- Email: [email protected]
Technological forecasting in six major U.K. companies
Tee hnological Forecasting Six Major U.K. Companies
In
D. L. Currill fy;;on,
Jordan
& Harrison
Ltd.,
This study, although based upon a small sample, generally supports the recent evidence in the U.K. and the United States concerning the state of current practice in technological forecasting. The weight of this evidence points to the conclusion that the formal techniques of TF are not widely practiced, although the need for TF is generally accepted, and that those companies which are using these techniques do so with some reservation. Some companies in the U.K., however, do have considerable experience in technological forecasting, diffusion of the knowledge of which would be of benefit to the bulk of British industry.
R knowledge
ECOGNIZING
THE
INADEQUACY
OF
concerning the use to which companies are putting technological forecasting within their planning systems in the U.K. this study was undertaken,* to identify the role of technological forecasting (TF) in the planning of technological development. Secondary objectives were to isolate the conditions that led to the adoption of explicit TF and to assemble a picture of the stages passed through in the development of the use of TF, to gather opinions on the formal TF techniques and to draw upon the experience of the companies in relation to the pitfalls and benefits in utilizing TF for technological planning. It was felt that this could only be achieved by looking at TF practice in each case in relation to the environment of the company.
*Copies of the M.Sc. dissertation from the University of Bradford Centre.
m
are available Management
THE NATURE RESEARCH
OF THE
The author undertook a questionnaire survey early in 1970 to support research into the implications of technological forecasting for R & D. The questionnaire was addressed to the Research Directors of 100 U.K. companies which were believed to be in industries in which technological development might be expected to be a significant factor in determining the rate of growth. Of the 37 companies contributing to the survey, six of the companies which indicated that they were utilizing the formal techniques of technological forecasting assisted in a second study of their use of TF in the planning of technological development. The respondent for the six companies was more often R & D man-. ager, though he was occasionally an assistant to the Director or adviser on TF. With one exception these respondents were members of Central R & D departments. There may thus be a research bias in the replies given because of lack of detailed knowledge of the input of other functions, for example marketing, to the process of planning for technological progress. The material for these studies was gathered in a single interview lasting 2-5 hours in each company and subsequent telephone conversations and correspondence. The interview method employed was for the author to secure discussion of key points by directed questions prepared prior to the interview and the same for each company. Although the summaries below may inadequately reflect the full complexities of the technological planning undertaken by the companies, they give some insight into the ways in which the technological forecasts are employed within a planning system. The following case studies describe: l The technological environment of the company. l The process leading to the adoption
of technological forecasting. 0 The technological forecasting methods employed. 0 The technological planning system. 0 The role of technological forecasting in the technological planning system. A Glass
Company
This is a sizeable company whose activities are confined to the glass industry but in some products, because it supplies markets which can be served by other material bases, it is competing with the products of other industries. The principal envisaged risks are of a widespread vertical integration backwards by customers, the customers’ ability to reduce the glass content of their products, and of legislation in safety standards of some products or in improving the environment. There is minimum danger from the inventory activities of competitors in giass. In 1964 the company recognized the need for formal procedures for formulating long-term strategies and in that year a corporate planner was appointed from outside the company. The forecasting of expected changes in technology was based upon intuitive thinking in the following years until a new R & D Director, who insisted on a more formal and explicit approach totechnical planning, was appointed in 1968. TF is now integrated into the total planning system in this company. The Company’s objectives in using TF are : i. To assist in the change from a craft base to a technology base. ii. To obtain a totally effective corporate plan in which the technological planning is integrated with the financial planning. iii. To achieve effective R & D goal setting and programming. The company at present uses Delphi, morphological analysis, physical laws of systems studies and comparative models.
