A wide range of techniques are available for trying to understand the likely dynamics of new markets, running from simple extrapolation of current trends through to complex techniques for handling discontinuous change, such as Delphi panels and scenario writing (Thomas, 1993).
Market forecasting needs to move beyond sales-related information to include other features which will influence the potential market for example, demographic, technological, political and environmental issues. For example, the present concern for environmentally-friendly green products is likely to increase and will be shaped by a variety of these factors.
The Delphi technique is an approach to trying to build up a picture of how markets (or other trends) might develop. It involves polling the views of experts ('consulting the oracle') but recognises that it is often difficult to get experts together, and even when you do they may not always listen to each other! The technique involves:
Various techniques exist for exploring technological futures, ranging from simple extrapolation of performance parameters and rates of development to complex, non-linear techniques. Some, like Delphi panels and scenarios, are similar to market forecasting techniques, whilst others are more closely aligned to technological development models.
One of the most useful approaches is that of S-curve tracking. this is based on the theory that most technologies go through a life cycle, both in terms of their development and maturity and also in terms of the extent to which they are adopted. The potential of this method is that if you can identify when a particular technology is coming to the end of its life cycle, and a new S-curve is beginning to take off associated with its replacement, you are in a stronger position to exploit this. (Foster 1986)
The idea of technological competence is essentially about the deep knowledge base of the firm what it knows about and is good at, on which it can build its growth. So we can take a metaphor of a tree, with this competence as the deep roots from which the tree can grow. Viewed in this way we can see the trunk and branches as the processes and products which deliver growth from these roots as the picture below suggests.
To use this as a mechanism for auditing competence and for positioning new technological choices, we can follow these steps.
First identify the roots what is the core technological competence of the firm? What sorts of things does the firm know about/ is able to do which others cannot either because of patent or other protection or because it is difficult to do.
Then identify the ways in which this competence is currently deployed in particular processes and product streams.
Finally identify where there is currently something being offered in the marketplace. And look for spaces where new fruit could come out that is, new combinations of existing product and process knowledge.
The tool can also help identify where there is fit with at least the knowledge base (even if the trunk and branches have yet to be built) and where there is no fit. In cases like this it may be necessary to grow a new tree and nurse it through to maturity essentially a start-up approach to a new business development.
Once again the main purpose of this approach is to focus discussion amongst the management group responsible for thinking about technology strategy. More discussion of this approach can be found in Coombs et al. (Coombs, Saviotti et al. 1992)
One useful tool for looking at potential new technologies is to map them on to a simple portfolio model. Typically we can classify new technologies into groups such as:
We can map these on to a simple portfolio (see figure below) and ask ourselves the extent to which they support or affect our current and likely future business. More details on this approach can be found in Ford and in Coombs. (Coombs, Saviotti et al. 1992; Ford and Saren 1996)
Innovation is about creating something new and with it comes risk. Clearly incremental improvement of an existing idea will be a much safer bet than development of a radically new product, but in all cases there will be uncertainty and the chance of something going wrong. For this reason a key principle in successful innovation management is to try and manage the risk and the value of a process model is that it provides milestones along the journey where these risks can be assessed. Robert Cooper, one of the foremost writers on product innovation, introduced the concept of stage-gates at these milestones essentially points at which strategic assessment can be made and where progress passing through the gate only takes place when key technical and market questions can be answered (Cooper 1994) see the example below.
The issue is not one of implementing a standard set of stage gates as with models of the process, the number and position of these will vary with the kind of business but rather it is one of managing the inevitable uncertainty in the process. It moves design from being a gamble to a managed set of risks.
By separating out the key stages in innovation the management aspects of the process can be more easily understood. At the end of each stage, considerable activity will have occurred to ensure that the proposed design can be resourced within the business plan and implemented. Marketing, production, purchasing, corporate planning all need to feed into the process to assess its viability at each stage and be prepared to abort the project if it does not meet business objectives. Key stages in the process are preparing the design brief, which defines the purpose and objectives of the project, time-scales and costs; concept development; detailed design and evaluation of the final outcome. The emerging product should be evaluated against the objectives set out in the design brief, together with as assessment of the market performance of the design.
Source: Adapted from Bruce, Cooper, and Vazquez (1997)(Bruce and Cooper 1997)
Many organisations now make use of some kind of post-project review or evaluation. These represent powerful opportunities for learning but they also carry risks.
