5

TECHNOLOGY LIFE
CYCLES

The performance of a technology has a recognized pattern over time that, if properly un­
derstood, can be of great use in strategic planning. As a matter of fact, neglecting this
pattern as a key factor in the planning process may prove very costly to the competitive
position of a corporation. Managing technology requires deep understanding of the life
cycles of the technology, product, process, and system.

THE S-CURVE OF TECHNOLOGICAL PROGRESS

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. Technological performance can be expressed in
terms of any attribute, such as density in the electronics industry (number of transistors
per chip) or aircraft speed in miles per hour.
As can be seen in Figure 5-1, technology progresses through a three-stage technol­
ogy 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 obso­
lescence when a new or better-performing technology emerges.
The new invention period is characterized by a period of slow initial growth. This is
the time when experimentation and initial bugs are worked out of the system. The tech­
nology improvement period is characterized by rapid and sustained growth.
The mature-technology period starts when the upper limit of the technology is ap­
proached and progress in performance slows down. This is when the technology reaches
its natural limits as dictated by factors such as physical limits. For example, the vacuum­
tube technology was limited by the tube's size and the power consumption of the heated
80
 CHAPTER 5: TECHNOLOGY LIFE CYCLES 81

Physical limit
------

� NEW MATURE­
� INVENTION TECHNOLOGY
g PERIOD PERIOD
m
E
� Embryonic Maturity Aging
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>,
Cl
0
0
C:
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Time
FIGURE 5-1
THE S-CURVE OF TECHNOLOGICAL PROGRESS

filament. Both of these factors were natural barriers to electron conduction in a vacuum
tube. Electronic engineers could not overcome these limitations. The arrival of the
solid-state technology, or transistor, which permitted electron conduction in solid mate­
rial, changed the physical barriers of size and power. The transistor technology started a
new technology life cycle and rendered the vacuum-tube technology obsolete.
This example illustrates a very important concept in MOT: When a technology
reaches its natural limits it becomes a mature technology vulnerable to substitution or
obsolescence.
The S-curve of technology progress is a very useful model in technological forecast­
ing, as shown by Fisher and Pry (1971). A more detailed discussion of technological
forecasting is presented in Chapter 9.
A technology's rate of performance improvement is dependent on the effort devoted
to its development. As shown in Figure 5-2, a technology may progress on curve A or
A', depending on a number of 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 ear­
lier 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 as a result of a sequence of newer technologies, each with a higher limit of
the performance parameter of interest.

The Technology Life Cycle and Market Growth

When technology reaches the market, it generates income. Technology under devel­
opment has no real income-producing value. Technology on the shelf (i.e., not being
82 MANAGEMENT OF TECHNOLOGY

Limit of B

....
ra .,, ,... A'
a.. /
u
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,'/
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a..
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//
,
• Slower rate of progress

.
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FIGURE 5-2
CHANGES IN NATURAL LIMITS OF TECHNOLOGY
The rate of performance improvement is shown for two technologies.

marketed) provides no return. As technology develops, following the recognized tech­

nology life cycle, market penetration occurs and so does market growth, expressed as
market volume. 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) ap­
plication 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 tech­
nology at all; it has zero response. However, this is the important period in which sci­
entists 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 period as much as possible, since it is very ex­
pensive and does not produce revenue.
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 vol­
ume 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.
 CHAPTER 5: TECHNOLOGY LIFE CYCLES 83

A B C D E F

Time

A Technology development D Mature technology

B Application launch E Technology substitution
C Application growth F Technology obsolescence