LONG
RANGE
PLANNING
The morphological analysis is used in planning rather than forecasting. The physical laws of systems studies are a practical approach making sense to the scientist who may be asked to undertake the forecast. Delphi. in particular, is used for both normative and extrapolative forecasting. Since the company believes that from a technological standpoint it can accomplish what it set out to do, there is no particular need to emphasize specific timing in forecasting. Forecasts are for IO-15 years ahead although the year 2000 is also used as a focal year. The technological forecasts are by specialists in a laboratory forecasting section, by means of sponsored studies of experts in other departments or by groups as. for example, with Delphi. The central R & D planning department at present employs one man full-time to co-ordinate technological forecasting and consults an American expert. It is estimated that the total annual effort invested in technological forecasting activity is probably 5-6 man years. The technological planning is directed by Board committees engaged in corporate planning. A Planning Coordinating Committee reviews corporate objectives and assumptions and defines group policy. Strategic Policy Committees consider new proposals of a strategic nature. A Technical Committee is responsible for the whole of the technical function of the company, including the direction of the R & D planning and the studies of individual technologies undertaken by working parties. Forecasts are made by R & D departments for long-range R & D planning by the Division and by the technology working parties. The Head of R & D Planning assists the Technical Directors of each division in the assembly of the divisional technical plan for inclusion in the divisional business plan and the company’s corporate plan. The planning activities and methodology of the working parties which study specific technological areas, and whose studies form part of the input to the technical plans, are controlled by the head of R & D planning. Figure 1 outlines the role that technological forecasts play in the technological planning system of this company. There has been no feedback yet on technological forecasting though a general planning review took place in 1967. It is considered within the company that TF function has been successful in revealing needs and so effecting changes in the R & D programme. A Consumer Goods Company The company is a large international one, considerably vertically integrated and
MARCH,
1912
Strategic (for
CoYl%Aees new technical
(2;i;i;s)
/,;A!=
Technological Forecasts
’ R&D Department (for R&D programming)
Figure 1. Technological
Divisions
Forecasts
predominantly supplying consumer markets. The basis of its growth has been its experience in the processing of oils and fats in the marketing of the resultant consumer products. The business risks faced by the company are of legislation affecting safety in manufacture or the products, of competition, particularly from impinging technologies, and of price controls. The technological knowledge that is required for some products is rising. Many of the company’s products and processes touch upon social problems. Technological risks spring particularly from the fact that the same market needs can be met by many different technologies. Much of the need for forecasting arises from the interaction of consumer tastes and technological progress. Consumer behaviour changes as the technology surrounding the consumer changes. Technological forecasting has been implicitly undertaken within the company at least since the establishment of a central research function in the 1950’s. During this period there were no formal exercises. At the beginning of the 1960’s, the central research unit, which had not long been set up, organized a large exercise in TF, using the scientists in the laboratories in working parties, to discover what technology could create. The TF methods employed were not formal but could be described as Delphi-like or scenariowriting. There has been no large exercise since this study. Because of the considerable autonomy given to research in the company the TF now undertaken is very
tech”‘c=l
I I
\i!echnoIog
as Inputs
.
y Working Parties (for studies of particular technologies)
in the Technological
Planning
Process.
much by groups within the laboratories and confined there to the product areas with which the iaboratories are associated. The studies in the 1960’s were largely ad hoc. The groups are now using more recognized TF techniques. As an assessment of its own abilities in this sphere it is felt within the company that perhaps it is much stronger in forecasting the changes in consumer markets which are affected by other technologies than in forecasting technological developments in themselves. The company’s origina reasons for the first major appraisal, which remain compelling today, were to suggest to the company the directions in which it might move and to identify for the company the direction in which it was of necessity being impelled by its large research investment. A subsidiary reason may have been a perceived need to demonstrate the capabiiities of the research division and thus to justify them. Now it is recognized that TF is not just used to identify the technological options open to the company. Such options are limited by the nature of what the company is and the types of expertise its people have. The company makes use of Delphi, relevance trees, morphological analysis, scenario writing and modeiiing. ‘Speculative’ product groups at each laboratory use Delphi to consider possible new areas of application of a technology away from the applications upon which the laboratory is now working. Matrix methods are employed in investigating technology
73