On the positive side, PPRs work well when there is a structured framework against which to examine the project, exploring the degree to which objectives were met, the things which went well and those which could be improved, the specific learning points raised and the ways in which they can be captured and codified into procedures which will move the organisation forward in terms of managing technology in future.
But such reviews depend on establishing a climate in which people can honestly and objectively explore issues which the project raises. For example, if things have gone badly the natural tendency is to cover up mistakes or try and pass the blame around. Meetings can often degenerate into critical sessions with little being captured or codified for use in future projects.
The other weakness of PPRs is that they are not so useful for the smaller scale, regular incremental change which make up a part of technology management. They are best suited to distinct projects for example developing a new product or service or implementing a new process.
A checklist for successful PPRs would include:
Related to benchmarking, auditing offers another structured way of reflecting on the process of technological change and how it has been/ is being managed. The analogy can be drawn to financial auditing where the health of the company and its various operations can be seen through auditing its books. The principle is simple; using what we know about successful and unsuccessful innovation and the conditions which bring it about, we can construct a checklist of questions to ask of the organisation. We can then score its performance against some model of best practice and identify where things could be improved. We can also use real examples and factual data to support the scores we allocate.
Innovation auditing has grown in popularity and several versions are being used as part of diagnostic and self-help toolkits for smaller enterprises. For example, in the UK the Department of Trade and Industry use a package called Innovation your move, whilst the European Union has been working with a variety of tools including the Innovation management Toolkit, originally developed by Barclays Bank and the National Economic Development Office in the UK. For more information on auditing for innovation see Chiesa et al. (Chiesa, Coughlan et al. 1996)
A powerful tool for picking up signals for innovation involves creating a simple profile of how your products and processes match up to what the market wants and what your best competitors can offer. The step-by-step process is well suited to discussion in groups and provides a powerful way of building a shared awareness of the strategic challenges facing the firm.
Step 1 involves reviewing and focusing the business. This recognises that for all but the smallest firm, there may be a number of different product/market combinations with widely differing strategic characteristics. Where one business might involve a relatively standard product and compete in a market based on price, another may involve producing to customer specifications, where competition is based on fast delivery, high quality and the ability to meet customer needs as closely as possible. Trying to configure a single factory to meet these different requirements is unlikely to be a successful approach, and an alternative model is to focus on particular families with common characteristics and concentrate development of parallel strategies for each of these.
For example, a firm making furniture might have three distinct product/market groups. The first is high volume furniture for general use which sells mainly on low price. The second is high quality, advanced design fashion furniture which sells at a higher price and can be customised to meet particular needs. And the third is for sale to a major retail store for resale under its own brand. Let us concentrate on the third of these.
Step 2 involves identifying the market requirements for performance within these groupings; the concepts of 'order qualifiers' and 'order-winning' criteria are helpful here. This involves defining those factors which have to be present simply to be able to enter the particular competition (such as, for example, minimum levels of price or standards of quality performance), and those factors which win orders (such as faster delivery, better levels of customisation, or high quality of service).
Then try and answer the question' what level of performance does the market expect on each of these?' Use a scoring scale from 1 to 5 where 1 is 'not important ' and 5 is 'very important'.
Essentially this stage involves building up a map of what the market requires and what competitors are achieving, as a means of setting clear targets towards which capability improvement must be directed.
For example, in the furniture case the retail store demands high quality, increasing variety, fast and reliable delivery and good prices. By contrast the mass market furniture sells mainly on price rather than design, and people will accept a trade-off on quality.
The next step involves answering (honestly) the question 'How well do we meet these demands?' and in our example it is clear that there is a big gap which must be closed.
The problem becomes even more acute if we add a third question ' How well does our best competitor perform?' and in our diagram it is clear they are better able to meet the needs of this particular customer than we are.
The challenge is simple either we close the gap or we might as well exit from this market. So there is a clear target for strategic change. Of course the level of detail involved in constructing a simple sketch like this is low, but the process can be used to focus on a more detailed analysis using better information for example, coming from a survey of customers or a benchmarking study of competitors. The purpose is the same to help focus the analysis of the market on key strategic drivers and to identify where and what has to change.
