By now, we are familiar with the concept of technology acquisition, advantages and disadvantages of technology acquisition. The previous unit also familiarised us with the alternatives for acquiring new technologies, and the reasons compelling a company for obtaining new technologies. We also learnt about the management of acquired technology that is required in all companies. We have also discussed the measures of scale and mechanisms for acquiring the technology. In this unit, we are going to define technology forecasting and discuss the need for technology forecasting. We will also study the role of forecasting in the planning process.
We are also going to discuss the different forecasting methods and techniques. At last, we will see how to relate planning and forecasting. Objectives: After studying this unit, you should be able to:
- Define technology forecasting.
- Justify the need for technology forecasting.
- Examine the role of forecasting in the planning process.
- Describe and apply different forecasting methods and techniques.
- Relate planning and forecasting.
Concept of Technology Forecasting
Before we start our discussion on ‘technology forecasting’, let us first define ‘forecasting’. Generally, ‘forecasting’ refers to the prediction of the future on the basis of available information. In the early days, traditional forecasts were used to deal with speed and power. They did not focus on the structures of the organisation. It was assumed that inventions of the future are not easy to predict. The forecasters were not focused on the evaluation of the forecast process. We can define technology forecasting as the process that predicts the future characteristics and timing of technology.
Technology forecasting is done by considering the parameters, attributes and capabilities of technology. The forecasting process helps in the effective management of technology. The forecaster needs to have a clear idea of the organisational goals and goals of the units for which the forecasting is prepared. Forecasting consists of the strength and weaknesses of the empirical sciences. Technology forecasting does not have any law because of the complexities that are associated with the systems. The complexities in technical, environmental, economical and ethical contexts are very difficult to remove.
The forecaster has to take the historical examples in order to forecast in a better way. Thus, we can say that technology forecasting deals with the prediction of future technological capabilities, attributes and parameters. The technology forecasting is done at the early stage of the project life cycle. The decisions made at the early stage influence the subsequent time of that project. Technological forecasting is an attempt to predict the way things are going to be done. We know that technology considers both hardware and software. The hardware includes the mechanical or physical hardware and software includes the procedures and methods for organising the human activity. In this regard, technological forecasting is nothing but the future characteristics of useful machines, products, processes, procedures or techniques.
Characteristics of technology forecasting
Generally, there are some characteristics that are associated with technology forecasting. We will now discuss them briefly.
· A technological forecast relates to certain characteristics such as levels of technical performance (e. g. technical specifications including energy efficiency, emission levels, speed, power, safety, temperature, so on), rate of technological advances (introduction of paperless office, picture phone, new materials, costs, so on).
· A technological forecast also relates to use machines, procedures, or techniques. In particular, this is intended to exclude the items intended for pleasure or amusement from the domain of technological forecasting, since they depend more on personal tastes rather than on technological capability.
· A technology forecast can be for short-term, medium-term, and long-term.
Technology forecast method
There are some steps in deciding the technology forecast method. We will now discuss these steps: · Selecting information requirements: In this first step in deciding the technology forecast project, we have to determine the purpose of the forecast that the project has to serve. We require the following information in this case of the forecast. The rate at which new technologies replace the old one: This tells the rate at which the new technology replaces the old technology. The substitution analysis is helpful for the growth of the company.
For example, the substitution of copper cable with the optical fibre cable.
- Assistance in the management of R&D: The forecast helps to set the realistic goals for the product or process of the R&D project. Technology forecast also helps in setting the strategies for different technologies. Technology helps to improve the overall schedule of the R&D.
- Evaluation of the present value of the technology being developed: It is common that we provide monetary value to the technology during its development. The use of technology forecast in the evaluation process involves the analysis.
In this, we consider ‘when’ and ‘to what extent the technology will be commercialised. This involves the way the profitability of a company is affected by competing and non-competing technologies.
- · Evaluation of the new products that can present threats or opportunities: The evaluation is done to verify whether the new product is causing the threats or causing the opportunities.
- Analysis of new technologies that may change the strategies: This analysis helps to evaluate the improvements that new technology offers for its internal strategies. The elements of a forecast – the output: The data that is collected for the forecasting process defines the amount of information that is contained in the technology forecast. We can divide the information into four elements.
- The technology being forecast (Qualitative element): This involves the definition of ‘what to forecast’ in the technology. It also defines whether it is forecasting a single approach of technology or the common technology.
