Assessing Technological Forces

Assessing Technological Forces

A 2017 survey conducted by CEMS (formerly the Community of European Management Schools and International Companies) concluded that technological change was seen as the biggest threat to business organizations, having been selected as the #1 threat by 68% of respondents, compared with 60% who cited shifts in economic and political power, and 59% who named climate change as the biggest threat. Technological change involves invention, development, and adoption. Forecasting it is difficult because both breakthroughs and users’ responses are uncertain. People may hesitate to replace familiar tools, especially when a new technology requires relearning or offers no obvious benefit. Old and new technologies can therefore coexist during a transition, giving organizations time to adapt.

There are numerous examples illustrating the potential length of technological transformation, as well as the importance of early recognition of the discontinuous impact of the new technology. The August 22, 1787 successful trial of a 45-foot steamship on the Delaware River in Philadelphia (in the presence of the members of the US Constitutional Convention) provides an early example of steam-powered shipping, but it took decades before the new technology displaced sailboats as the primary means of water transport. Similarly, the world’s first single chip microprocessor was introduced by Intel in 1971, though at the time few could foresee the enormous transformational impact of that breakthrough on business and the society at large, and the transition from ‘paper and pencil’ to electronic information storage and dissemination was a gradual process although not nearly as lengthy as was the transition from wind to steam powered shipping. The account contrasts the adoption of personal computers, introduced about 40 years before it was written, with the faster spread of smartphones and the later arrival of wearable devices such as Fitbit and Apple Watch. These computing technologies developed through many related innovations after Intel’s 1971 chip. The account uses the familiar Moore’s Law rule of thumb of transistor counts doubling about every 18 months to illustrate the pace of development; it is a historical description, not a guarantee of future progress.4

Technological change can look much clearer in retrospect than it did to people working in the field at the time. Kodak and Polaroid were both technological innovators not only in their traditional businesses of film-based photography but also in the area of digital photography – in fact, both companies developed industry leading digital cameras that were ahead of their competitors. Yet, in spite of their early technological advantage, the management of both organizations refused to truly embrace their own new digital technologies because they feared it would destroy their highly profitable film-based business. As famously captured by a senior Polaroid manager’s comment – ‘Why should we accept a 38% margin [of digital photography]? I can get 70% in film’ – the organizational leadership of Polaroid (and Kodak alike) saw digital photography as an alternative to film-based photography, rather than what it truly was – an existential threat to their addictively profitable film business.

A useful broad distinction is between incremental improvements to existing technologies and discontinuous changes that introduce different capabilities. This account uses disruptive in that broad sense; the significance of a change depends on the market and the activity being considered. The former usually takes the form of improvements in an existing technology or process, whereas the latter entails introduction of a brand new technology or process. Telephone, television, and the Internet are all examples of disruptive innovations offering new, radically different (from the standard of the time) means of communication, whereas cellular telephone, color television, and the World Wide Web all can be seen as incremental improvements that added new features and user functionality to telephone, television, and the Internet, respectively. Incremental improvements may be easier to anticipate because they build on established capabilities. Discontinuous changes can undermine the trends used in a forecast. Historical data and research still provide evidence, but their usefulness depends on whether the forces behind the observed patterns continue to operate.

Expert judgment can reveal technical possibilities and constraints that historical trends miss. People developing a technology may know which problems remain unsolved and which advances could change its uses. That knowledge is valuable, although technical insight alone does not establish how quickly a product will be adopted or whether a forecast will be accurate.

Within the 3E framework, expertise can concern performing tasks, understanding processes, or making projections. An experienced claims adjuster and a researcher developing a new technology bring different kinds of knowledge. Choose expertise relevant to the question, and examine the basis of a forecast rather than assuming that proficiency with current tools implies foresight.