Step 3 is concerned with reviewing the internal capability to meet these performance targets. This can be a review of strengths and weaknesses of individual elements or functions in the product or process, or a wider look at the appropriateness of the process itself, in the light of prevailing technological and market conditions (business process re-design). It is concerned with answering the question 'how far does our product or process help or hinder the achievement of the external performance targets?'
In the above case it may well b that the firm needs to look at new design technology to help close that gap. Or it could look at new production techniques to reduce its lot size and enable it to work with higher variety, smaller volumes which would also speed up its deliveries. New equipment might be another option. But in each case these possible changes are now being considered in the context of a strategic framework, not as random inputs.
Step 4 involves exploring the range of innovations possible for effecting improvements in those areas identified in step 3. We might also want to stretch the model a little and ask questions like ' if we had a product that met or exceeded market needs, what would it look like?' or ' how much advantage would we get if we had a process which was faster/higher quality/ etc.?'
Step 5 reviews the potential choices and selects options based upon some set of priorities. These may be technological (for example, the urgency of need for replacement of worn-out equipment) or market related (for example, concentrating efforts on the most profitable or fastest growing products and markets at the expense of the more mature or declining combinations). The key here is to ensure that choices made are appropriate and do not represent the development of capability which does not match to market need. We will look at tools for helping strategic choice shortly.
The table above lists a wide range of possible mechanisms which firms can use to obtain knowledge resources to support their innovative activity. Think about a firm (your own or one with which you are familiar) and try and list which of these mechanisms are used. What do you see as the particular strengths and weaknesses of each and what might you do to compensate for some of the weak areas and build on the strengths? Put your answers in the following table.
Technology Forecasting is concerned with the investigation of new trends, radically new technologies, and new forces which could arise from the interplay of factors such as new public concerns, national policies and scientific discoveries. Many of these forces are beyond the control, influence and knowledge of individual companies.
Technology Foresight is a combination of creative thinking, expert views and alternative scenarios to make a contribution to strategic planning.
The future is almost by definition unknown, but in both forecasting and foresight activities the judgements or opinions of experts are used. Experts can be used singly, or in numbers. Different techniques can be applied to provide either a consensus view, a range of opinions, or maverick views. The kinds of exercises that can be carried out vary enormously in their complexity and structure and in the ease with which they can be managed.
The simple expedient of subscribing to a technical journal, or belonging to a network or collaborative R&D project, or finding out what research is being done by a relevant research organisation, can all be the first stage towards setting up a more structured approach.
When planning to start either forecasting or foresighting it is useful to consider:
In order to assess if a more systematic approach will be useful the following factors can be considered:
The magnitude and direction of technological progress in general is driven by financial investment and by market forces and needs; these must also be watched and monitored as part of any forecasting activity.
Decisions must be made about who should manage the forecasting process. It is not a task for a junior member of staff. It may need a multidisciplinary team or a single individual with adequate authority to co-ordinate across several departments. In all cases the exercise should first seek to use the knowledge and expertise of individuals within the company. Their specific knowledge of company activities and processes will be useful; much additional information can also be gleaned from their contacts and networks and from their appreciation of the general business environment.
The process has two primary activities: information gathering and analysis. The value of the overall process to each company depends on how the two main activities are carried out, how the techniques are customised, and the extent to which the process is followed through to recommendations and actions. They are often applied in iterative or parallel processes. It is not necessary to complete the whole process to appreciate the potential benefits so the process reinforces itself and encourages further iterations.
The major issues to be addressed are:
Practical decisions arising from consideration of these issues include:
The major issues to be addressed are:
Decisions following from considerations of these issues could result in a greater understanding of the potential contribution and judgement of different experts, within and without the company; more tightly formulated objectives; and a greater understanding of the value of forecasting in general.
Foresight activity seeks the subjective or intuitive opinions of a number of people with varying degrees of expertise. Opinions need to be collected without bias or misinterpretation. Using different techniques, some more structured than others, experts are asked to project their present knowledge towards how events and trends might develop in the future. They also need to consider what alternatives might be possible within the projected time frame. When setting up a foresight programme it is important to consider:
The formal forecasting techniques are standard components that are described in many textbooks on forecasting techniques (see specific techniques). Specific techniques for forecasting fall into two main categories, exploratory and normative. Information about each technique is available in various references.
Examples of relevant exploratory techniques are:
all of which rely on a large amount of statistical data, which may or may not be available freely.
