AT 6001 Fundamentals of Management of

Technology
Lecture 1
Introduction
Role of Technology in Creation of Wealth
Critical Factors in Managing Technology

Dr. Manzila Islam Tuheen

Assistant Professor
Institute of Appropriate Technology (IAT)
Bangladesh University of Engineering and Technology (BUET)
 1 INTRODUCTION

Learning objectives

 Technology and its components

 Classification of technology

 Management of technology (MOT)

 MOT at firm, national and government level

 Conceptual framework of MOT

 Technological pace and scope change in today’s world

 1.1 DEFINITION OF TECHNOLOGY

 Throughout human history, technology has had a profound effect on human development and on
the progress of civilization.
 It was only less than two centuries ago that the steam engine and the factory system ushered in
the start of the Industrial Revolution. Energy generated from water and from mechanical,
electrical, and nuclear sources enabled humans to achieve unprecedented change in their way
of life.
 Yet in no other time in history has technology been as pervasive in human lives as it is today. To an
ever-increasing extent, it has invaded every aspect of human endeavor.
 The rate of technological progress and society's dependence on technology only promises to
intensify as the world moves into the twenty-first century.

Technology can be defined as all the knowledge, products, processes, tools, methods, and
systems employed in the creation of goods or in providing services.
In simple terms, technology is the way we do things. It is how we accomplish objectives.
Technology is the practical implementation of knowledge, a means of aiding human
endeavor.
 1.2 COMPONENTS OF TECHNOLOGY
Zeleny (1986) highlighted this point by proposing that any technology consists of three
interdependent, and equally important components:

Hardware: The physical structure and logical layout of the equipment or machinery that
is to be used to carry out the required tasks.

Software: The knowledge of how to use the hardware to carry out the
required tasks.

Brainware: The reasons for using the technology in a particular way. This may also
be referred to as the know-why.

In addition to the above three components, a fourth one must be considered independently,
for it encompasses all levels of technological achievements:

Know-how: The learned or acquired knowledge of or technical skill regarding how

to do things well. Know-how may be a result of experience, transfer of knowledge, or
hands-on practice. People acquire technical know-how by receiving formal or informal
education or training or by working closely with an expert in a certain field.
 1.3 KNOWLEDGE AND TECHNOLOGY
Knowledge is all that has been perceived or grasped by the mind from the range of information
available. Human beings have been able to sort information accumulated throughout their
environment into a body of facts, principles, and theories that form a basis for human
enlightenment and learning.

Technology is knowledge applied to the creation of goods, provision of services, and

improvement of our precious and finite resources; on a negative note, it can also be applied for
destructive purposes.

It is only when knowledge is practically implemented to create new

things, operate a system, or provide a service that we enter the
realm of technology.

The advances in information technology (IT) in the second half of the twentieth century
have expanded the amount of information available in the world. This has created an explosion
of knowledge and brought about further dramatic progress in technology. The accelerated rate of
technological change is having a profound impact on society and the standard of living. As we
move into the twenty-first century, the Industrial Revolution has given way to the "technology
revolution."
 1.4 TECHNOLOGY AND BUSINESS

The technologies that exist in a business are the technological assets of that
business.

These assets may therefore include hardware, software, brainware, and know-how.
They constitute the collective knowledge and technical capabilities of the
organization, including its people, equipment, and systems.

In the past, the value of a company was assessed largely based on its capital and
physical assets such as land, buildings, equipment, and inventory. Today, the real
value of a company is much more than the value of its physical assets or its simple
accounting net worth. Technology adds value to the assets of a company. The
technology resides in the company's people and its technological systems.
 1.5 CLASSIFICATION OF TECHNOLOGY
Technology can be classified in several ways -

New Technology - A new technology is any newly introduced or implemented technology that has an
explicit impact on the way a company produces products or provides services.

Emerging Technology - An emerging technology is any technology that is not yet fully commercialized but
will become so within about five years. It may be currently in limited use but is expected to evolve
significantly.

High Technology - The term high technology (high tech) refers to advanced or sophisticated technologies.
High technologies are utilized by a wide variety of industries. A company is classified as high-tech if it fits
the following description:

 It employs highly educated people.

 Its technology is changing at a faster rate than that of other industries.
 It competes with technological innovation.
 It has high levels of research-and-development expenditure. (A general guide is that the ratio of R&D
expenditures to sales is 1 to 10 or twice the average for the industry.)
 It has the potential to use technology for rapid growth, and its survival is threatened by the emergence of
competing technology.
 1.5 CLASSIFICATION OF TECHNOLOGY (CONT.)