- The characteristics of the technology (Quantitative approach): As we have defined what to forecast, let us now learn how to represent the technology in the form of quantitative terms.
There are both the functional and the technical parameters with this. The functional parameters are related directly to the user. The technical parameters include the parameters like the inlet temperature, compression ratio. We cannot mix both the technical and functional parameters. Time: While making any decisions regarding technology, we have to consider the time when we are forecasting for any of the projects. The time of forecasting is concerned with the time the condition or event occurs in the future. Probability: Usually, there are some uncertainties associated with the forecast.
This probability factor defines the probability of achieving the fixed level capacity of an organisation. Forecasting resources – the input: We have already defined what to forecast and what is required from the forecast. Now let us learn about the inputs that have to be fed as the resources to get the needs satisfied. Assumptions: We can consider the assumptions to set the real factors. All the forecasts mainly depend on assumptions. Insight: This is helpful to start the qualitative element of the forecast. We have to use our minds and knowledge to form a relationship with forecasts.
This insight helps to merge divergent thinking with creativity. Data: As many of the forecasting techniques depend on the past and are developed on the basis of the past, so we need proper data that represents the technological performances of the past. It is required to forecast the future. Judgement: This involves the judgement that has to be taken by the forecaster when there is no data about the past.
Principles of technology forecasting
Till now, we have studied technology forecasting and its characteristics. Now, we will discuss the principles of technology forecasting, that are associated with a rational approach to predict the future. Let us now discuss some principles of technology forecasting.
- Correct for biases in judgemental forecasts: The judgemental forecasts are strongly influenced by the biases, such as desired for the outcome.
- Forecasts provided by efficient markets are optimal: Most of the time, the forecast that is developed in the past fails and this has to be developed on the basis of the present markets so that we can have the optimum result at least. Use the longest time series available: The principle of using the longest time series involves using the longest time that is available and this conflict with using more relevant data.
- Econometric forecasting models should be fairly simple: There should be simplicity in the forecasting models.
- Do not use judgement to revise predictions from cross-sectional forecasting models that contain relevant information: We should avoid judgemental revisions and include the available information about the job of a candidate in a quantitative model. The theory should precede analysis of data in developing econometric models: The research on parole predictions concluded that the theory should precede the development of predictive models.
- Questions 1. Predicting the _________ is an essential element of the planning process
- All the forecasts mainly depend on assumptions. (True/False)?
- We provide the _____________to the technology during its development.
Activity 1:Consider that you are working in ABC Company as the team lead and you have to carry out the technology forecasting. Explain the principles of the forecasting process. Hint: Forecasting resources-the input.
Technology Forecasting Process
In the previous section, we learnt about the principles of technology forecasting. Now, we will discuss the technology forecasting process. The forecasting process Twiss has suggested some general elements for the technology forecast process. The forecasting process involves three elements that are shown in figure 3. 1. As we can see in figure 3. 1, that there are three elements involved in the forecasting process, we will discuss them briefly. The first element is the input that has to be fed for the process.
This involves the requirements that we have to feed, so the decision-maker of the forecast will gather the information like the assumptions and data, and feed the information to the second element named ‘forecasting techniques’ which will process depending on the output that it has to contain. Lastly, the resources that are required to define the forecast are identified. According to our working definitions, the main function of the technology is “to lead the decision-making process towards profitable solutions with minimum uncertainties. ”
Identification of needs: This is the first phase in the technology forecasting process. After identifying the expected outputs and the objectives of the future, a thorough analysis is done in order to make sure the relevance of technology forecasting. This phase ends with a decision on the technology forecast. Prepare project: This is the second phase in the technology forecasting process. In this phase, the forecasting activities are planned and resources are allocated.
The roles of each human resource are carefully prepared and explained. There are three human resources, clients, core team and external participants. The client includes both customer and user of the technology forecast. The core team performs the activities like defining references, writing documents, creating the structure of the forecast and filling it. The core team coordinates the efforts of experts from teams, external participants and clients which help to develop an entire forecast. The external participants help in providing data, information and experience.
The major sources of information and data are identified in this phase. Define objectives: This is the third phase in technology forecasting. This phase once again goes through the objectives that are defined in the first and second phases. This phase decides the dimensions of the forecast. This includes both the normative and exploratory forecast. We use normative forecast when the desirable future is seen and the normative forecast focus on finding the path, from the present to the desired state. Perform analysis and develop Technology Forecast (TF): This is the fourth phase in the technology forecasting process.