Examples of relevant normative techniques are:
Information needed for these techniques is likely to be more firm-specific than that needed for exploratory techniques. Technology-watch in particular needs a proactive role to help the organisation identify and establish links with the most useful sources of information and opinion; typically these will be at the forefront of innovative activity.
The methods and systems used in foresight programmes are drawn from the forecasting field, particularly technology forecasting (see above).
Intuitive thinking is used more in technology foresight than in technology forecasting and is used in a comprehensive and structured form. All intuitive thinking methods are relevant to foresight activities, but only a few of the exploratory and normative methods used in forecasting are applicable to foresight. Which exploratory or normative method to use, under different circumstances, will depend on the requirements of each specific study.
The use of 'vision' is a form of intuitive thinking. When companies formulate a business strategy the vision of key individuals can play an important part. The value of this kind of input is increasingly acknowledged.
It is unlikely that any single method on its own will meet the needs of a foresight programme.
Other methods and techniques that can be used for foresighting include:
Both of these classes of methods provide some elements of semi-quantitative or judgmental analysis.
Patent analysis can be regarded as a specific foresight technique if the implications of the analysis are followed through.
Intuitive thinking is used in technology foresight in a comprehensive and structured form. All intuitive thinking methods are relevant to foresight activities, but only a few of the exploratory and normative methods are applicable. Which exploratory or normative method to use, under different circumstances, will depend on the requirements of each specific study.
Once an objective has been defined, a relevance tree technique can be used to investigate the relevance and feasibility of different ways of achieving it. It provides a means of exploring all the contributing technologies and approaches in a systematic way and highlights the alternative routes and choices that are available, and their consequences. If there is a critical gap which cannot be bridged with existing technology, it could signal an opportunity for a major technological innovation. Each route can then be assessed on criteria such as development cost, probability of success and lead time, and a decision taken relevant to company policy at that time. Expert opinion has to be employed to quantify the consequences and relevance of many of the steps, and there is no 'best' approach, because criteria will be company specific. A methodology using 'relevance numbers', which assigns to each path a proportional relevance with respect to other alternatives at the same level, is a useful tool for reaching a consensus, and for quantitatively comparing relative importance.
The Delphi technique is used where a consensus of expert opinion is required on the timing, probability and identification of future technological goals or consumer needs and the factors likely to affect their achievement. It is best used in making long-term forecasts and revealing how new technologies and other factors could trigger discontinuities in technological trajectories. The choice of experts and the identification of their level and area of expertise are important; the structuring of the questions is even more important. Experts in non-technological fields can be included to ensure that trends in economic, social and environmental fields are not overlooked.
The exercise usually consists of an iterative process of questionnaire and feedback among the respondents; this process finally yields a Delphi forecast of the range of experts' opinions on the probabilities of certain events occurring by a quoted time. The method seeks to nullify the disadvantage of face-to-face meetings at which there could be deference to authority or reputation, a reluctance to admit error, a desire to conform, or differences in persuasive ability. All of these could lead to an inaccurate consensus of opinion. The quality of the forecast is highly dependent on the expertise and calibre of the experts; how the experts are selected and how many should be consulted are important questions to be answered. If international experts are used, the exercise can take a considerable length of time, or the number of iterations may have to be curtailed. Although seeking a consensus may be important, adequate attention should be paid to views that differ radically 'from the norm' there may be important underlying reasons to justify such maverick views. With sufficient design, understanding and resources, most of the shortcomings of the Delphi technique can be overcome and it is a popular technique, particularly for national foresight programmes.
Technology cannot be considered in isolation from environmental, social, economic and political factors and all these factors can affect a company's performance and outlook. The quality of decision-making in strategic planning can be improved by information on these factors and by the knowledge and experience learned from obtaining such information.
Forecasting and foresight extend and expand the benefits of near-term market intelligence and simultaneously stimulate learning and improvement practices.
Forecasting and foresight studies try to shed light upon the nature, magnitude, probability and timing of relevant scientific and technological developments. These can be opportunities or threats and might have a potential impact either on a single enterprise or on several or many enterprises collectively. They might have an impact on supply-chains, industry sectors or consumer markets.