transfer. The morphological approach has been tried to identify alternatives but such attempts have not been successful because the company’s specialism is in satisfying consumer needs and these are difficult to explain. Scenario writing is regarded as useful to start off the analysis. Modelling of markets takes place to assess the marketing possibilities of technological deve!opments. In its use of the formal techniques the company has perceived the need for some modification. What starts from a basic technique is often altered to accomplish a practical end. The forecasts are typically for 10 years, which is considered to be the most useful time period. With Delphi the period may be unlimited. Studies have taken place of periods till 1990. The forecasters are the specialists in the laboratories, although their forecasts may be ordinated by special operations research groups within the External consultants are laboratories. employed who are experts in their fields but the company does not use consultants to do technological forecasting. The company does not have a formal system of centralized planning which integrates technological development into a corporate planning system. The essence of the company’s planning activities in relation to technological development is shown in Figure 2. The laboratories are responsible for the technological forecasting and research planning for all the product groups in the company. The Central Economics Department does predominantly economic forecasting, though it has made technological forecasts of an extrapolative nature and does use Delphi and relevance trees. It provides support for the product groups. The Customer Committee examines trends in consumer behaviour but these become inseparab!e from technological changes in
many spheres where each is reacting to the other. Ad hoc studies under the direction of a Main Board Director are made of particular technological areas. The central co-ordination in technological planning is achieved by having a representative from each product group located in Central Research, and he is a member of the research planning group for that product area. The company’s interest in TF arises from the impact of technological change upon consumer behaviour. It is this fact, plus the large size of the research investment, which defines the role of technological forecasting in the company’s planning of its own future development. Without such forecasting “there are dangers that research will lead the company up avenues which it cannot cope with in marketing terms”. A Chemical Company-Chemco
This is also a large international company, which has been given a fictitious name in this article. Its products are sold as intermediates but in a few instances reach consumer markets without further processing. It is quite vertically integrated in the organic chemicals side of its activities. The principal business risks spring from the fact that many of the markets that the company has itself successfully supplied in the past can now be adequately served by more companies of equivalent competence. The technological risk emanates from the risks of process obsolescence as a result of the technological progress of competitors. TF is defined by the company as forecasting which involves technology. Any long-term forecast, therefore, given the nature of Chemco, involves technology. Until about 1960 forecasts were made for 5 years ahead only. Thus for approximate-
Figure 2. The Principal Agencies of Technological Company.
Forecasting and Planning
B”:[d
Directors
Z~~&+r
Laboratories (product groups)
Central Economics
~___-___---Department
74
Customer Committee
_____ - _____ -___--1
I I I
in the
ly 10 years, the need for technological forecasting has been recognized by some executives in the company. There have not been any catalytic events leading to adoption but rather the gradual acceptance by top management of TF as proposals for long-term studies were persistently made in the early 1960’s in an attempt to achieve credibility. The struggle to obtain general acceptance lasted about 4 years. The company has now been actively using TF for 7 years or so, and the resources required for the studies have been easier to obtain since 1967. The company now undertakes technological forecasting: i. to force itself to take a “detached” look at its activities. ii. to define long-term company and research and development objectives. iii. to accomplish both of these on a world-wide basis. This company does not consider that the techniques used in themselves are important. Its long experience has indicated that the most important step in TF is to choose the right people to control the forecasting activity. Two methods of TF were distinguished. The methodological approach selects people to go through elaborate procedures to effect critical examinations. It may be an endless process in an illdefined area because of the number of questions that need to be asked, but it is the easier of the two methods to get management to believe the results are good. The second approach is one using a team of intuitive thinkers. This can obtain results quickly but it is difficult to get later acceptance. Chemco’s experience indicates that the best studies result from the second method. The favoured method within the company is therefore to choose a team, ideally of three people, with each member selected for the different nature of his knowledge. This group may have company or external advisers whose advice may be rejected. All three members of the team have to be convinced of the conclusions reached. Delphi is regarded as second best because of the extremely careful selection of Delphi participants required, where it is of importance not to mistake interest for knowledge. The utility of the wellknown methodological approaches has been carefully evaluated and the choice of a particular technique remains in the hands of the team members. The comment was made that “sophisticated methods are a gloss to give extra polish to results discovered by simpler methods. The method used is in itself an insufficient measure of forecast credibility. The question to be asked is “Is the result convincing?” For up to 5 years ahead extrapolative
LONG
RANGE
PLANNING
