TECHNOLOGY STRATEGY FOR ENTERPRISE

Organising technology at the enterprise level is part of corporate planning function and is a continuous process. This can be divided into the following three streams :

  • Replacement of obsolete technologies with newer ones; and continuous modernisation of existing ‘technologies for improving productivity and competitiveness.
  • Development and introduction of new products with a view to Diversify.
  • Setting up of new units.

technology strategy for enterpriese1While having certain common components, the above three streams have certain operational differences and, therefore, need to be dealt with separately. However, the first step to technology planning for any of the streams is the defining of the technology status and the forecasting of technology needs, keeping in view the technology trends (domestic and global) and to the changing market in order to better satisfy the consumer expectations. While defining strategy, the time frame of technology cycle and its impact needs the maximum attention. Further, technology should be identified not only in term of machines but also products and processes to achieve the desired end product and level of productivity. This can be clarified by comparing core industries like Cement and Steel with fast track Electronics industry. While in the first case changes in the machines and processes take place without consumer getting the feel of it, in case of electronics and consumer products, the product range changes have an impact on consumer because he gets involved in it.

Further, a company engaged in the manufacture of consumer electronic products has very little time at its disposal to bridge the gap and keep pace with changes, but a company making cement or steel could go in a systematic manner to improve its state of technology and simultaneously meet the requirements of employment policies and marketing distribution system in the country in order to satisfy the consumer needs effectively.

The questions of technological obsolescence, time cycle and scale of operations are more relevant today than they were ever before. It is because of the increased pace of technological developments, emerging intense competition and stepping in of electronics in almost all industries- be it automobile, telecommunication, aviation, cement or mineral industries where use of micro-processor has now become more a necessity than fashion- that the concepts of scale or size of production have assumed increasing importance. India is passing through transition phase where we have technologies varying from bullock cart to A-320 aircraft. Appropriate technology for each industrial segment is thus the need of the hour and should be the objective of an enterprise. While we might like to introduce bio-engineering, super conductivity and jet engines in one go, the scale of operations and results achieved may or may not justify the same. Since technology strategy of the corporation has a long term impact, it’s appropriate choice in the context of the operating environment is very critical.

As indicated earlier, the technology strategy of an electronic consumer product company, for instance, cannot be the same as that of Steel, Cement or other core industry. And within the same sector, the technology strategy of a company will change depending upon whether its target is domestic, international or mixed market. For example, the technology strategy of a 100% Export Oriented Unit (EOU) company has to be the state-of-the art technology and also has to be backed up by the capability to quickly (or fastly) respond to the changes in accordance with the merging global situation. On the other hand, the strategy of a core industry company will be governed by domestic needs and Government’s socio-economic policies.

Technological changes at the enterprise level should take cognisance of the following:

a) Country’s changing economic scenario

b) Changing cultural and living standards

c) Government policies including those with respect to import and export and their effect on cost.

d) Global changes taking place in the range of products affecting the economic scene and living standards

e) Intensity in competition

f) Economics and sociology of conservation (e.g. energy conservation, conservation of inputs like minerals etc.) and pollution control consciousness created as a result of Government policies and pressures.

Some of the typical products exemplifying the global or universal trends are the TV, Video, automotive and home appliances industries in which a sort of explosion in at Enterprise Level demand has taken place.

In these very industries, greater computerisation, control through remote instruments (i.e. remote control) and miniaturisation are the technological changes which are now taking place.

TECHNOLOGY GAPS AND ENTERPRISE NEEDS 

After the internal resources, customer needs; global technology and market trends have been evaluated, the next step is to precisely identify the gaps at the enterprise level. While quantitative methods can assist in the identification of emerging technologies and possible know-how gaps, an assessment based on the following can be of direct use for an existing set up (for new enterprises the more scientific methods may be necessary):

  • Feedback data on the performance of existing equipment and failure analysis report, comparing productivity, cost of production and quality vis-a-vis acceptable standards.
  • Feedback data on basic product parameters vis-a-vis other competitors and keeping watch on their plans and activities.
  • Technology scanning by product groups.
  • Interaction with customers, foreign companies, consultancy organisations, institutions, etc.
  • Mapping the international technological status through tendering, obtaining quotations, engaging foreign consultants and evaluating the same in terms of domestic/export environment for the enterprise.
  • Clearly defining the technology life cycle of new products as a consequence of technological changes by means of cost benefit analysis and with reference to time frame for implementation.
  • Energy conservation and pollution control policies and strategies.