Low Technology - The term low technology refers to technologies that have permeated large segments of
human society. Low technologies are utilized by a wide variety of industries having the following
characteristics:
 They employ people with relatively low levels of education or skill.
 They use manual or semiautomatic operations.
 They have low levels of research expenditure (below industry average).
 The technology base used is stable with little change.
 The products produced are mostly of the type that satisfy basic human needs such as food, shelter,
clothing, and basic human services.

Medium Technology - The term medium technology comprises a wide set of technologies that fall between
high and low technologies. It usually refers to mature technologies that are more amenable than others to
technology transfer. Examples of industries in this category are consumer products and the automotive
industry.

Appropriate Technology - The term appropriate technology is used to indicate a good match between the
technology utilized and the resources required for its optimal use. The technology could be of any level-low,
medium, or high. It does not make sense, for example, to use high technology when there is a lack of necessary
infrastructure or skilled personnel. This is a dilemma faced by many developing countries that want to transfer
technology used in more industrialized countries. Utilizing the appropriate level of technology results in better
use oflabor resources and better production efficiency.
 1.5 CLASSIFICATION OF TECHNOLOGY (CONT.)

Codified versus Tacit Technology - Technology can be preserved and effectively transferred among
users if it is expressed in a coded form.

Codified technology allows people to know how technology works but not necessarily why it works in a
certain way

Tacit technology is nonarticulated knowledge. There is no uniformity in the way it is presented or

expressed to a large group of people. It is usually based on experiences and therefore remains within the
minds of its developers. The technology developers are the ones who have the know-how in question.

Transfer of technology is easier when the technology is in a codified form. It is harder, less precise, and
more time-consuming to transfer tacit technology. A complete mastery of the technology requires an
understanding of both the explicit codified knowledge and the nonexplicit tacit knowledge.
 1.6 MANAGEMENT OF TECHNOLOGY

Management is an art and to some extent a technology. It is the art of carrying out business. It involves directing
and controlling an organization and steering it toward achieving its objectives. The term "directing" means
providing a direction and establishing the path that an organization follows to fulfill its mission.

Management is also a technology, as it is how the desired goals of an enterprise are achieved. Management
functions in an organization include planning, organizing, staffing, motivating, and controlling activities of the
organization. Management, as a field, has a knowledge base and guiding principles.

 Management of technology (MOT) is an interdisciplinary field

that integrates science, engineering, and management
knowledge and practice
 The focus is on technology as the primary factor in wealth
creation
 Managing technology implies managing the systems that
enable the creation, acquisition and exploitation of technology
 Research, inventions, and development are essential
components in technology creation and the enhancement of
technological progress
 1.6 MANAGEMENT OF TECHNOLOGY (CONT.)

 While the underlying premise for the MOT field is

that technology is the most influential factor in a
wealth-creation system, there are other factors
that contribute to the system

 Each one of these factors has its own disciplinary

field of study and research. MOT, as an
interdisciplinary field, combines knowledge from
these disciplines. A comprehensive MOT degree
program requires in-depth studies of all these
factors.

 More important for the creation of wealth is the

exploitation or commercialization of technology. It is
only when technology relates to a customer that its
benefits are realized
 Technology generates wealth when it is commercialized
or used to achieve a desired strategic or operational
objective for an organization
 1.7 MOT AT THE FIRM LEVEL

 MOT involves combined knowledge from science, engineering, and business administration fields
 It impacts different functional entities of the corporation: research and development, design,
production, marketing, finance, personnel, and information
 Its domain involves both the operational and the strategic interests of organizations
 The operational aspect deals with the day-to-day activities of the organization, while the strategic
dimension focuses on the long-term issues

 In the 1970s and 1980s U.S. industries started to lose their competitive advantage, mainly to Japanese
products but also to products produced in a slew of other Asian and European countries. The decline in
competitive position prompted many organizations to express their concern and examine various
approaches that might help U.S. industries restore their competitiveness. Their efforts brought attention to
the importance of MOT in restoring the United States to its position of economic leadership in the world

 It was also realized that first-rate educational programs are needed to develop the engineers and managers
that can manage technological change and expand global markets. The emergence of new specialized
programs in management of technology was one of the outcomes of this self-examination exercise
 1.8 MOT AT THE NATIONAL/GOVERNMENT LEVEL

At the national level, more focus is placed on the role of public policy as it applies to the advancement
of science and technology. The overall impact of technology on society is explored, particularly its role
in developing sustainable economic growth. The effect of technological change on people, the type of
education and training they need, and effects on health and safety as well as on the environment are
considered. Government and organizational policies are developed to embrace technological change
for the benefit of their constituencies.
 1.9 CONCEPTUAL FRAMEWORK FOR MOT

Management of technology connects disciplines that focus on

technology creation with those that enable its conversion to
wealth.
The field examines:
 How technology is created
 How it can be exploited to create business opportunities
 How to integrate technology strategy with business
strategy
 How to use technology to gain competitive advantage
 How technology can improve the flexibility of
manufacturing and service systems
 How to structure organizations that embrace
technological change
 When to enter and when to abandon technology.
 1.10 CONCEPTUAL FRAMEWORK FOR MOT (CONT.)

