Strategic Rationale for Technology Forecasting- Valutrics

The importance of technology forecasting is its ability to inform current and future investment decisions throughout a business. It can provide valuable information about the likely longevity of a technology. It may even indicate the time period over which a widespread (even market standard) technology is probably going to be replaced.

Technology change potentially has implications for all business. The products a firm markets, the processes a firm uses for production, or the equipment it uses to provide its service may be superseded, thus giving a competitor an immediate advantage in the marketplace.

Technology forecasting can provide information with obvious and immediate applicability and with significant cost implications. For example, the products or services a firm sells are vulnerable to the effects of technology change. Considerable investment is involved in developing a new product and setting up production lines. This will be lost if the product is rendered obsolete by technology developments. It is also possible to gain a price advantage over competitors by investing in more efficient technology production processes.

An example of a traditional business model when compared to the potential impact of an alternative technology is the  Online distribution versus CD technology in the recording industry.

Adapted from “Boosting the Payoff from R&D,” by R.N. Foster (1982), Research Management, 15(1), pp. 22–27.

The equipment and software used to conduct administration and distribution processes and the communication methods used in most firms to reach clients are all based on particular technologies. Often this technology will be introduced at great expense and will commit the firm to a considerable substitution cost. For example, consider a situation where a firm installs a new software system to record and track customer service calls. Besides the expense of the software and associated licenses, the firm will have to invest in training for staff. There may also be expenses incurred in migrating earlier records to the new system. A major change or update to a new system will incur expenses all over again.

Technology forecasting aims to extend the time during which a firm may work on its response to a new technology by giving the firm insight into change before it happens or before it has a practical impact. This buys time for the research and development of new products and/or services. It will also give some insight into the likely longevity of investment returns a firm can expect from its investment in a particular technology.

There are a variety of methods used to generate technology forecasts:

• Expert opinion may be sought about likely directions for change. Delphi is an example of a process using expert opinion to forecast likely change. It explores future technology developments by drawing a consensus opinion from a panel of experts.
• Trend extrapolation and growth curves use information from the past to predict developments likely in the future.
• Morphological analysis uses information about current technology to try to find new applications for existing inventions.
• Relevance trees systematically break down a problem as a method for finding a solution.
• Monitoring follows current research and finds links between inventions to predict what practical innovations may arise from them. An example of monitoring is patent analysis.
• Historical analogy picks an analogous technology from the past and plots development in a new technology as following a similar growth trajectory.
• Scenarios can explore future technology by presenting a series of perspectives on possible futures each involving slightly differing conditions to arise.

Technology forecasting predicts future developments by anticipating the probable characteristics and timing of technology. It will focus on one specific technology outcome and explore the likely attributes of that technology at some nominated time in the future—for example, in 10 years’ time. The most useful technology forecast will include some sort of estimate of how the likelihood of its predictions materializing. It should always make explicit the assumptions on which it is based.

While technology forecasting itself is not necessarily concerned with a firm’s profits, it should provide sufficient insight to allow a firm to make informed decisions about its investments in technology, which will in turn have a direct bearing on future profitability.

To not undertake any form of technology forecasting is to assume that either technology change is not relevant to a firm or that the technology used is static.