methods are used, but normative methods tend to be employed for ISyear forecasts. Likely technological developments in the remainder of this century have been examined. The technological forecasting is undertaken by the divisions and within the Planning Department of Central R & D where the teams may consist solely of company members or of mixed company and external participants. The forecasters are often divisional members who have been seconded for up to 3 years to the Planning Department. The forecasting has been employed to examine potential in certain technological areas as part of a programme to identifiy the broad technological areas of promise. It has been successful in identifying “markets and projects to keep out of”. A Chemical Company-Calchem
The company is fictitiously named Calchem to distinguish it from the chemical company in the last case study. For a small proportion of its activities this company extends backwards into extraction and forwards into consumer markets. It is a monopolist for part of its product range but at the same time certain elements of its business principally supply two customers. The apparent risks to the company are of competition in new areas, pricing and dumping, and in the possibility that customers will integrate backwards. Technological threats ensure from the pace of technological change and the specificity of the capital investment, though these features of the industry also act as a “barrier to entry”. The company has been employing the formal techniques of TF since about 1965. There was no momentous decision to do Its so, it was “a bloodless revolution”. objectives in using TF were and are: i. To look at what is likely to happen in the future and how this affects what research should be done. ii. To examine how customer requirements will change. It is the view in the company that “there is no such thing as technological forecasting in the sense of its being separate from sociological, economic and political forecasting”. The point was made that it is the delimiting of the areas of interest before undertaking the TF which is of prime importance and often the most difficult. The task is to spot the trends and then to examine their significance for technological development. Most of the principal techniques have been tried and often modified to suit the purpose in hand. The view is held that the formal techniques do not have the level of generality which is acclaimed for them. The techniques that have been used are
MARCH,
1972
the need for long-term demand forecasting for that customer, demand variability as a result of government action and its effect on productive capacity, and the size of capital investment decisions. The technological risks are associated with the expensiveness and specificity of the capital investment. In this industry the risk of a competitor making unforeseen technological progress or establishing a disadvantageous lead time is not considerable. Formerly implicit consideration was given to forecasting changes in technology within the Central R & D unit. In 1969 TF was first undertaken as an explicit function, This coincided with the establishment of a small corporate planning group at the same time. The realization of the need for formal studies had come to the fore over a number of years. The principal TF method used is described by the company as “modified Delphi”. The Head of Project Assessment requests project approaches and forecasts from R & D members and circulates these in an iterative feedback process. Morphological analysis has also been used, particularly for economic as well as technical considerations, but certain of the possibilities are ruled out from the beginning. It was further pointed out that the approach can change the analysis. What is forecast is the technical capability as modified by economic considerations. The two are seen to be essentially inseparable for project appraisal purposes. Forecasts are generally for up to 10 years ahead, particularly for areas in which production is involved. For basic research areas the technological forecasts go well beyond this. The forecasters are the scientists and engineers employed in the company, in a process of project appraisal which is co-ordinated by the Head of Project Assessment. Technical experts outside the company may be consulted. As a result of the decentralized nature of the company the planning of technological innovation is not a formally closely
trend extrapolation, brainstorming, Delphi and pseudo-morphological analysis. The brainstorming project was a failure in that it gave impossible co-ordinates in which to work. In a Delphi study everyone within the company appeared to have assimilated the company view. More than one technique might be used on the same problem in order to test the analysis; the analogy advanced was of the use of triangulation in surveying. The forecasts, which are made principally by chemical engineers, are for up to 20 years ahead, but most often for R & D and market planning for IO years only. Technological forecasts are made in the divisions, and there is a full time technological forecaster/co-ordinator in Central R & D. TF may also be undertaken in the new project teams of Central R & D and in Market Research. External forecasting consultants are not used. Calchem’s planning of technological development and the integration of such planning in the company’s total business plans is shown schematically in Figure 3. The role of Central R & D is to exert an influence on the forecasting studies and to try to persuade the divisions to undertake such studies where it thinks they may be appropriate. The co-ordination of technological planning in this way takes place in the Central R & D Department. TF is not the only preparatory step to this planning but it remains a key part since so much money is expended on research. Calchem’s attitude to the formal techniques of TF has changed and expectations have been At the beginning TF was reduced. originally considered as something of a panacea. Now it is regarded as part of the essential technical input to formal planning, but that it is not, in itself, the emollient it was once thought to be. An Electrical Engineering Company
The company is a supplier of intermediate products at home and overseas. The business risks are attributable to competition, a monopsonistic customer, Figure
3. The
Role of Technical Plans in the Company
Central Planning Department
Divisions
Central
Planning.