 Infrastructure and management of R&D is a key aspect, and entrepreneurship is vital for the development of
new technologies. Other pertinent subjects include technology transfer; the role of multinational
corporations; the risks associated with technology; economic analysis; human, social, and cultural issues;
education and training aspects; productivity and quality; organizational structure; management of
technological projects; the boom in information technology; the marketing of technologies; financial issues
related to technological development; and environmental sustainability and eco-efficiency.

 All these topics are interwoven to form the fabric of the MOT field. The issues covered have implications for
engineers and managers. Engineers deal with the physical components of technology. They need to relate
that technology to markets and economic systems. Managers must anticipate implications of technology on
business. It is imperative for all concerned to understand the basic concept of connecting technology with
the marketplace to create wealth.
 1.11 THE PACE OF TECHNOLOGICAL CHANGE IN TODAY’S WORLD
 A very rapid rate of technological innovation is making it imperative to consider technology as the primary
factor influencing economic growth and prosperity.
 Technological changes have been of such magnitude that it is difficult for individuals, and often for
institutions, to follow them. In several technological sectors, such as the information sector, more changes
have occurred in the last few decades than in the previous few thousands years (Pritchett, 1994). The rate of
change is increasing exponentially.

 Technology will continue to be the base for economic growth. At the national or the company level,
competing by means of technology is no longer a matter of choice but a matter of survival in the global
marketplace.
 With the high rate of change in technology, successful managers are those who embrace change for the
benefit of their organization. A manager's role, in a predictable, relatively stable technological environment, is
to optimize the use of available resources.
 In a dynamic environment of fast-paced technological change, a manager's job expands beyond the
traditional role of managing available resources to a new role of managing change. A manager should be able
to manage with technology as well as manage the innovation process.
 1.12 THE CHANGE IN SCOPE

 With the rapid growth of technology, there has been a change in market behavior. Customers are now
demanding choice and expect high-quality products.

 In the early twentieth century, Henry Ford introduced his Model T. To drive the cost down and make the
automobile affordable to the masses, he introduced the concept of the assembly line, and mass
production was born. Ford is credited with saying that he would produce any color car a customer wanted
if it was black. Ford's thinking would not be as popular with today's consumers.

 Today’s goods are produced to meet customers' particular needs and demands. Such luxury has
fortunately become affordable because of advances in technology. The rapid change in technology
combined with consumers' new attitude has forced a move away from the use of fixed production lines.
The use of modem computers and software makes possible such flexibility.

 The emergence of Internet technology has permitted the growth of mass customization where a customer
selects the features desired in a product on-line. The producer develops the system capable of meeting
the customer's demands.
2 ROLE OF TECHNOLOGY IN CREATION OF WEALTH

Learning objectives
 Historical perspective
 Long-wave cycle
 2.1 HISTORICAL PERSPECTIVE

 Technology has always played a major role in creating the wealth of nations and influencing standards of
living and quality of life.
 In primitive societies, production was achieved by manual labor and the economy was agricultural.
 It was not until the eighteenth century and the Industrial Revolution, about a mere 200 years ago, that radical
technological innovations created a major transformation in the way people live and do business. The
factory system was born, and mass production became dominant.
 Technology transformed many national economies from agricultural-based to industrial-based economies.
More wealth was created in industrialized countries by utilizing the latest developments in technology and
diligently converting resources to marketable products. The result was an improvement in the quality of life
and an increase in the products and services available to citizens of industrialized countries.
 Technology has always been the force that influences production and effects an increase in the standard of
living.
 2.1 HISTORICAL PERSPECTIVE (CONT.)

