3.

TECHNOLOGY PLANNING
FORECASTING TECHNOLOGY
Forecasting Technology: A Critical Step in Technological Planning
Technology forecasting (TF) is an essential component of technological
planning. It involves predicting future technological trends to guide
present actions, allowing businesses to anticipate and capitalize on
upcoming opportunities. By understanding potential future
developments, organizations can position themselves strategically in a
rapidly changing environment.
Importance of Forecasting
Forecasting provides organizations with insights into the future, helping
them take proactive steps today. Those who forecast well can seize
opportunities ahead of competitors and reap rewards from
technological advances. However, traditional forecasting often relies on
projecting past performance into the future, which may be inadequate
for rapidly evolving technologies. The future may not always behave according to past trends, necessitating more
sophisticated forecasting approaches.
Challenges in Technology Forecasting
A key challenge in forecasting is dealing with discontinuities—situations where one technology is displaced by another,
often with dramatic shifts. For example, a company relying on an older technology (e.g., nuclear power plants, as shown
in Figure 9-2) may fail to predict the disruptive effect of environmental concerns and shifting market dynamics, which can
force a change in the technology’s growth pattern.
Similarly, as shown in Figure 9-3, companies that are slow to recognize discontinuities, such as the emergence of a
superior technology, can lose their competitive edge. Technologies like the steamship replacing the sailing ship, the
transistor replacing the vacuum tube, and the personal computer replacing the typewriter exemplify such technological
shifts.
S-Curves and Technology Discontinuity
Technologies often follow an S-curve in their development, where each
technology reaches a natural performance limit (Figure 9-4). Over time, as
each mode of technology approaches its limits, a new innovation pushes the
performance envelope and may render older technologies obsolete.
For instance, the evolution of transportation speed follows a pattern of
successive S-curves, where new technologies (e.g., cars, trains) emerge,
pushing the boundaries of performance while threatening existing ones. The
same pattern is observed in lamp technologies (Figure 9-5), where newer
types of lamps gradually improve performance over time.
Forecasting and Technology Life Cycles
A technology forecaster needs to understand the life cycles of various technologies and the factors influencing their
development. Accurate forecasting relies on clear methods and assumptions, and the forecast should have the following
attributes:
1. Credibility and utility: The forecast should be reliable and useful.
2. Accurate information base: It must be based on credible and up-to-date data.
3. Clearly described methods and models: Transparent techniques are crucial for validating the forecast.
4. Defined assumptions: Assumptions should be clearly stated and supported.
5. Quantitative expression: Whenever possible, forecasts should be expressed in measurable terms.
6. Confidence levels: The level of confidence in the forecast should be specified.
Forecasting Methods
Porter et al. (1991) discuss several forecasting methods used in technology management. Each has strengths and
weaknesses, and selecting the appropriate method depends on the context and the type of technology being forecasted.
1. Monitoring: This involves gathering and organizing information from the environment. While useful for staying
current on trends, it can lead to information overload if not managed properly.
2. Expert Opinion: Experts in a particular field can provide valuable insights. However, identifying experts and the
inherent biases in expert judgment can be a limitation.
3. Trend Analysis: This method uses past data to project future trends. It works well for quantifiable parameters
but is less reliable for longer time frames or when significant technological disruptions occur.
4. Modeling: Models provide simplified representations of real-world systems, which can forecast future behavior.
They are especially helpful for understanding complex systems but can be misleading if the assumptions are
flawed.
5. Scenarios: Scenarios provide a range of possibilities for the future, integrating both quantitative and qualitative
information. They are useful for communicating forecasts in uncertain situations but require careful grounding in
reality to avoid becoming speculative.
Conclusion
Accurate forecasting is vital for organizations to stay ahead of technological trends. By combining various forecasting
methods and understanding the technology life cycle, businesses can make informed decisions, reduce uncertainty, and
navigate disruptive technologies more effectively. While predicting the future is challenging, adopting a diverse range of
forecasting methods can provide valuable insights into what lies ahead, helping organizations make proactive strategic
decisions.