R &D
Technical Total Company Business Plan
/Plans -
Business Plans
-
-Other Functional Plans
,’ Other Technical Elements
Total Company Technical Plan
75
integrated exercise. The R & D Unit carries out the long-term studies from basic research and is thus responsible for technological planning. TF is not considered to be an irreplaceable element in the planning of technological development in this company. The methodology of TF is certainly not a key feature in project appraisal, nor part of a systematic appraisal of the technological opportunities open to the company. The forecasting of technological progress has, however, become an explicit, although not formal, consideration in project appraisal. It is one element that assists in the evaluation of basic research along with other financial, technical and psychological criteria. A Semiconductor Company This is a division of an electrical engineering company. The two principal business problems encountered by the division are attributable to the competition and low net profit margins. The company’s strategy in this situation is to operate in the interstices of the market, picking fields where it is possible to avoid direct competition with the bigger companies. The technological risks of a catastrophe from product mistakes are negligible. It is easy to license but not profitable because of the need to pay royalties. The company is required to anticipate the technological capability that would be demanded by customers. The employment of technological forecasts as part of the input to project and process analysis has always been an implicit task within this company. TF is essentially an informal process that is part of a more formal planning procedure. There has been to date no catalytic event that has resulted in more explicit attention being paid to the forecasting problem but a trend that has brought the problem of project selection to the fore. The company is of the opinion that many of the TF techniques available take too much time for the amount and type of forecasting that is required. Trend extrapolation is employed which is conditioned by opinion as to technology or economics. Detailed TF is not undertaken because such forecasting requires belief in the data which is available. Short-term technological forecasting, i.e. up to 2 years ahead. takes place relating to the improvements in new products. Longer term TF is undertaken preparatory to new product research. For example, the decision to undertake specific new product research in semiconductor materials is based upon a technological forecast of the material’s capabilities and then an examination of the market’s response to these capabilities.
76
The technological forecasters are members of the R & D department engaged in the research activity. There is no formal system for planning technological development. Being a division of a larger company the technological planning relates to the well defined product area of the division. Thus any need that exists for TF within the company is &fined largely to development work and some basic research. The principal need arises in the selection of R & D projects. To accomplish this effectively technological forecasting is required but it is not worthwhile to employ any of the formal techniques. The company perceives that if it grew bigger it might require a more formal forecasting system because of the greater risks involved. Otherwise it is satisfied with its present ability to forecast technological change. A COMPARATIVE ANALYSIS from the case studies briefly summarized here that there is some uncertainty within companies as to what amounts to technological forecasting and to whether or not technological forecasting can be considered as separate from longterm forecasting.
It is evident
The Technological Planning System in the study have not 1. The companies adequately appraised their use of TF in technological planning. ii. There is an absence of a systematic approach to technological planning in most of these companies. Not all of them are employing TF as part of a strategic analysis of the technological areas that are, and will be, of interest to them. Rather it is being used in an ad hoc manner. .. forecasting 111. Most of the technological is undertaken within R & D departments. iv. Three criticisms can be advanced of the use made of TF in the planning of technological development in that: (a) lnadequate use is made of objective setting. (b) The uncertainties associated with the technological forecasts are represented in an imperfect manner. (c) Little attention has been paid to an assessment of the effectiveness of technological forecasting. The Technological Forecasting Function i. The process that leads to the adoption of explicit technological forecasting often involves a change in top management and the establishment of corporate planning. It may be the result of
ii.
111.
iv.
V.
vi.
vii.
pressure from below. The formal techniques. and the literature describing them, are criticized for not being generally applicable as it believed and for the considerable human and data input required. The use of the techniques in itself is not considered to be the important part of the forecasting. The most popular techniques are Delphi. trend extrapolation and morphological analysis. There is a failure to integrate the TF techniques utilized within a total forecasting system. The technological forecasters are predominantly technical experts. Professionals in TF are used as co-ordinators. There are mixed attitudes to the use of external forecasting input. Technological forecasts are made for both products and processes, for usually IO-15 years. though for longer periods for focal interests.