FIGURE 5-3
MARKET GROWTH AT DIFFERENT STAGES OF THE TECHNOLOGY
LIFE CYCLE

MULTIPLE-GENERATION TECHNOLOGIES
Technology, like all systems, has a hierarchy. A system can consist of a number of sub­
systems, and each subsystem may have a number of components.
Technology need not consist of a single component or derive from a single innova­
tion. Technology can consist of multiple technologies and derive from different genera­
tions of innovation. The personal computer is a technology and has a technology life
cycle. It consists of several subtechnologies. One such subtechnology is the micro­
processor, which can also be defined as a technology with a technology life cycle all its
own. In tum the microprocessor has its own multiple-generation technologies or sub­
technologies. For example, the microprocessor technology developed by a company
such as Intel has undergone several generations of changes (8088, 286, 386, 486,
Pentium). Each of these generations of innovation helped boost the technology life
cycle of the microprocessor and, in tum, that of the PC. (See Figure 5-4.)
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. Another
situation occurs for a company that is making an acquisition investment in the software.
If it buys one generation of software and an update is introduced, the new version has
84 MANAGEMENT OF TECHNOLOGY

Technology
ai Life Cycle
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TECHNOLOGY
CYCLE
Time
FIGURE 5-4
MULTIPLE-GENERATION TECHNOLOGIES
Subtechnology life cycles in multiple generations of innovation shape the
overall technology life cycle.

more capabilities and extends the application of the software. The company may have to
invest to update its software in order to extend the life cycle of its software technology.

TECHNOLOGY AND MARKET INTERACTION

A very strong dynamic relationship exists between technological innovation and the
marketplace. The presence of a market or the creation of a new market represents the re­
ward for technological development. Breakthroughs in technology open new vistas for
industrial developments and economic growth. However, 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
Events of the nineteenth and twentieth centuries provide many illustrations of how sci­
ence and technology have become closely intertwined. 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. Bayraktar (1990) cites
several examples of technologies that owe their bases to scientific discoveries, as shown
in Exhibit 5-1: The field of electronics is based on Maxwell's theory of electromagne­
tism; nuclear energy is based on Einstein's 1905 paper, which established the famous
E = mc2 equation; the transistors are based on A. H. Wilson's 1931 paper on the theory
of semiconductors; and genetic engineering followed the discovery of the structure of
DNA by Watson and Crick in 1952. In this sense, we can say that science provides the
base for the technological push. Figure 5-5 illustrates this concept. Innovations that
ensued from the technologies in Exhibit 5-1 caused major industry upheavals and totally
 CHAPTER 5: TECHNOLOGY LIFE CYCLES 85

EXHIBIT 5-1
TWENTIETH CENTURY TECHNOLOGIES AND THEIR SCIENTIFIC BASE

Technology Scientific discovery

Nuclear energy Based on Einstein's 1905 paper, which established the

equivalence of mass and energy
Transistors Based on A.H. Wilson's 1931 theory of semiconductors
Electronics Based on Maxwell's theory of electromagnetism,
developed in the 1880s
Genetic engineering Followed Watson and Crick's 1952 discovery of the
structure of DNA

Technological
Development
FIGURE 5-5
SCIENCE/TECHNOLOGY PUSH
Jhe push opens new vistas for
industrial development and economic
Science Push growth.

changed the markets. They brought major economic growth. Radical innovations of
products within a technology area create similar effects. An example of a radical inno­
vation that created a major change in the way we do business is xerography. When the
Xerox machine was developed, it was dubbed an invention with little promise and a
product concept without a market (Mort, 1990). Observe where this copying industry is
today. Radical innovations create new markets and expand existing markets.

Market Pull
Technological development is also stimulated by market pull. Technology is often de­
veloped to meet a market need or demand. This is the most effective way to connect tech­
nology with the market. However, in the majority of cases, market pull is stimulated by
consumers. Consumers may or may not know whether a new technology exists or is
being developed, or if they do, they may not understand the technology. Most of the tech­
nological developments stimulated by market pull are of an incremental nature, or rep­
resent improvements to existing technologies. Incremental technological improvements
have a cumulative effect, and they can have a tremendous impact on productivity and
competitiveness. 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.
Figure 5-6 illustrates this concept. Both mechanisms, push and pull, contribute to stimu­
lating innovation and technological change. Integrating them accelerates the change
(Figure 5-7). 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
86 MANAGEMENT OF TECHNOLOGY

Incremental
Technological
Improvement

FIGURE 5-6
MARKET PULL
The pull stimulates incremental
Market Pull technological improvements.