The management of technology at the enterprise level requires that the technology management group should receive necessary inputs for formulation of possible technology options from the customers, business groups and other corporate agencies. Based on these inputs the Technology Management Group should identify gaps in technology and formulate possible new technology alternatives. Thus the specifications of the required new technology get firmed up as a first step. The plan of action to implement the strategy may include:

a) Resource analysis of the company in terms of availability of technological expertise, finances, skills and equipment.

b) Analysis of Customer (both current as also emerging) needs and the time frame of validity.

c) Analyse the global data regarding the state of art of the technology and the markets. Based on these inputs, the Technology Group carries out an evaluation of available options and the cost benefit analysis to arrive at investment decision.

d) Identify the route: technology acquisition vs. in-house development.

EVALUATION OF TECHNOLOGY OPTIONS AND ROUTES 

Evaluation of technology should be based on the enterprise needs. The later are based on several factors, as we mentioned earlier, such as study of the market and existing and global state of the art of the technology. The right selection of a forecasting method in relation to technology need is important. Needless to say, the most important aspect of any evaluation is the corporate objectives of the enterprise. Although technology forecasting is considered to be a highly risky venture, yet due to the fact that technologies are based on science and innovations, it should not be difficult to determine as to when the current technology will reach its physical limits keeping in view the status of up-gradation process. Technology evaluation process on the other hand is becoming more complex because the finer analytical techniques used in evaluation generally require large amount of data on technology related factors e.g., technological obsolescence rates in the past, upgradation trends for key features, scale of operations, efficiency and reliability factors, rate of developments regarding use of inputs and materials, venture capital financing, volume to success ratio, energy and pollution considerations, etc. All such data may not be available at a single place or may not be easily accessible to the enterprise. Various sources have to be tapped to collect such data which, even if possible, requires substantial amount of time and cost. The identification of suitable sources for both data and its interpretation are important. The services of a professional agency may thus be felt rather necessary. Once the decision about the technology route has been arrived at, the various technological options offered have to be evaluated strictly in terms of the parameters of the enterprise strategy.

The technology evaluation has following three critical parameters.

a) Resource analysis by the Enterprise

b) Techno-commercial considerations of customer

c) Techno-commercial considerations of the enterprise

The technology proposed to be acquired from outside may be examined with respect to the following:

  • Adaptability and reliability of operation and maintenance of the proposed product/process/equipment in Indian conditions.
  • Suitability of indigenous raw materials and other local endowments for the technology.
  • Major technical features/parameters of the product/process such as performance/efficiency/productivity, inputs like power consumption, fuel consumption, etc.
  • Performance and reliability indicators of the products/process,
  • Phased manufacturing programme, if relevant (under the new industrial policy this requirement however is no longer Valid)
  • Govt. guidelines for import of technology
  • Upgradation guidelines and the costs involved
  • Participation by foreign collaborator
  • Competitiveness and reputation of the licensor’s products in the Indian and world markets together with market share and backup services
  • Willingness on the part of the collaborator to assist the licensee in attending the site problems, removing generic defects in the equipment and debugging other operational problems
  • Capability with regard to other product ranges, types, models, etc. not covered, in the original agreement,
  • Possibilities of engineering. and other back-up support within the country and potential for indigenisation as fast as possible,
  • Cost analysis for enterprise and its comparison with global and domestic competition,
  • Availability/development of skills Organising For Technology
  • Easy availability of spare parts/solution to maintenance problems in the country, at Enterprise level including standard bought-outs,
  • Long term (5 to 10 years) cost analysis and its relevance to the consumer,
  • Adaptability to the existing set up (techno-commercial and cultural),
  • Time frame for technology absorption and upgradation
  • Technology transfer costs such as lump sum payment, royalty, etc.
  • Detailed erection/commissioning instructions,
  • Supply of manuals (regarding operation, quality and maintenance),
  • Training details of personnel at all levels at the site and at licencer’s unit and costs for the same,
  • Supply of detailed specifications, information and drawings, wherever necessary,
  • Performance guarantee for the product when manufactured at the licencee’s works without any strings.

