Technology Maturation and SubstitutionAmin Aghajani

Zeinab Rouhollahi

Fall 2011

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Introduction

The most important and difficult task in managing

technology:

The appropriate balance between the application and

extension of conventional technology and the

development and introduction of new technology

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But Why? The Technology Paradox

Most attempts to replace existing technology will

fail.

Technology is like a jigsaw puzzle.

But, history shows that all technologies are fated to

be replaced eventually.

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The Technology Paradox (cont.)

If we understand how and when a technology

becomes vulnerable as well as the issues involved in

technological substitution, we are more likely to

achieve a sound balance of effort.

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Technology Life Cycle

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Technology Life Cycle

When a technology first emerges, there are almost

no constraints on what can be tried.

Effort is focused on improving raw physical

capabilities.

Business is dominated by engineers.

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Technology Life Cycle

As the technology is applied, constraint begin to

emerge:

Advances must be compatible with equipment already

being used

Nature impose limits

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Technology Life Cycle

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Dominant Design

What is a dominant design?

A dominant design is a specific path, along an

industry's design hierarchy, which establishes

dominance among competing design paths

Factors

the emergence of a dominant design is the result of

a fortunate combination of factors:

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Technological

Organizational

Economic

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Facilitating Factors

What makes a design dominant?

1. Possession of collateral assets (market knowledge,

distribution network, reputation, etc.);

2. Industry regulation and government intervention;

3. Strategic maneuvering at the firm level;

4. Existence of bandwagon effects or network

externalities in the industry.

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Dominant Design Along Life Cycle

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Technology Life Cycle

As the gap between natural limit and reliable

practice narrows, more and more attention shifts

from improvement in capabilities to improvement

in processes that lead to lower cost.

Manufacturing effectiveness rises in importance

and visibility.

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Technology Life Cycle

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Technology Life Cycle

As processes become more sophisticated, they

become more expensive and specialized, and the

technology becomes more capital intensive.

The effective management of assets increasingly

determines competitive success.

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Technology Life Cycle

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Dominant design in industries

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Hypothesis

A firm's probability of surviving through time will be

directly affected by a firm's entry timing vis-a-vis' the

evolution of technology in the industry.

The probability of survival will tend to be greater for

firms entering the industry before the emergence of a

dominant design than for firms entering after it.

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Rationale

Dominant design is a catalyst for the accumulation of

collateral assets and creation of barriers to entry:

Dominant designs emerge as a process of experimentation

between the firm and the users of the product.

Entering early allows the firm to 'buy' time in order to

experiment with the market and thus increase its

probability of coming up with a dominant design.

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Typewriter Industry

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An alternative hypothesis

Firms before a dominant design will have lower

chances for Survival because the chance of choosing

the wrong design.

There are some cases which late entrants can also

survive:

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Standards

Financial power

Collateral assets

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Research Conclusion

Entry pre-dominant design is clearly associated with

lower probability of failure.

Entry post-dominant design presents more

ambiguous results: only one industry clearly supports

our prediction that the risk of failure would be higher

for firms entering a greater number of years after the

dominant design.

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But the Paradox Still Remains!

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But the Paradox Still Remains!

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What We Can Say

At a minimum, awareness that a technology is

maturing should alert managers of technology to its

growing vulnerability and lead them to an increased

monitoring of potential threats from new fields that

may supplant conventional technology.

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Technology Substitution