It is sometimes important that national governments and international organisations, such as health and environmental agencies, should set up forecasting and foresight activities. These activities can complement the formal or informal planning, marketing or forecasting and foresight activities set up by business associations and/or individual companies. A co-incidental benefit of national or international studies that are conducted in a participative way is that they can facilitate networking between companies.
Much of the value of engaging in foresight activities at a company level lies in working through the processes themselves rather than just reading the results and formal reports arising from the exercise.
Foresight information can give greater legitimacy to vision statements. A common reason for a company to change its Chief Executive Officer is to inject a new vision into the organisation. Foresighting exercises can provide an alternative way to inject new vision; they are less dependent on the talent or inspiration of a few key individuals. A wide representation of employees can be involved in foresighting, or can learn about its impact and results; this has direct benefits since the vision is already communicated and better understood across the organisation. There are also indirect benefits in terms of empowerment, motivation and learning.
Forecasting must be a continuing activity if it is to bring maximum value and utility to a company. Systematic and longer time-span data will give an improved basis for conducting forecasts, and much can be learnt by comparing previous forecasts with what has actually happened in the intervening period. Forecasting need not be carried out continuously or frequently but it should be repeated at appropriate intervals.
Foresight can be an occasional activity but ideally should be continuous and integrated into the operating philosophy and culture of the company.
If forecasting exercises are not clearly understood and structured they can consume considerable resources of effort and expense.
Before beginning any forecasting exercise it is important to review the need for a forward look, and then match this to the resources available. The quality and usefulness of results are very dependent on the quality of information obtained and the expertise with which it is analysed and used. Deploying too many resources in futures studies can be counter-productive.
The results of the first attempts at forecasting or foresighting may be disappointing. For a variety of reasons there may be a lack of conviction in the early stages of establishing the process. For example: information may not be sufficiently comprehensive or relevant; new sources of data may have to be identified; new contacts or networks may have to be established; the relevance and value of different techniques may have to be reviewed. However, the process should not be abandoned too hastily. Further work will lead to better results. The best way to learn the skills and to evaluate the most useful and relevant sources, inputs and methods for each company, is to actually do it.
A vision or mission statement or defined core competence can narrow the focus of futures studies, but care needs to be taken to prevent the focus becoming too narrow. The value of any study would be reduced if mindsets became too narrow or closed; companies would under such circumstances fail to recognise the potential relevance of certain trends and developments.
In general futures studies are much more advanced in Japan than in Europe or the USA. Most reported cases of industrial forecasting have been limited to high profile examples by large companies with considerable resources of time, expertise and computer power; such studies have been especially prevalent in the USA and Japan.
Studies in particular technology areas are available via government publications or specialist consultancies and publishers, such as Predicast.
In order to find data it is desirable first to identify experts, such as individual managers and academics and research and trade associations, in technologies and markets relative to the specific business area or technology under investigation. These experts might not be experts in technology forecasting but be very knowledgeable about the industry and/or its science and technology. Finding such experts is a networking activity that can proceed over years of 'doing business', or can be set up as a project for a specific purpose such as an innovation feasibility study or a merger or acquisition.
Foresight studies have been carried out at national level in Europe in France, Germany, Ireland, The Netherlands, Spain and the UK, and by industrial sector in a number of other countries.
A practical guide is:
Twiss, B C (1992): Forecasting for Technologists and Engineers: a practical guide for better decisions. London, UK: Peter Peregrinus Ltd, on behalf of the Institution of Electrical Engineers.
Another useful text is:
Martino, J P (1993): Technological Forecasting for Decision Making. New York: McGraw-Hill.
'New' electronic information resources such as the internet and CD-ROM databases can make access to relevant information MUCH easier than just a few years ago. They facilitate 'data mining' and 'knowledge engineering' and academic centres and consultancy practices will structure and exploit available data using specialist software. Bibliometric techniques applied to patent data and research literature can be expected to become more sophisticated. The Technology Policy & Assessment Center at the Georgia Institute of Technology provides information about a centre that specialises in developing these techniques; it refers to 'technology opportunity analysis' and 'innovation forecasting'. The centre uses proprietary software to facilitate structured searches in large, publicly accessible databases such as The Engineering Index, INSPEC, and U.S. Patents. These databases are generally useful to introduce the technology forecast and foresight techniques to a company and can be browsed periodically for information in designated technology and business areas as well as be used in ad hoc basis before embarking on any innovation project.