After evaluating technology proposals of different suppliers or parties on the basis of above, considerations, it is essential to clarify the scope of technology transfer to as great an extent as possible.

Development of Technology is quite expensive, both in terms of time and money. An individual enterprise generally may not be able to afford this luxury unless the size of the enterprise is large or on a global scale. Special inputs are required to transfer technology from laboratory to market. In case of limited resources, what an enterprise should do is to study the differences in raw materials, machines and processes and highlight the same to seller or developer of technology and work for their adaptation and optimisation for the enterprise.

Government of India has been changing its trade and industrial policies from time to time; the latest changes relate to the creation of market economy. With freedom allowed to foreign companies to own 51% equity, and even upto 100% in select sectors, and import of technical know-how, the procedural situation is considerably changed, and so have the technology strategies to change.

In view of the policy environment it may be almost impossible to meet the technology needs of an enterprise facing competition, more so in high-tech areas, through in-house R&D efforts alone because of limited resources and capabilities compared to most of the foreign companies in industrial countries. Therefore, a definite role has to be identified by a company for its in-house R&D. In the light of this, therefore, it has to be decided what appropriate technology package should be purchased taking into account market needs and resources. This is highly subjective as in different countries the economy levels are different. For faster growth the path of acquisition of technology is thus considered necessary by many enterprises. It is now more relevant than even before due to the new policy of the Government to permit outside investment which in turn would perhaps bring the latest technology also. Once a state of art technology is imported it is necessary to continue to upgrade and modify the same so as to avoid or minimise further imports and face international competition in select areas.

TECHNOLOGY TRANSFER AND ABSORPTION

The technology transfer plan and absorption, to a large extent, depend upon the mode of technology transfer which in turn depends upon the scope and specific needs of the enterprise. For example, technology transfer needs and mechanisms for setting up a new plant, and those for improving the productivity or introducing new products in the existing plant would be different. The normal modes of transfer are: Turnkey joint ventures, technical know-how licencing, one time purchase, vetting, modernisation through Technology Development Fund (TDF) schemes and purchase of prototypes and drawings.

Once the negotiations with seller/collaborator have been completed and taken on record, it is essential that the licencee should evolve a proper back up organisation to ensure smooth technology transfer for both design and manufacturing. The R&D set up should also be activated to support the technology transfer process and develop the know-why capabilities. A time bound project plan and implementation scheme after conclusion of the collaboration agreement as also a comprehensive technology transfer plan have to be prepared defining the responsibilities of the various divisions of the company. Coordinated by the Technology Management Group, the project plan could cover several aspects, e.g., receipt of technical documentation, training of licensee personnel at the collaborator’s works, establishment of any additional manufacturing facilities, production build up and achievement of indigenisation levels. A system for continuous monitoring of technology transfer plan at the product, divisional and corporate levels has to be developed depending upon the area/ scope of collaboration. The indigenisation scheme and training of engineers in identified areas at the collaborator’s works after familiarising them, with the documentation received from the collaborators has to be worked out so that the trainees could derive the maximum benefit from their stay at the collaborator’s works.

The involvement of R&D is necessary to carry out product improvement research so that the technology acquired is upscaled and improved upon after successful absorption. Cement industry has done exceedingly well in the absorption of technology imported from different sources. The following guidelines need to be followed for transfer and absorption of imported technology.

i) Continuous monitoring of technology transfer plan at the product, divisional and corporate levels.

ii) Training of engineers in identified areas at the collaborator’s works after familiarising them with the documentation received from the collaborator, so. that they could derive the maximum benefits from their stay at the collaborator’s works.

iii) Analysis of documentation, technical information etc. received from the collaborators by the R&D groups and preparation of specific developmental plans for import substitution, product improvement, cost reduction, etc. keeping in view the innovations taking place internationally.

iv) Entrusting the R&D group with the responsibility to carry out product improvement research so that the technology acquired is upscaled and improved upon further.

v) Associate the Technology Management Group from the initial stages of technology transfer plans including negotiations, training, discussions, etc. held with the foreign collaborator.

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