lines, cutting variety to reduce cost.

  1. Variety-driven costs start lower and increase more slowly as variety grows, scale costs remain unchanged (figure 2, p211). Thus the optimum cost point for a flexible factory occurs at a higher volume and with greater variety than for a traditional factory.



14      Effects of technological changes: Output


Rate and nature of product change

Technology may help an organization improve its products or services in several ways:

à reduce product costs (increase profits)

à make products satisfy more user needs

à meet new standards or legislation

à improve handling or transportation/distribution

àopen new markets

à reduce maintenance and prolong product life

àmeet changes in demand

àincrease convenience of use


To assist in future product planning, following techniques are used to stimulate the flow of new ideas:

à Brainstorming

à Quality circles and skunk works: it is to talk through the current production problems that a group of workers re experiencing, such circles are an excellent way of bringing expertise to bear on these problems.

à Attribute listing: list all the key attributes of the product or service and then modifying each of them to see if the result might be an improved version.

àMorphological analysis: broke down into variables or parts which can be treated independently, all possible relationships between the variables or parts involved are then worked through, for each of the combinations, of which there may be many, a new product is postulated.

àSynectics: based upon analysis of the existing situation leading to model building to find alternative solutions ( eg. to see how other organizations have solved similar problems)


àInnovative imitation


b. Changes in product functions (p.220)

i.    Product ( services) modification

à Feature modification: functional modification (eg. compact disc players add programming and remote control)

à Quality modification: good image

à Style modification

à Image modification: perceived quality changes


ii. Development process (p.223)

à Scanning

à Idea generation

à Strategic screen

à Concept test

à Product development

à Product testing

à Test market

à Launch


1.  Detection & Innovation

a.  Environmental scanning (Book 1)

b.  Detecting (p.225) and forecasting technological change

c.  Implications for management (p.231-234)

d.  Innovation

è    Riedle cycle (p.235): institutional research in fundamental areas, small companies covering the later aspects, while large organizations try to cover everything.

è    Kim et al’s typology (p.238): 4 types of innovative organization

è    Pearson et al (p.240)

i. The generic strategy refers to the degree to which the firm’s business strategy tends to differentiation or to cost leadership. Differentiation allows concentration on the strategic aims of the business, whereas cost leadership normally lacks this power and results in lack of concentration

iii.          A differentiation strategy requires a marketing functional orientation rather than a financial or production orientation. Lack of marketing orientation results in lack of concentration on the strategy.

iv.         Effective differentiation can only be achieved with high quality external communications with customers, technology leaders and competitors.

v.Low integrity undermines concentration on strategy, as does lack of long-term vision.

Research suggested that innovativeness required an organization to be positioned in the concentrated area of the matrix.