Market
Pull

Science
Push

FIGURE 5-7
COMBINED EFFECT OF TECHNOLOGY PUSH AND MARKET
PULL

Opportunities for Opportunities for

Innovation
Technology Push Market Pull

• Scientific discoveries • Market demand

• Applied knowledge • Proliferation of
application areas
• Recognized needs
• Recognized needs
• Intellectual capital
• Opportunities for increased:
(scientists and engineers)
profitability, quality, productivity
• Entrepreneurs
FIGURE 5-8
INTEGRATING TECHNOLOGY PUSH AND MARKET PULL TO STIMULATE
INNOVATION
 CHAPTER 5: TECHNOLOGY LIFE CYCLES 87

financial resources. Figure 5-8 depicts how opportunities for technology push and mar­
ket pull can be integrated to stimulate innovation.

THE PRODUCT LIFE CYCLE

A product life cycle closely resembles the profile of the technology life cycle and its as­
sociated market-growth profile (Figure 5-9). A product emerges from a concept, which
is translated into an engineering design and usually illustrated through an engineering
drawing. A prototype is developed and tested to make sure that the product specifica­
tions are met and the performance parameters achieved. In this initial design-and-proto­
type-development phase, 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,
whose profile depends on the market response to the product. 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.
They may be recycled, placed in museums, or kept as collection items if they possess
aesthetic or appealing characteristics.
When scientific and engineering aµvances lead to the introduction of new tech­
nology, turbulence is created in existing systems. New products emerge in the embry­
onic phase of a technology and many product innovations occur. As the rate of product

FIGURE5-9
PRODUCT-MARKET LIFE CYCLE

A B C D E F

0
>
�
j

Time

A Concept Design Prototype D Mature Stage

B Product Launch E Substitution Products
C Product Growth F Product Obsolescence
88 M ANAGEMENT OF TECHNOLOGY

innovation reaches its peak and starts to decline, a dominant product design emerges
and the industry standard is defined accordingly (Figure 5-10). Process innovation fol­
lows new product designs. It continues throughout the technology life cycle in support
of both radical and incremental product innovations. Process innovations are important
for the different generations of products. Process innovations increase a product's life
cycle and help maintain competitiveness until a substitute technology creates a discon­
tinuity in the system and a new life cycle emerges. For example, switching from steam­
powered engines to diesel-powered engines creates turbulence in the diesel technology
and discontinuity of the steam technology. The diesel technology will have its own
products, which go through different designs until an industry standard emerges and
dominates the market. Process innovation continues to create improvements in the per­
formance of the dominant design until a new technological discontinuity occurs, such as
an electric-powered engine. The electric technology may render the diesel technology
obsolete. The product and process innovation of electric products will run their cycles
until another discontinuity occurs, perhaps hydrogen-powered engines.
For a single product, the technology life cycle and the product life cycle coincide. Tech­
nological 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 innova­
tion 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.

FIGURE 5-10
TECHNOLOGICAL PROGRESS
The progress of technology is shown in relation to product and process innovation.

---
_____,,__
.,, .,,.. Technology
Product Life Cycle
_,, "'
C
0

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C

Technological Dominant Aging Technology

discontinuity Design (Substitution and
(turbulence) discontinuity)
lime
 CHAPTER 5: TECHNOLOGY LIFE CYCLES 89

COMPETITION AT DIFFERENT PHASES OF THE TECHNOLOGY

LIFE CYCLE
In the early stage of the technology life cycle, also known as the embryonic or emerging­
technology stage, 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. The introduced tech­
nology has not yet demonstrated its potential for changing the basis of competition.
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. The tech­
nology becomes a pacing technology in that it has the potential for changing the basis of
the competition. 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. The Osborne Computer Company case discussed in Chapter 3
illustrated this fact.
Once the innovation has proved itself in the market, it permits its owner to take a
patented position or 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 perfor­
mance, 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.