The Role of Technological Forecasting in Technological Planning encountered in practice 1. The problems in TF relate to barriers of acceptance and credibility, bias of forecasters. the demands made on time and effort and the difficulties for other departments, like Marketing, in keeping pace with the sophistication of technological planning. of TF spring from ii. The benefits changed policies and directions and the involvement in technological planning of executives, which is useful experience for top management. TF is further one of the pressures for improved marketing. future use of TF within the 111. The companies is directed towards reviewing utilization of techniques and effecting a greater orientation of technological planning to end consumer needs. CONCLUSION This study, although based upon a small sample, generally supports the recent evidence in the *U.K. and the United States concerning the state of current practice in technological forecasting. The weight of this evidence points to the conclusion that the formal techniques of TF are not widely practiced, although the need for TF is generally accepted, and that those companies which are using these techniques do so with some reservation. Some companies in the U.K., however, do have considerable experience in technological forecasting, diffusion of the knowl-
LONG
RANGE
PLANNING
edge of which would be of benefit bulk of British industry. E
to the
READING LIST D. L. Currill, The role of technological fofecasting in the integrative planning of technological development, M.Sc. Dissertation, Management Centre, University of Bradford (1970).
MARCH,
1972
D. L. Currill, The implications of technological forecasting for research and development, Research Report, Management Centre, University of Bradford (June 1970). P. D. Wilmot, A review of technological forecasting in some British companies. A study of the European Technological Forecasting Association.
S. Skoumal, Review of present state of TF art in British Industry. A study of the European Technological forecasting Association. J. P. Dory and R. J. Lord, Does TF really work? Harvard Business Review (November-December 1970).
77
In
D. L. Currill fy;;on,
Jordan
& Harrison
Ltd.,
This study, although based upon a small sample, generally supports the recent evidence in the U.K. and the United States concerning the state of current practice in technological forecasting. The weight of this evidence points to the conclusion that the formal techniques of TF are not widely practiced, although the need for TF is generally accepted, and that those companies which are using these techniques do so with some reservation. Some companies in the U.K., however, do have considerable experience in technological forecasting, diffusion of the knowledge of which would be of benefit to the bulk of British industry.
R knowledge
ECOGNIZING
THE
INADEQUACY
OF
concerning the use to which companies are putting technological forecasting within their planning systems in the U.K. this study was undertaken,* to identify the role of technological forecasting (TF) in the planning of technological development. Secondary objectives were to isolate the conditions that led to the adoption of explicit TF and to assemble a picture of the stages passed through in the development of the use of TF, to gather opinions on the formal TF techniques and to draw upon the experience of the companies in relation to the pitfalls and benefits in utilizing TF for technological planning. It was felt that this could only be achieved by looking at TF practice in each case in relation to the environment of the company.
*Copies of the M.Sc. dissertation from the University of Bradford Centre.
m
are available Management
THE NATURE RESEARCH
OF THE
The author undertook a questionnaire survey early in 1970 to support research into the implications of technological forecasting for R & D. The questionnaire was addressed to the Research Directors of 100 U.K. companies which were believed to be in industries in which technological development might be expected to be a significant factor in determining the rate of growth. Of the 37 companies contributing to the survey, six of the companies which indicated that they were utilizing the formal techniques of technological forecasting assisted in a second study of their use of TF in the planning of technological development. The respondent for the six companies was more often R & D man-. ager, though he was occasionally an assistant to the Director or adviser on TF. With one exception these respondents were members of Central R & D departments. There may thus be a research bias in the replies given because of lack of detailed knowledge of the input of other functions, for example marketing, to the process of planning for technological progress. The material for these studies was gathered in a single interview lasting 2-5 hours in each company and subsequent telephone conversations and correspondence. The interview method employed was for the author to secure discussion of key points by directed questions prepared prior to the interview and the same for each company. Although the summaries below may inadequately reflect the full complexities of the technological planning undertaken by the companies, they give some insight into the ways in which the technological forecasts are employed within a planning system. The following case studies describe: l The technological environment of the company. l The process leading to the adoption
of technological forecasting. 0 The technological forecasting methods employed. 0 The technological planning system. 0 The role of technological forecasting in the technological planning system. A Glass
Company
This is a sizeable company whose activities are confined to the glass industry but in some products, because it supplies markets which can be served by other material bases, it is competing with the products of other industries. The principal envisaged risks are of a widespread vertical integration backwards by customers, the customers’ ability to reduce the glass content of their products, and of legislation in safety standards of some products or in improving the environment. There is minimum danger from the inventory activities of competitors in giass. In 1964 the company recognized the need for formal procedures for formulating long-term strategies and in that year a corporate planner was appointed from outside the company. The forecasting of expected changes in technology was based upon intuitive thinking in the following years until a new R & D Director, who insisted on a more formal and explicit approach totechnical planning, was appointed in 1968. TF is now integrated into the total planning system in this company. The Company’s objectives in using TF are : i. To assist in the change from a craft base to a technology base. ii. To obtain a totally effective corporate plan in which the technological planning is integrated with the financial planning. iii. To achieve effective R & D goal setting and programming. The company at present uses Delphi, morphological analysis, physical laws of systems studies and comparative models.