This is the central part of the present research. In this phase, we start with defining the boundaries of the technological system that has to be forecasted. This, in turn, involves the definition of the other four steps that are clearly shown in the diagram. The four steps in defining the boundaries include defining the key functions and futures, defining the system in relation to the laws of system incompleteness and energy conductivity, defining the system in terms of technological, social and environmental contexts and lastly the analysis of the drivers and barriers for the development of the system. After completing the definition of the boundaries, we get a shape of the problem and also the contradiction network. We have to capitalise on this set of problems. The first step in this is reformulating the technological barriers into the contradictions. The next step is, defining critical-to-X features, and the third step involves revising and reformulating the collected contradictions to match with the critical to X features. The last step in this involves mapping obtained contradictions as a network.
The network consists of critical-to-X features, components of the system and opposite values of features. The next step in the analysis and development TF is the ‘analysis of limitation of resources’. This helps to find the resources that are less and causes problems on the map. R&D helps to get the raw materials and solve the problem. This also helps in determining the time delays of the activities. The next step in the analysis and development TF involves; build the timing diagram’. This uses the results that we get after the problem mapping. The different order of critical to X features is developed by considering the different contexts. Validate results: The fifth phase in the technology forecasting process is to ‘validate results’. This includes customer satisfaction with the results of TF. Different processes are associated with the evaluation of the results of the forecast. Our R&D uses the traditional method of evaluating the result of the forecast. We can do peer review with the external experts and our colleagues in between working hours of the forecast to make the evaluation easy. Application of TF: The last phase in the technological forecast is the ‘application of TF’. This depends mainly on the needs and the formulated objectives.
We have seen the development of TRF using contradiction networking. This helps mainly in all the projects.
- Questions 4. Prepare project phase involves the forecasting activities that are planned and _________ are allocated.
- Normative is used when the desired future is not seen. (True/ False)?
- Application of TF depends mainly on the needs and formulated ________.
Activity 2:Consider that you are the manager involved in the process of forecasting, in a company. Suggest the phases in which you will carry out the technology forecasting process. Hint: Application of TF.
Need and Role of Technology Forecasting
In the previous section, we learnt about technology forecasting along with the diagram. In this section, we will analyse the need for technology forecasting and the role of technology forecasting in the planning process. Need for technology forecasting Today, we are mainly focussing on corporate strategies, as the pressure on R&D planning is increasing. Technology forecasting is needed for the long-term planning process. Technology forecasting helps us in finding out the opportunities at an earlier stage, and to evaluate the significance of these opportunities.
Many different industries utilise technology forecasting for different purposes. They use it to:
- Identify and evaluate new technology-based products.
- Make better technology investment decisions and project technology advances by providing information.
- Define market needs for new technologies. · Project market adoption rates for new technologies.
- Identify critical technologies and gaps. · Formulate strategic models for future development.
Role of Forecasting in Planning Process
As we have already analysed the need for technology forecasting, we will now discuss the role of forecasting in the planning process. The forecast serves as an input to the process of making plans and decisions. Forecasting plays many roles in planning. Let us briefly describe these roles.
- The forecast identifies limits beyond which, it is not possible to go.
- The forecast establishes feasible rates of progress so that the plan can be made to take full advantage of such rates; conversely, it does not demand an impossible rate of progress.
- The forecast describes the alternatives which are open and can be chosen from.
- The forecast indicates possibilities that might be achieved if desired. The forecast provides a reference standard for the plan. The plan can thus be compared with the forecast at any point in time, to determine that it can still be fulfilled, or, because of changes in the forecast, it has to be changed.
- The forecast furnishes warning signals, which can alert the decision-maker that it will not be possible to continue present activities. Note that the purpose of the forecast is to improve the quality of our decisions related to the selection of an alternative from available alternatives, and not to force us to accept a particular decision.
Today, technology forecasting has become popular in the corporate world. All companies including large as well as small depending on technology forecasting for their survival. Large companies are using technology forecasting for centralising the efforts of R&D and planning for developments of new products; at the same time, the survival of smaller companies depends on technological innovation by using appropriate methods of technology forecasting.
- Questions 7. The technology forecasting is helpful for the _________planning process.
