TECHNOLOGY FORECASTING

1. TECHNOLOGY FORECASTING

2. Technology Defined: - Ferré (1988) has defined technology as “practical implementations of intelligence”. - Gen dron (1977) defined as “A technology is any systematized practical knowledge, based on experimentation and/or scientific theory, which is embodied in productive skills, organization, or machinery”.

3. Technological Change defined as: “the process by which economies change over time in respect of the products and services they produce and the processes used to produce them”. it also has been termed as: “Alteration in physical processes, materials, machinery or equipment, which has impact on the way work is performed or on the efficiency or effectiveness of the enterprise”.

4. Major Theories of Technological Change

5. Neo-Classical Theory technological change takes place in the form of shifts of the production function towards the origin.

6. Some of the major limitations of neo-classical theory are: • Only labor and capital are incorporated as factors of production. • The presence of infinite techniques at a given level of technology is rather unrealistic. • Only cost-reducing improvements can be described by the production function. • Though an efficient tool for equilibrium analysis of economic life, it is ill at ease when dealing with dynamic problems.

7. Marxist Theory - Karl Marx perceived technology as not self generating, but as a process directed by willful, conscious, active people and molded by historical forces He held that technological change - the development of the productive forces - was the prime mover of history

8. Major limitations of the Marxist theory are: • Undermining of capital-saving innovations. • Underemphasizing the concept of productivity. • Controversy involved in the theory of the falling rate of profit.

9. Schumpeter’s theory This theory views innovation as the engine of economic development and as a disequilibrium phenomenon. Innovation is defined as the carrying out of new combinations of means of production, which include a wide variety of cases such as: the introduction of a new good or of a new quality of a good, or of a new method of production, the opening of a new market, the conquest of a new source of supply of raw materials, the carrying out of a new organization of any industry.

10. Continuation Schumpeter’s Theory Schumpeter’s formulation of production function differed from neo-classical theory in that capital was excluded and only labor and land were included as inputs. Major limitations of this theory are: • Psychology of the entrepreneur (the embodied aspect of innovation) is an elusive phenomenon. • No explicit attention is paid to the process by which innovation is generated. • Lack of empirical evidence.

11. Evolutionary theory This suggests a biological analogy to explain technological change. The Darwinian two-state process of mutation (invention) and selection (innovation) has been employed to understand the evolution of technology

12. Major limitations of the evolutionary theory are: • Dearth of quantitative models. • Many propositions need to be validated.

13. Market-Pull Theory Markets govern the innovation process. The market constitutes a communication channel through which political, economic, social and ecological forces influence buyers in their demand for technological products.

14. Major limitations of this theory are: • The logical and practical difficulties in interpreting the innovation process. • Difficulties of defining demand functions as determined by utility functions. • The incapability of defining the ‘why’, ‘when’ and ‘where’ of certain technological developments instead of others.

15. Technology-Push Theory Technology is defined as an autonomous or quasi-autonomous factor. It assumes a one-way causal determination approach, i.e., from science to technology to the economy.

16. Major limitations of this theory are: • Failure to take into account the intuitive importance of economic factor in shaping the direction of technological change. • Lack of understanding of the complex structure of feedbacks between the economic environment and the directions of technological change.

17. Measurement Of Technological Change

18. Economic Indices Arithmetic indices are derived based on price variations in capital and labor in relation to the industrial output. Technological change is measured as the weighted average of the change in factor prices, holding inputs constant.

19. Patents They have also been used to analyze the diffusion of technology across firms or industries or countries.

20. Rate of improvement of technology A figure of merit for each functional capability of a technology is to be identified. S-shaped growth curves are formulated to form a system of curves depicting advancement of technologies.

21. Rate of Substitution of Technology It is determined on the basis of relative changes in the market shares of two technologies or two sets of technologies. Cumulative pattern of gain in market share by a technology exhibits S-shaped growth.

22. Rate of Diffusion of Technology It represents the cumulative number of adopters of a new product, material or process. This follows an S-shaped curve.