 In the late nineteenth century and early twentieth century, science and technology became increasingly
intertwined.
 Scientific discoveries and methodologies triggered technological breakthroughs, while technological
devices and know-how helped advance science. This closer linkage created an explosion in technological
development.
 The war effort during World Wars I and II forced faster technological development in products,
manufacturing, quality, logistics, material handling, operations research, human factors, and many other
areas. Technology helped win the war and eventually bring peace. Technology also helped build the Western
industrialized countries' strong postwar economies and propel their standards of living to new heights.
 Communication technology, the Internet, genetic engineering and cloning, logistics, nanotechnology, and a
host of other technologies are expected to have an even greater impact in the years to come.
 2.2 THE LONG-WAVE CYCLE

Technology permits real improvement in the standard of living. It is the driver for such
improvement. Technology also triggers another mechanism for economic growth that is yet
to be fully appreciated, one whose effect has not been quantitatively measured. Through
this mechanism, emerging and new technology spurs economic expansion. In traditional
economic literature it is known as the long-wave or long economic cycle.

After the Industrial Revolution, economies of Western countries went through major
economic expansion followed by a depression. In 1930, the Soviet economist Kondratieff
observed that fluctuations occurred in Western economies every 30 years and he attributed
them to the long-wave effect.
 2.2 THE LONG-WAVE CYCLE (CONT.)

Betz ( 1987) suggested that the process behind a long wave is an interaction between
new technology, business opportunities the new technology creates, and an eventual
overbuilding of capital after the technology ages. He suggested the following sequence
of events for the long-wave process:

 Discoveries in science create a phenomenal base for technological innovation.

 Radical and basic technological innovation creates new products.
 These products create new markets and new industries.
 The new industries continue to innovate in products and processes, expanding markets.
 As the technology matures, many competitors enter internationally, eventually creating
excess production capacity.
 Excess capacity decreases profitability and increases business failures and unemployment.
 Subsequent economic turmoil in financial markets may lead to depressions.
 New science and new technology may provide the basis for new economic expansion.
 2.2 THE LONG-WAVE CYCLE (CONT.)

Betz argued that the long-wave hypothesis merely describes past connections among pervasive
basic innovation, long-term economic expansion, and excess capital formation in technology-
mature industries: "It does not determine anything in the future." He made the following pertinent
observations:

 Cutting-edge technology is behind the long waves of economic activity.

 High-technology products displace old technology when there is a justification for
performance over cost.
 Technology life cycles of industries affect long cycles in the national economy.
 New technology comes from science, and science comes from new discoveries in nature.
 A new technology, when created, will begin a new wave.
3. CRITICAL FACTORS IN MANAGING TECHNOLOGY

Learning objectives
 Creativity factor
 Link between science and technology
 Technology-price relationship
 Timing factor
 Vision to change strategy
 Productivity, effectiveness, and competition
 Leaders versus followers
 3.1 CREATIVITY FACTOR
Technology requires great creativity along with a system designed to exploit it. It also requires an investment in
research and development. R&D is a costly endeavor. Technology creation and exploitation require a chain of
events, starting with inventions and ending at the marketplace.

Invention is either a concept or the creation of a novel technology. It could be a product, a process, or
a previously unknown system. The steam engine, the transistor, and the Xerox machine are examples of
important inventions. A new composite material, a new manufactured product, and a new process
constitute inventions. The word "new" here implies new to the world. Inventions occur because of
human ingenuity and imagination. They occur only sporadically, sometimes happening by chance or
through trial and error to satisfy a need.

Innovation involves the creation of a product, service, or process that is new to an organization.
It is the introduction into the marketplace, either by utilization or by commercialization,
of a new product, service, or process. The technology (or the product) need not be novel or groundbreaking.

An invention can be thought of as an event, while innovation can be thought of as a process.

Innovation represents the important connection between an idea and its commercialization. The bottom line of
innovation is the market, which will buy it or ignore it, thereby dictating success or failure. MOT encourages
invention and the management of innovation. Both are creative processes representing essential components
of any technology-creation and application system.
 3.2 THE LINK BETWEEN SCIENCE AND TECHNOLOGY
 Science deals with understanding the laws of nature. This leads to the discovery of fundamental
knowledge about the world, the universe, and all living things.
 It is when scientific knowledge is applied to the things we do in life that knowledge enters the realm of
technology.
 When we discuss science, we mention scientific discoveries; but when we talk about technology, we
mention technological innovations. New technology permits new scientific discoveries. When science and
technology connect with the market, they influence human lives. The market may buy or ignore an
innovation. It may also stimulate innovation and request the initiation of new scientific discoveries to
satisfy market needs, such as the need for a vaccine to prevent the spread of a disease.
 3.3 TECHNOLOGY-PRICE RELATIONSHIP