LONG
RANGE
PLANNING
The morphological analysis is used in planning rather than forecasting. The physical laws of systems studies are a practical approach making sense to the scientist who may be asked to undertake the forecast. Delphi. in particular, is used for both normative and extrapolative forecasting. Since the company believes that from a technological standpoint it can accomplish what it set out to do, there is no particular need to emphasize specific timing in forecasting. Forecasts are for IO-15 years ahead although the year 2000 is also used as a focal year. The technological forecasts are by specialists in a laboratory forecasting section, by means of sponsored studies of experts in other departments or by groups as. for example, with Delphi. The central R & D planning department at present employs one man full-time to co-ordinate technological forecasting and consults an American expert. It is estimated that the total annual effort invested in technological forecasting activity is probably 5-6 man years. The technological planning is directed by Board committees engaged in corporate planning. A Planning Coordinating Committee reviews corporate objectives and assumptions and defines group policy. Strategic Policy Committees consider new proposals of a strategic nature. A Technical Committee is responsible for the whole of the technical function of the company, including the direction of the R & D planning and the studies of individual technologies undertaken by working parties. Forecasts are made by R & D departments for long-range R & D planning by the Division and by the technology working parties. The Head of R & D Planning assists the Technical Directors of each division in the assembly of the divisional technical plan for inclusion in the divisional business plan and the company’s corporate plan. The planning activities and methodology of the working parties which study specific technological areas, and whose studies form part of the input to the technical plans, are controlled by the head of R & D planning. Figure 1 outlines the role that technological forecasts play in the technological planning system of this company. There has been no feedback yet on technological forecasting though a general planning review took place in 1967. It is considered within the company that TF function has been successful in revealing needs and so effecting changes in the R & D programme. A Consumer Goods Company The company is a large international one, considerably vertically integrated and
MARCH,
1912
Strategic (for
CoYl%Aees new technical
(2;i;i;s)
/,;A!=
Technological Forecasts
’ R&D Department (for R&D programming)
Figure 1. Technological
Divisions
Forecasts
predominantly supplying consumer markets. The basis of its growth has been its experience in the processing of oils and fats in the marketing of the resultant consumer products. The business risks faced by the company are of legislation affecting safety in manufacture or the products, of competition, particularly from impinging technologies, and of price controls. The technological knowledge that is required for some products is rising. Many of the company’s products and processes touch upon social problems. Technological risks spring particularly from the fact that the same market needs can be met by many different technologies. Much of the need for forecasting arises from the interaction of consumer tastes and technological progress. Consumer behaviour changes as the technology surrounding the consumer changes. Technological forecasting has been implicitly undertaken within the company at least since the establishment of a central research function in the 1950’s. During this period there were no formal exercises. At the beginning of the 1960’s, the central research unit, which had not long been set up, organized a large exercise in TF, using the scientists in the laboratories in working parties, to discover what technology could create. The TF methods employed were not formal but could be described as Delphi-like or scenariowriting. There has been no large exercise since this study. Because of the considerable autonomy given to research in the company the TF now undertaken is very
tech”‘c=l
I I
\i!echnoIog
as Inputs
.
y Working Parties (for studies of particular technologies)
in the Technological
Planning
Process.