23. Use Of Technology Forecasts

24. In the National Context: • Developing technological competencies. • Planning for creation of sustainable comparative advantages in select technological thrust areas. • Planning for the well-being of citizens with the aid of technological innovations.

25. In the context of Business Firms: • Establishing technical parameters and performance standards for new products and processes. • Augmenting new product development efforts as well as improvement of existing products. • Enabling better timing for new technology introduction and facilitate ‘take-to-market’ strategy formulation. • Aiding prioritization of research programs and identification of techno- scientific skills required for the same. • Identifying major opportunities and challenges in technological environment and offering guidance for technological planning.

26. • One of the main aspects of Technology Forecasting is its communication aspect. • Technology Forecasting (TF) initiates and fosters the communication between various communities such as: • Science and science (inter-disciplinary fields) • Science and Technology • Industry and politics • Technology and public administration • Technology and the general public.

27. Technology forecasts can be a short, medium or a long-term exercise. Short term forecasts are of usually a year or less, might typically deal with a single technology. Medium-term forecasts might cover a 2-10 year period. Long-term forecasts cover 10-20 years - a time horizon long enough for totally new technologies to emerge.

28. The most appropriate choice of forecasting method depends on: • What is being attempted to forecast • Rate of technological and market change • Availability and accuracy of information • The planning horizon • The resources available for forecasting.

29. Classification Of Technology Forecasting Methods The technology forecasting methods can be classified as exploratory and normative forecasting methods. Exploratory technology forecasting starts from today’s assured basis of knowledge and is oriented towards the future. Normative technology forecasting first assesses future goals, needs, desires, mission, etc., and works backwards to the present.

31. Delphi Method The Delphi method, which is subjective in nature, is arguably the most popular forecasting tool in vogue. Though statistical or model-based forecasting techniques are preferred over expert opinion techniques, there are two scenarios where subjective (or intuitive) methods are found to be relevant. • When there is no precedent - mostly in the case of new technology forecasting where expert opinion is the only possible source of forecasting or in situations where the impact of factors which were previously considered to be relevant have lost their strength. • Ethical evaluation is required – instances where ethical issues are more important than technical and economical issues.

32. The Delphi process involves the following steps: • Identify the subject in which the Delphi survey is to be conducted. • Recruit a group of experienced people who can prepare the questionnaire for forecasting the technological developments. • During the first round the questionnaire is then distributed among experts to address all possible aspects of the issues. These participants are asked to forecast events or predict trends regarding the issue. The responses are collected and all opinions including the extreme ones are taken into cognizance. • In the second round, results of the first round are sent back to the participants and it contains a consolidated list of all the responses. The participants are then asked to forecast the possible occurrences enlisted in each of the responses. • In the third round, all the responses are sent back to the participants. This time, along with the inclusion of statistical details, they are also asked to reevaluate their responses. After the end of the third round, the moderator processes the response by combining it with similar responses, summarizing lengthy ones, etc.

33. • The questionnaire for the fourth round contains the responses, the statistical information and the summary of points for modifying the forecasts, if any. Here the participants are required to provide reasons for any change in a given forecast value. • At the end of the fourth round, the moderator collects and summarizes the results and comes out with forecasts, the degree of disagreement and a summary of critical issues for each forecast. • The Delphi method is mostly used in the following contexts: • To determine critical factors that might impact the development of technology. • To forecast statistical estimates on the progress of a particular technology over a specified duration. • When forecasting cannot be made using other methods. • To evaluate the chance of a particular event occurring under given conditions.

34. Trend Extrapolation This method uses historical data rate to determine the rate of progress of technology in the past and extends it into the future. This type of forecasting implies that the factors which affected the past trends would continue to impact in the same known manner. There are two types of extrapolation based on the rate of progress of past behavior – linear and exponential methods.

35. Linear Extrapolation is used where a linear growth function is predicted. The trend is explained using the linear equation: yi = A xi + B yiis the value of the dependant variable in the ith time period xi is the value of the independent variable in the ith time period A and B are estimated by the method of sum of squares and minimizing them from the projected extrapolation.