 When an entity such as a company has a technological advantage, it can command a premium price
for its technology. If the knowledge gap between the company (as the owner of the technology) and
the customer is high, the owner can command a high price for it.
 However, as the customer gains experience with the technology, the knowledge gap shrinks.
 The value of the technology, as well as the commanded price, will decline and eventually vanish.
 3.3 THE TIMING FACTOR
 Management of technology involves the timely creation and introduction of technology into the
marketplace. Equally important is the timing of the introduction of follow-up technology that will improve
performance. Continuous improvement of products and the production capability of the corporation are
vital to the firm's health and survival. "Timely" is the key word in this discussion. Actions must be taken
at the right time if an enterprise is to succeed in a competitive marketplace.
 Entering the market with a new innovation gives a company an early advantage in sales.
 If a company competes with innovation, it should plan to continue competing with innovation.
 A product's life cycle is greatly defined by the competition and the market. Companies must listen to
consumers and be positioned to react faster than competitors do.
 The timing of announcements is very important. Companies should not announce new improvements
while holding large inventories. Customers are not likely to purchase an old model when they know that
a new and improved model will go on the market soon.
 For manufacturing and service organizations, time-based competition (TBC) is an important competitive
weapon for achieving world-class status
 3.4 THE VISION TO CHANGE STRATEGY

 When a company has a strong market and its revenues are good, management tends to lose sight of
environmental changes that may affect the company's competitive position and sometimes even its
survival.
 Short-term success can mask the need for change. "If it's not broken, don't fix it" attitude may lead
management to maintain the status quo. In today's world of fast-paced technological change, this can be
a very dangerous posture to take, an attitude that can lead to loss of competitiveness.
 When a new technology threatens an older one, it is better to take the risk of investing in the new
technology rather than stay with the certainty of the declining one.
 Management must always be on the lookout for new or emerging technologies that can either become a
threat or open new opportunities for the business
 A company does not need to invent technological change to implement innovations. What is needed is to
embrace change and strategize to acquire the technology.
 3.5 PRODUCTIVITY, EFFECTIVENESS, AND COMPETITIVENESS
Productivity is the ratio of the output to input resources. For a manufacturing firm, input resources include
capital, material, labor, and energy. The output is what the firm produces.

Effectiveness implies the ability to achieve desired goals, such as increasing the market share of the
company or attaining an acceptable level of profit. Effectiveness can be understood as the degree to which
an organization accomplishes its objectives. Effectiveness is about producing or being capable of
producing results.

Competitiveness indicates the standing of a country or a company in relation to a known group. The
competitiveness of a company compares the firm's output to the outputs of its competitors and indicates
its standing in the marketplace. When competition is high, only the fit survive. A company is competitive
when it maintains a profitable status while producing a product or service that meets the tests of the
marketplace.

MOT is concerned with achieving higher levels of efficiency and productivity while rendering the
organization more effective in achieving its desired goals. It is also concerned with being competitive in an
increasingly global marketplace to ensure survival.
 3.6 LEADERS VERSUS FOLLOWERS

In terms of technological innovation, a firm can be one of three types:

 A leader: A leader is a firm that is the first to market an innovation.
 A follower: This firm misses the initial wave of capitalization on the technology but recognizes the
technology's impact on its business. Such firms follow closely behind the leader. They may be able
to catch up or surpass the leader if they can capitalize on their own strengths.
 A laggard: This type of firm realizes a potential for profit on technology but seldom influences
technology's use. Often, their survival may depend on adopting new technology.
 3.6 LEADERS VERSUS FOLLOWERS (CONT.)
The advantages of being a leader in innovation are:

 Name recognition: The names of leaders with innovative products come to be well known by the
public.
"Kleenex" instead of tissue
"Xerox" instead of photocopy
"Coke" instead of soft drink or cola

 Better market position: Being first to market gives a firm an opportunity to capture a large market
share.
 A chance to define the industry standard: When a firm leads with technology, it has an opportunity
to establish a dominant product or a dominant design that will define the industry standard.
 A head start on the learning curve: Leaders start on the learning curve before competitors. They also
develop tacit knowledge that is difficult for competitors to acquire or transfer.
 Protective barriers: Leaders can protect their technology through patents and
 their means to prevent late entrants from competing. They also have better opportunities to exploit
their technology.
 High profit: Leaders command the market. They establish a technology gap between their products
and their customers or competitors. Thus, they can obtain a high price for their products, thereby
earning large profits.
 3.6 LEADERS VERSUS FOLLOWERS (CONT.)

There are several disadvantages to being a leader in innovation:

 The leader assumes the large cost associated with research, prototyping, testing, and overall
development.
 The leader must be able to sustain the lead. There are costs associated with updating the
technology.
 The initial investment in design, tooling, and production may create difficulty in reversing the
course of action should a competitor introduce a better technology or an improved design.
 There is market uncertainty associated with the introduction of new technology. It is difficult to
predict demand and to set an optimal price. The leader is a target for competition.