TECHNOLOGY AUDIT
Technology Audit Model (TAM) - Notes with Examples
The Technology Audit Model (TAM), developed by Garcia-Arreola (1996), is a comprehensive framework to evaluate a
company’s technological position. It aims to assess the current technological status, identify opportunities for
improvement, and leverage a company's strengths. The model consists of three levels: the upper level with six
categories, the second level with 20 assessment areas, and the third level with 43 specific elements.
1. Technological Environment
 Objective: Evaluate the overall environment that supports technology-driven business strategies.
 Key Elements:
o Executive Leadership: Leaders must prioritize technology, be involved in its implementation, and
understand its strategic value.
 Example: A company like Apple has strong leadership that drives technological innovation, from
Steve Jobs to Tim Cook.
o Technology Strategy: The alignment of corporate strategies with technological goals.
 Example: Tesla's strategy focuses on cutting-edge electric vehicle technologies and sustainable
energy solutions.
o Organizational Structure: The ability to foster creativity and teamwork, often achieved through
decentralized structures.
 Example: Google's flat organizational structure promotes innovation and autonomy for tech
teams.
o Technology Culture: The culture of innovation, knowledge-sharing, and adaptability.
 Example: Amazon’s culture of "Customer Obsession" encourages constant innovation in
technology to improve customer experience.
o People: Recruitment, training, empowerment, and rewarding employees to support technological
advancement.
 Example: Microsoft invests heavily in training and skill development, empowering employees to
contribute to tech-driven innovation.
2. Technologies Categorization
  Objective: Assess the company’s understanding of its own technologies, state-of-the-art innovations, and
emerging technologies.
 Key Elements:
o Critical Technologies: Understanding both product and process technologies that are essential for
business success.
 Example: A pharmaceutical company may prioritize biotechnology as a critical technology.
o Emerging Technologies: Evaluating the potential of new technologies that could disrupt existing business
models.
 Example: In the automotive industry, autonomous driving technology is an emerging technology
influencing the future of transportation.
o R&D to After-market Services: The continuous innovation from research and development to the final
product and after-sales support.
 Example: Apple’s continuous updates to the iPhone, from R&D to after-market services like
software updates and customer support.
3. Markets and Competitors
 Objective: Assess how well the company understands its competitive environment and market dynamics.
 Key Elements:
o Supplier and Customer Relationships: Understanding how technologies impact the supply chain,
distribution, and customer interactions.
 Example: Amazon’s relationship with suppliers and customers drives its e-commerce and cloud
business innovations.
o Competitor Analysis: How technological advancements affect competition and pricing strategies.
 Example: In the smartphone market, Samsung competes with Apple through technological
innovation in hardware and software.
o Pricing and Distribution: Technology affects how products are priced and delivered to consumers.
 Example: In the software industry, subscription-based models (e.g., Microsoft Office 365) are a
result of digital distribution technologies.
4. Innovation Process
 Objective: Evaluate how effectively a company transforms ideas into products or services that provide
competitive advantage.
 Key Elements:
o Resource Allocation: The way resources (capital, talent, time) are allocated to technology development
and innovation.
 Example: A company like Intel invests heavily in R&D to maintain its leadership in microprocessor
technologies.
o Innovation Speed: The ability to launch new products quickly to maintain market relevance.
 Example: Apple's fast innovation cycle with yearly iPhone releases keeps it at the forefront of the
smartphone market.
o Reward Systems: Incentives for employees to innovate and contribute to technology advancements.
 Example: Google offers financial rewards, patents, and recognition for employees who
contribute groundbreaking innovations.
5. Value-Added Functions
 Objective: Evaluate the value chain activities that bring technology to the market.
 Key Elements:
o R&D: Research and development that leads to the creation of new technologies.
 Example: Pharmaceutical companies invest in R&D to create new drugs that meet emerging
health challenges.
o Manufacturing: How technology impacts the efficiency, flexibility, and scalability of production.
  Example: Automation in car manufacturing, like Tesla’s Gigafactories, increases production
capacity and reduces costs.
o Sales and Distribution: How technology enhances sales operations and customer access.
 Example: E-commerce platforms like Shopify empower small businesses to leverage online sales
channels.
o Quality and Flexibility: The ability to meet market demands while maintaining high product quality.
 Example: Toyota’s use of lean manufacturing ensures flexibility and high-quality standards in its
production processes.
6. Acquisition and Exploitation of Technology
 Objective: Assess the company’s strategies for acquiring and effectively using technology.
 Key Elements:
o Capital Investment: The financial resources allocated to acquiring and developing new technologies.
 Example: Google’s acquisition of YouTube allowed it to enter the online video market, leveraging
existing technologies.
o Partnerships and Alliances: Collaboration with external partners to gain access to new technologies.
 Example: Apple’s partnerships with suppliers for semiconductor technologies (e.g., TSMC for
chips) are key to its product development.
o Technology Adoption: How quickly and effectively new technologies are integrated into business
processes.
 Example: Cisco’s swift integration of emerging networking technologies helped it maintain
leadership in the networking hardware industry.
Conclusion
The Technology Audit Model provides a structured approach to evaluate a company’s technological standing across
multiple dimensions. By assessing leadership, technology strategies, innovation processes, and market dynamics, TAM
offers valuable insights into how a company can capitalize on technology to gain competitive advantage and foster
growth. For instance, Apple’s ability to innovate rapidly and invest in critical technologies has been pivotal in maintaining
its market leadership. Similarly, companies like Amazon leverage technology across the value chain to deliver exceptional
customer experiences.