Competition with Product and Process Innovation

The rate of product and process innovations follow a general pattern, as shown in Fig­
ure 5-10. This pattern can be used to formulate policies and procedures to better manage
the process of technological innovation.
When a new product or process is introduced to the market, it creates certain energy
within the innovation community, triggering a series of changes to the product or pro­
cess. 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.
At the early stages of product development, competition in innovation and improvement
delays agreement on a standard design. 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 com­
pany 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 re­
duce cost. Another is to rely on complementary assets, such as name recognition, to in­
crease market share. Yet another is to use marketing innovation and improve customer
service to lure customers away from competitors.
90 MANAGEMENT OF TECHNOLOGY

Competition in Mature Technology

As the technology approaches the maturity stage, the rules for competition change, as
follows:
1 The competition switches from being based on innovation to being based on price
and quality.
2 Process innovations tend to dominate, and they assume greater importance in
achieving a competitive edge.
3 Companies compete by introducing product lines into segmented markets.
4 Companies rely on economy of scale to reduce price.
5 Specialization and production efficiency within companies assume greater impor­
tance.
6 Only firms with dominant markets tend to survive. This favors large companies.
Mergers and acquisitions of companies assume greater importance in companies' strate­
gies.
7 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.
8 Companies with mature technology become subject to increased competition by
those who have lower production costs, lower labor rates, or lower overheads. This in­
troduces international competition as a major factor.
9 Mature technology is continuously threatened by substitution of newer technol­
ogy. Management must be alert to emerging or competing technologies.
A company's success in introducing a product innovation gives it a leading edge but
does not guarantee sustained competitive advantage. A company that leads with product
innovation, establishes the industry standards, and follows through with incremental
and process innovation can sustain success. It is important to maintain control over
products and their domination of the market throughout the product life cycle. It is also
important to take a proactive approach to developing or dealing with technological
disturbances. Migrating to the emerging technology in a timely manner keeps a com­
pany's products competitive.
Managing technological innovation requires that an organization continue to intro­
duce incremental innovations and forecast future changes in order to ensure continued
existence in the face of discontinuous innovation. Companies that have been able to do
this successfully are 3M, General Electric, Sony, and Microsoft. These companies com­
pete with innovation and work hard to be leaders in technology (case studies are pre­
sented in later chapters).

DIFFUSION OF TECHNOLOGY
A technological innovation, a new idea, or a new system is considered to be successful
when it is adopted by users and diffused through the user population. Diffusion is the pro­
cess by which an innovation is communicated, over time, through certain channels to
members of a social system (Rogers, 1995). The term "innovation" is frequently used in
the diffusion literature as being synonymous with "technology." Adoption of a certain
 CHAPTER 5: TECHNOLOGY LIFE CYCLES 91

type of technology is usually based on the possible efficacy of that technology in solving
a perceived problem. Information about an innovation reaches a potential adopter through
communication channels. There are many channels for communicating new ideas to po­
tential users, including interpersonal channels and mass media. The rate of adoption of an
innovation by members of a social system is dependent on the following factors:
1 The degree to which the innovation is perceived to be offering better advantage
than does existing practice: An example is an innovation that offers a less expensive
method of producing a product.
2 The degree to which the innovation is compatible with the values and needs of the
users: An example of an incompatible innovation is a new product that may produce
pollution in an environmentally sensitive community.
3 The degree to which the innovation is considered complex and difficult to use: An
example is a new process that requires a great deal of effort in retraining employees and
has a high cost of implementation.
4 The degree to which the innovation can be introduced on a trial basis before users
must fully commit to its adoption: An example is a new drug that physicians can use on
a limited trial basis before prescribing it to all patients. Free samples of drugs given to
physicians permit them to do so.
5 The degree to which the innovation is seen, and its results are observed, by poten­
tial adopters: An example is a small satellite dish for television viewing. As people see
it in use and observe their neighbors' satisfaction with its performance, they are more
likely to be willing to use it.
Innovations that are perceived by individuals as having greater relative advantage, com­
patibility, and less complexity and that can be tried and observed will be adopted more
rapidly than other innovations (Rogers, 1995). An example of the diffusion curves of
two technologies is shown in Figure 5-11.