- The forecast serves as an input to the process of making plans and decisions. (True/False)?
- The forecast provides a _________standard for the plan.
Forecasting Methods and Techniques
In the previous section, we learnt about the role of forecasting in the planning process. Let us now study the different forecasting methods and techniques. We can classify the technology forecasting methods into two methods, which are, exploratory, and normative forecasting methods. These methods include some techniques too.
We will now briefly describe the different forecasting methods and techniques depicted. Exploratory Methods: Exploratory methods are primarily concerned with the analysis of historical data. Selected attributes such as functional performance, technical parameters, economic performance, and so on are plotted against time. Since it is usually assumed that progress is evolutionary and that technological progress is not random, it is possible to generate characteristic curves or patterns from the data and from these patterns forecasts can be made with varying degrees of certainty.
The exploratory methods include methods like intuitive forecasting, extrapolation, growth curves and technology monitoring. Let us study these methods and techniques in brief. · Intuitive forecasting: This is the most widely used forecasting method. This method assumes that the experience and education of experts are sufficient to forecast the vectors of expansion and evaluation in a specific field. The intuitive method mainly involves two techniques that are the Delphi technique and the opinion polls technique. Delphi technique: The Delphi technique involves the comparisons of expert projections of future technological developments.
This helps us in projecting future technical and market developments. This also involves the uncovering of the fundamental differences in opinion. -Opinion polls: The opinion poll technique involves the opinion of different experts. This technique involves the joint assessment of different ideas. This technique also helps us in knowing the new technologies and evaluating many of the options of the new technologies. Extrapolation technique: Extrapolation is the most usual method of forecasting in exploratory methods.
The extrapolation method involves the extension of the present methods for the future. We can classify the techniques in extrapolation aslinear extrapolation and exponential extrapolation. Linear extrapolation: Linear extrapolation involves the creation of a tangent line at the end of known data and then extending the line beyond that limit. Linear extrapolation gives good results when this is extended approximately as the linear function and not too far behind the known data. Exponential extrapolation: The exponential extrapolation is the non-linear extrapolation.
This includes the historical trends of a particular period of time and these trends are extended for the future. This is reliable, simple and inexpensive. Growth curves: This is another method included in exploratory methods. The growth curves are reformulated from a time basis to an observation basis. This includes the numerous time series of growth behaviour that is collected and categorised according to data characteristics. The growth curve includes the pearl curve and Gompertz curve techniques. Pearl curve: The pearl curve is an inhibitive model of technology growth.
Pearl curves are produced, when there is some competitive situation between the two technologies with the same growth rates. Gompertz curve: The gompertz curve uses the pearl curve to show the pattern in which the maturing technologies approach the development limits. This is the preferred model for technology adoptions that are driven by the technical superiority of the new technology. Technology monitoring: Technology monitoring is also an exploratory method. We can define this method as a method that looks after the monitoring of the technologies.
This is based on analysis and meaning of signals of change. The growth curve assumes the good continuity between the past and future and they are incapable of predicting the breakthroughs. · Normative Methods: We have discussed the exploratory methods and techniques. We will now discuss the normative methods of forecasting. The normative forecasting provides the budgetary decision in the technological area. The normative approach includes the well-organised attempts to allocate the money, manpower and other resources, on a rational basis, that might affect the technology forecast of the future.
The normative methods include the three methods, namely, relevance trees, morphological analysis and mission flow diagrams. · Relevance tree: The relevance tree includes the hierarchical listing of the tasks and the alternatives. In this tree, we consider each branch as a goal. The relevance tree is helpful for all the planners to systematically assess all the interlinked technologies. · Morphological analysis: Morphological analysis involves systematic evaluation of all possible combinations of solutions to the individual parts of a system.
This involves the breaking down of the main tasks into smaller tasks and treating all the individual tasks separately and finding the solutions for that. · Mission flow diagrams: The mission flow diagram indicates the mapping of all the substitute routes or sequences for finishing a given task. We need to determine the important steps on each route and also identify the problems and costs related to each route. Then, we can derive the performance requirements for every relevant technology and we can use the same as normative forecasts. Self Assessment Questions 10.