Key Responsibilities for a Technology Auditor (Based on TAM)

The Technology Audit Model (TAM) provides a structured process for evaluating a company's technological strategies,
capabilities, and gaps. The auditor's role is to assess various aspects of the company’s technology landscape, providing
feedback on how to improve and align technological resources with business goals. Below are the steps a technology
auditor should take, as well as the criteria for evaluating each area:
1. Analyze the Firm's Internal Technologies (Products and Processes) to Identify Core Competencies
 Objective: Understand the company's internal technologies to identify areas of strength that drive competitive
advantage.
 Focus: Assess how products and processes reflect the firm’s unique capabilities.
 Evaluation: Rate from 1 (poor) to 5 (outstanding) based on the company’s proficiency in using technology to
differentiate itself.
2. Identify External and Basic Technologies
 Objective: Identify the technologies outside the firm that are essential for the industry and the company’s
competitive positioning.
 Focus: Assess market trends and emerging technologies that could influence the firm’s technology strategy.
 Evaluation: The auditor must score the firm’s awareness and integration of external technologies that are critical
to its business success.
3. Identify "Technology Gaps"
 Objective: Identify areas where the company lacks essential technologies and where new technology adoption is
necessary.
  Focus: Review technological deficiencies that could impede progress.
 Evaluation: Score the company's awareness and proactive efforts to close these gaps.
4. Review the Technology/Science Push and Market Pull
 Objective: Assess the balance between technological innovations driven by R&D (science push) and market
demand (market pull).
 Focus: Examine how the company aligns its technology development with market needs.
 Evaluation: A strong alignment should score highly, while poor alignment would score low.
5. Establish Whether the Innovation Process Takes into Account Science Push and Market Pull
 Objective: Assess whether the company’s innovation process incorporates both technological advancements
(science push) and customer-driven market demands (market pull).
 Focus: Innovation should be driven by both cutting-edge technology and market needs.
 Evaluation: Score based on the integration of both elements in the innovation process.
6. Check Time to Market
 Objective: Evaluate how efficiently the company can bring new products and technologies to market.
 Focus: Identify any constraints or delays in the development cycle.
 Evaluation: A shorter time to market indicates a more efficient process and should score higher.
7. Review the R&D Strategy
 Objective: Assess whether the firm’s R&D strategy is aligned with its overall business objectives and market
demands.
 Focus: The strategy should reflect a balance between innovation and practical applications.
 Evaluation: Score based on how well the R&D strategy supports long-term business goals.
8. Check for Consistency Between Core Technologies, R&D, and Marketing
 Objective: Ensure that the firm’s core technologies are supported by R&D initiatives and effectively marketed to
customers.
 Focus: Look for alignment between technical development, R&D priorities, and marketing messages.
 Evaluation: High consistency should receive a higher score, as it demonstrates coordinated strategy across