FIGURE 5-11
DIFFUSION CURVES

100%
Later Adopters _
__
Technology A:
Rapid Adoption
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92 MANAGEMENT OF TECHNOLOGY

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FIGURE 5-12
THE DIFFUSION-COMMUNICATION-CHANNEL RELATIONSHIP
This relationship can be used to forecast the rate of adoption of innovation.
 CHAPTER 5: TECHNOLOGY LIFE CYCLES 93

Laggards

Followers

FIGURE 5-13
Time INNOVATION DECISION TIME

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 a new in­
novation as a result 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).
The decision to adopt an innovation by an individual or an organization takes a certain
period of time and consists of several stages. It starts with gaining knowledge of the inno­
vation, forming a favorable opinion about it, making the decision to adopt it, implement­
ing the innovation, and following up on its performance. Innovative organizations that are
considered technology leaders require a shorter time period than others to go through the
innovation-decision process. Followers take longer to effect the same process, and lag­
gards take much longer to make a decision for technology adoption (Figure 5-13).

DISCUSSION QUESTIONS
1 Select a technology you are interested in (car or plane speed, computer power, screen res­
olution, etc.). Look for performance parameters and plot them against the years they
were launched. Use the data to obtain a regression equation. (You don't need to be a sta­
tistics expert; MS Excel can do that with a click of the mouse.) Can you predict future
technological developments?
2 Select a company you want to study. Read articles about the company in business maga­
zines, trying to understand its origins, latest achievements, and problems. (Fortune mag­
azine and Business Week usually provide good background information; corporate
Internet sites are also a good source for this purpose.) How have the elements iri Fig­
ure 5-7 contributed to the firm's performance? Explain how Figure 5-11 applies to the
case of the company you selected.
94 MANAGEMENT OF TECHNOLOGY

ADDITIONAL READINGS
Theodore Levitt. "Exploit the Product Life Cycle." Harvard Business Review, November­
December 1965.
This apparently old-fashioned but classic article provides very good insight on
strategic actions to be taken on the basis of market maturity.
Everett M. Rogers. Diffusion of Innovation, 4th ed. Free Press, New York, 1995.
This book provides a comprehensive review of the concepts and process of dif­
fusion. It has an extensive reference list of publications in the diffusion area of
research.

REFERENCES
Bayraktar, B. 1990. "On Technology and the Management of Technology." In Khalil, T., and
Bayraktar, B. (eds.), Management of Technology II: The Key to Global Competitiveness,
Industrial Engineering and Management Press, Norcross, GA.
Fisher, J.C., & Pry, R.H. 1971. "A Simple Substitution Model of TechnicalChange." Tech�
nological Forecasting and Social Change, vol. 3, pp. 75-88.
Mahajan, V., Eitan, M., & Bass, F. 1990. "New Product Diffusion Models in Marketing-A
Review and Directions for Research." Journal of Marketing, vol. 54, pp. 1-26.
Mort, J. 1990. "Xerography-SO Years of Technological Innovation." In Khalil, T., and
Bayraktar, B. (eds.), Management of Technology II: The Key to Global Competitiveness,
Industrial Engineering and Management Press, Norcross, GA.
Munro, H., & Noori,H. 1988. "MeasuringCommitment to New Manufacturing Technology:
Integrating Push and Pull Concepts." IEEE Transactions on Engineering Management,
vol. 2, pp. 63-70.
Rogers, E. M. 1995. Diffusion of Innovation, 4th ed., Free Press, New York.