36. The second method of trend extrapolation is the exponential method. A exponential growth curve could be assumed to be as follows: Yi = A BXi Yi is the value of the variable to be estimated Xi is the impact variable A, B are constants to be estimated.

37. Technology Monitoring Major steps involved in technology monitoring are: • Scanning • Filtering • Analysis and Development of forecast

38. Scanning The idea behind scanning is to collect as much information that is available on the particular field of technology. The information could cover the following aspects: • Research plans and developments • Environment of the technology • Support of various governments for the technology • Human skills and capabilities • Social and ethical issues • Benefits of the technology

39. Filtering In most cases, not all the information captured on the technology would be relevant for a particular forecast. Hence, based on the forecast required, the necessary information is identified through filtering of pertinent data.

40. Analysis and Development This methodology is relevant in situations such as developing Research and Development (R&D) plan; and identifying new sources of technology or emerging technologies

41. Growth Curves The evolution of technology as function of time has been found to follow patterns similar to the growth curves of biological systems. The biological s-curve is used to represent technology evolution with technology adoption on the y axis and time on the y axis. There are basically two types of s-curve formulations, which can be adopted based on the requirements of the forecaster.

42. Pearl - Reed Curve The Pearl-Reed curve is symmetric about the inflection point (at y = L/2) and plots a straight line on a semi log graph. The pearl curve is used to track individual technologies. But the overall growth of technologies is tracked by integrating the s-curves of all the individual curves. y = L / (1 +a * e-bt) y Forecast variable L Upper limit of y a Location coefficient B Shape coefficient

43. Gompertz curve The Gompertz curve is not symmetric about the inflection point and does not plot a straight line on a semi log graph. But the log of L/y does plot a straight line on a semi log graph. These curves are used to represent technologies where the growth in the initial stage is faster than in the Pearl curve. Y = L*(e-bt)^-kt y Forecast variable L Upper limit of y b Location coefficient k Shape coefficient

44. Relevance Trees It is an organized ‘normative’ approach starting with a particular objective and used for forecasting as well as planning. The basic structure looks like an organizational chart and presents information in a hierarchical structure. The principle behind using the relevance tree is to evaluate systematically all the related technologies that would lead to the success of the intended objective. From the forecasting perspective, the branches represent alternatives that are traced to a number of points, which represent deficiencies in the existing technology. Thus, the relevance tree provides a framework for identifying the deficiencies that need to be overcome. It is usually relevant in situations where distinct levels of complexity can be identified and the same can be simplified by further breaking them down.

46. Morphological Analysis It is a normative technique developed by Fritz Zwicky which provides a framework for exploring all possible solutions to a particular problem. The morphological analysis involves the systematic study of the current and future scenarios of a particular problem. Of all the techniques available for forecasting new products or processes, morphology is one of the most systematic. The technique relies on a matrix, usually called a morphological box.

47. Figure 13 is an example that uses a morphological box to examine the possible development of clocks. The vertical axis, lettered A, B. C. etc., defines the stages of parameters or the technology under consideration. The horizontal axis, numbered 1, 2, 3, etc., defines alternate methods to achieve the stages or parameters. The analysis is usually initiated by starting with a well-known or existing solution (Al-B1-Cl-D1-El-FI), and changing one element at a time. Alternate methods (e.g., A2-B2-Cl-D1-El-F1) are analyzed to find potential improvements in current technology. The solutions can be examined for efficiency, and estimates then made of the time when the alternative technologies might be available.

48. Mission Flow Diagrams Mission Flow Diagrams have been originally conceived by Harold Linstone as a means of analyzing military missions. The analyst needs to identify significant steps on each route and also determine the challenges/costs associated with each route. This involves mapping all the alternative routes or sequences by which a given task can be accomplished. The performance requirements can then be derived for each associated technology and the same can be used as normative forecasts.