departments.
9. Look for Evidence of Continuous Improvement in Manufacturing
 Objective: Review the manufacturing processes to ensure that technology is being used to continuously improve
quality, reduce costs, and enhance flexibility.
 Focus: Manufacturing technology should evolve to meet market demands and improve operational efficiency.
 Evaluation: Evidence of continuous improvements in processes will reflect a high level of technology
management.
10. Analyze Partnerships and Joint Ventures
 Objective: Assess whether the company’s partnerships and joint ventures are in line with its technological and
business strategy.
 Focus: Strategic partnerships can help acquire new technologies or enter new markets.
 Evaluation: Strong, strategically-aligned partnerships should score higher.
11. Review the Technology Transfer Procedures
 Objective: Examine the methods used by the company to transfer technology internally and externally.
 Focus: Effective transfer of technology ensures that innovations are utilized across the organization and with
partners.
 Evaluation: Effective knowledge management and technology transfer procedures will score highly.
12. Analyze the Corporate Structure
 Objective: Assess the flexibility of the corporate structure and the communication flow between different layers
of the organization.
 Focus: A flexible, communicative structure facilitates faster innovation and responsiveness to market demands.
 Evaluation: More adaptable structures should score better, reflecting the ability to quickly respond to
technological changes.
Quantitative Evaluation
A five-point scale is used for each assessment area, where:
 5 (Outstanding): Ideal scenario, the company excels in this area.
 4 (Good): Strong, but there is room for minor improvements.
 3 (Average): Meets expectations but could benefit from improvements.
 2 (Below Average): Several deficiencies that require attention.
 1 (Poor): Significant weaknesses that hinder progress.
Periodic Reviews
The technology audit should be conducted at least once a year. Over time, comparing the scores from different years will
highlight the company’s progress in technology management and help pinpoint areas for further improvement. This can
serve as a diagnostic tool to evaluate strengths and weaknesses, set improvement goals, and benchmark against industry
standards.
The TAM Process Serves Multiple Functions:
1. Diagnostic Tool: Helps identify areas of strength and weakness.
2. Targeting Improvement: Provides a roadmap for focusing on key opportunities for technology and business
improvements.
3. Benchmarking: Compares a company's technological capabilities against competitors.
4. Measuring Progress: Tracks the effectiveness of implemented strategies and programs.
5. Continuous Improvement: Helps ensure ongoing enhancement in technology practices.
6. Self-Assessment: Encourages internal reviews and better technology planning for future growth.
Conclusion
The Technology Audit Model (TAM) is a comprehensive framework that allows technology auditors to assess all aspects
of a company’s technological strategy. By identifying gaps, opportunities, and strengths, TAM provides a roadmap for
aligning technology with business goals, improving operational efficiency, and ensuring long-term success. Repeating the
audit periodically helps track progress and refine strategies, ultimately guiding the company toward technology
management excellence.