The extrapolation method involves the ____________ of the present methods for the future also. 11. The pearl curve is an inhibitive model of technology. (True/False)? 12. Exploratory techniques are primarily concerned with the analysis of _________ data. Activity 3:Consider that you are working under the manager who is in charge of technology forecasting in the company. Your manager has asked you to list the different technology forecasting methods. Prepare a list of such methods that you will follow. Hint: Morphological analysis. | 3. 6 Planning and Forecasting
In the previous section, we have learnt in detail about the methods that are involved in technology forecasting. In this section, we will learn about planning and forecasting. Planning and forecasting provide us with the tools that anticipate demands and respond quickly when the demand changes. Planning and forecasting allow us to communicate through the entire supply chain of a company. Nowadays we have found that there is a time lag between the lead time of the event and the occurrence of that event. This lead time is the main reason for planning and forecasting.
If the lead time is zero or very small, there is no need for planning. If the lead time is long and the outcome of the final event is conditional on identifiable factors, planning can play an important role. In such situations, forecasting is needed to determine when an event will occur or a need arise, so that appropriate actions can be taken. A layperson may question the validity and efficacy of a discipline aimed at predicting an uncertain future. However, it should be recognized that substantial progress has been made in forecasting over the past several centuries.
There are a large number of phenomena whose outcomes can now be predicted easily. The sunrise can be predicted, as can be the speed of a falling object, the onset of hunger, the thirst of fatigue, rainy weather, and many other events. The evolution of science has increased the understanding of various aspects of the environment and consequent by the predictability of many events. Successful forecasting is not always directly useful to managers and others. More than 100 years ago, Jules Verne correctly predicted such developments on submarines, nuclear energy and travel to the moon.
Similarly, in the mid-1800s, Charles Babbage not only predicted the need for computers but also proposed the design of computers. In spite of the accuracy of these forecasts, they were of little value in helping organisations to realize those possibilities or achieve greater success. We should also know the distinction between uncontrollable external events (originating with the national economy, governments, customers, and competitors) and controllable internal events (such as marketing or manufacturing decisions with the firm).
The success of a company depends on both types of events, but forecasting applies directly to the former, while decision making applies directly to the latter. Planning is the link that integrates them. To draw a line between business forecasting and technological forecasting, business forecasting uses more quantitative techniques, whereas technological forecasting uses more qualitative techniques. It is not that business forecasting does not use qualitative techniques, but it is viewed with relative importance. In fact, it also depends on the factors forecasted. In business forecasting, the stress is on physical quantities, whereas in technological forecasting it is on behavioural issues.
- Questions 13. The _________ is the main reason for planning and forecasting.
- To draw a line between business forecasting and technological forecasting, business forecasting uses more qualitative techniques. (True/False)?
- Planning and forecasting allows us to communicate through the entire ___________.
In this unit, we discussed technology forecasting, which is the prediction of technology. We also analysed that the main aim of technology forecasting is to lead the decision-making process towards profitable solutions with fewer uncertainties. We also studied the six different phases of technology forecasting including identification of needs, preparation of the project, defining objectives of technology forecasting, analysing and developing technology forecasting, validating the results and applying technology forecasting. We also noticed that technology forecasting helps to find opportunities at the earlier stage of the project.
Different projects use technology forecasting in different ways, depending on the duration of forecasts. We also studied the technology forecasting methods including the exploratory and normative methods. We also discussed the planning and forecasting process that helps to communicate through the entire supply chain.
|Glossary Term||Description||Inhibitive||It means holding back.||Long-term technological forecasts||Forecasts for 10-20 years (a long time for the emergence of totally new technologies).||Medium-term technological forecasts||Forecasts for 2-10 years. Normative||Pertains to giving norms or rules.||Reformulating||The act of developing again.||Short-term technological forecasts||Forecasts for usually one year or less.|
- Describe some characteristics of technology forecasting.
- Explain in brief the six phases in the technology forecasting process.
- Explain in brief the need for technology forecasting.
- Write a short note on the role of technology forecasting in the planning process.
- Explain the different forecasting methods.
- Give a short note on planning and forecasting.
- Monetary value
- Lead time
- Supply chain
- Refer to section 3. 2 Concept of Technology Forecasting.
- Refer section 3. 3 Technology Forecasting Process.
- Refer section 3. 4 Need for Technology Forecasting.
- Refer section 3. 5 Role of Forecasting in Planning Process.
- Refer section 3. 6 Forecasting Methods and Techniques.
- Refer section 3. 7 Planning and Forecasting.