PLANNING ACCORDING TO THE TECHNOLOGY LIFE CYCLE

Planning According to the Technology Life Cycle (TLC)
The Technology Life Cycle (TLC) framework, developed by Arthur D. Little, is an important strategic tool for companies to
assess and decide how to invest in technology based on its position along the S-curve. This model helps businesses
understand the competitive impact of a technology and how it evolves over time. It distinguishes technologies by their
stage in development, which guides the company's investment and strategy decisions.
Key Stages of the Technology Life Cycle
The technology life cycle is represented by an S-curve, where the X-axis represents time and the Y-axis represents
technology performance or market penetration. The stages are as follows:
Embryonic Phase (Early Stage):
o Technology Status: At this stage, the technology is still
in development, and its potential to change the
competitive landscape is uncertain. The focus is on
research and development (R&D), and the technology
is not yet proven in the market.
o Strategic Actions: Companies should monitor
emerging technologies. The risk of investing in this
phase is high due to its unproven status, but the
potential rewards could be significant if the technology
matures.
o Investment Decision: Firms should not make heavy investments but should stay informed and engaged
with the technology’s progress.
 2. Growth Phase:
o Technology Status: The technology begins to gain market acceptance and shows promise for
transforming industries or product categories. This phase is marked by rapid technological improvements
and increasing performance.
o Strategic Actions: Companies should invest selectively in the technology, focusing on building expertise
and securing a foothold in the market.
o Investment Decision: Investment should be made in pacing technologies—those that are progressing
quickly and show potential to significantly impact competition.
3. Maturity Phase:
o Technology Status: The technology is widely accepted and its capabilities are well-established. It
becomes a standard in the market, with relatively little innovation occurring. The focus shifts to
optimizing processes, improving cost efficiency, and maintaining market share.
o Strategic Actions: At this point, technologies are considered base technologies. These are essential for
doing business but offer little competitive advantage. Companies can focus on cost leadership and
efficiency improvements.
o Investment Decision: Investment in base technologies should be limited. The strategy should shift to
harvesting or milking the "cash cow" by extracting the remaining profits while minimizing further
investment.
4. Aging Phase:
o Technology Status: The technology begins to lose its relevance in the market as newer technologies
emerge. It faces obsolescence and declining performance, with potential competitors overtaking it in
terms of innovation.
o Strategic Actions: Companies must prepare for the decline of the technology and transition to newer,
more promising alternatives. Strategic options should already be in place to avoid the risk of falling
behind.
o Investment Decision: Firms should divest from aging technologies and invest in more cutting-edge or
disruptive innovations. Continued heavy investments in aging technologies should be avoided.

Technological Investment Model: Decision-Making Based on TLC

The Technological Investment Model advocated by Arthur D. Little
emphasizes that strategic investment decisions depend on where a
technology is located on the S-curve. The model provides guidance on the
following:
1. Emerging Technologies: These technologies are at an early stage
and have not yet demonstrated their full potential. Companies
should monitor these technologies closely, as they could offer
strategic advantages in the future if they prove viable.
2. Pacing Technologies: These are technologies that are advancing
rapidly and have the potential to shift competitive dynamics. Companies interested in maintaining a competitive
edge should selectively invest in these technologies to gain a market advantage.
3. Key Technologies: These technologies are essential to a company’s business success and are deeply integrated
into its operations. They have a strong impact on performance, cost, and quality. Companies should
systematically strengthen their position in key technologies to maintain leadership.
4. Base Technologies: These are mature technologies that provide no competitive edge but are necessary for basic
participation in the market. Companies should divest selectively from base technologies once they reach
maturity, continuing to "milk" the technology for profit but not investing significantly in further development.
5. Aging Technologies: These technologies are nearing obsolescence and will soon be replaced by newer
innovations. Companies should have already developed strategic options to transition away from these
technologies to remain competitive. They should focus on divesting or phasing out these technologies.
Strategic Implications
 Investment Focus: Early-stage investments should focus on emerging and pacing technologies. As technologies
mature, companies should shift investment strategies toward efficiency and cost reduction. Eventually, the focus
will move to transitioning out of aging technologies and into new innovations.
 Competitive Advantage: The key to maintaining competitive advantage is recognizing which technologies will
shape the future of the industry and investing accordingly. Technologies that are pacing or key should receive the
most attention and resources, while base and aging technologies should be phased out once they no longer
provide strategic benefits.
 Long-Term Vision: A company’s technological planning should not only be reactive but also proactive,
anticipating future changes in technology and preparing for them well before the technology reaches the aging
stage.

Conclusion
Arthur D. Little's approach to Strategic Technology Planning According to the Technology Life Cycle provides a roadmap
for companies to assess their technological investments. By aligning investments with the stage of development of a
technology, companies can maximize their competitive advantage, optimize resource allocation, and ensure that they
remain innovative and relevant in a constantly evolving technological landscape. This approach helps businesses make
informed decisions on whether to develop, invest in, or divest technologies based on their position in the lifecycle.