much by groups within the laboratories and confined there to the product areas with which the iaboratories are associated. The studies in the 1960’s were largely ad hoc. The groups are now using more recognized TF techniques. As an assessment of its own abilities in this sphere it is felt within the company that perhaps it is much stronger in forecasting the changes in consumer markets which are affected by other technologies than in forecasting technological developments in themselves. The company’s origina reasons for the first major appraisal, which remain compelling today, were to suggest to the company the directions in which it might move and to identify for the company the direction in which it was of necessity being impelled by its large research investment. A subsidiary reason may have been a perceived need to demonstrate the capabiiities of the research division and thus to justify them. Now it is recognized that TF is not just used to identify the technological options open to the company. Such options are limited by the nature of what the company is and the types of expertise its people have. The company makes use of Delphi, relevance trees, morphological analysis, scenario writing and modeiiing. ‘Speculative’ product groups at each laboratory use Delphi to consider possible new areas of application of a technology away from the applications upon which the laboratory is now working. Matrix methods are employed in investigating technology
73
transfer. The morphological approach has been tried to identify alternatives but such attempts have not been successful because the company’s specialism is in satisfying consumer needs and these are difficult to explain. Scenario writing is regarded as useful to start off the analysis. Modelling of markets takes place to assess the marketing possibilities of technological deve!opments. In its use of the formal techniques the company has perceived the need for some modification. What starts from a basic technique is often altered to accomplish a practical end. The forecasts are typically for 10 years, which is considered to be the most useful time period. With Delphi the period may be unlimited. Studies have taken place of periods till 1990. The forecasters are the specialists in the laboratories, although their forecasts may be ordinated by special operations research groups within the External consultants are laboratories. employed who are experts in their fields but the company does not use consultants to do technological forecasting. The company does not have a formal system of centralized planning which integrates technological development into a corporate planning system. The essence of the company’s planning activities in relation to technological development is shown in Figure 2. The laboratories are responsible for the technological forecasting and research planning for all the product groups in the company. The Central Economics Department does predominantly economic forecasting, though it has made technological forecasts of an extrapolative nature and does use Delphi and relevance trees. It provides support for the product groups. The Customer Committee examines trends in consumer behaviour but these become inseparab!e from technological changes in
many spheres where each is reacting to the other. Ad hoc studies under the direction of a Main Board Director are made of particular technological areas. The central co-ordination in technological planning is achieved by having a representative from each product group located in Central Research, and he is a member of the research planning group for that product area. The company’s interest in TF arises from the impact of technological change upon consumer behaviour. It is this fact, plus the large size of the research investment, which defines the role of technological forecasting in the company’s planning of its own future development. Without such forecasting “there are dangers that research will lead the company up avenues which it cannot cope with in marketing terms”. A Chemical Company-Chemco
This is also a large international company, which has been given a fictitious name in this article. Its products are sold as intermediates but in a few instances reach consumer markets without further processing. It is quite vertically integrated in the organic chemicals side of its activities. The principal business risks spring from the fact that many of the markets that the company has itself successfully supplied in the past can now be adequately served by more companies of equivalent competence. The technological risk emanates from the risks of process obsolescence as a result of the technological progress of competitors. TF is defined by the company as forecasting which involves technology. Any long-term forecast, therefore, given the nature of Chemco, involves technology. Until about 1960 forecasts were made for 5 years ahead only. Thus for approximate-
Figure 2. The Principal Agencies of Technological Company.
Forecasting and Planning
B”:[d
Directors
Z~~&+r
Laboratories (product groups)
Central Economics
~___-___---Department
74
Customer Committee
_____ - _____ -___--1
I I I
in the
ly 10 years, the need for technological forecasting has been recognized by some executives in the company. There have not been any catalytic events leading to adoption but rather the gradual acceptance by top management of TF as proposals for long-term studies were persistently made in the early 1960’s in an attempt to achieve credibility. The struggle to obtain general acceptance lasted about 4 years. The company has now been actively using TF for 7 years or so, and the resources required for the studies have been easier to obtain since 1967. The company now undertakes technological forecasting: i. to force itself to take a “detached” look at its activities. ii. to define long-term company and research and development objectives. iii. to accomplish both of these on a world-wide basis. This company does not consider that the techniques used in themselves are important. Its long experience has indicated that the most important step in TF is to choose the right people to control the forecasting activity. Two methods of TF were distinguished. The methodological approach selects people to go through elaborate procedures to effect critical examinations. It may be an endless process in an illdefined area because of the number of questions that need to be asked, but it is the easier of the two methods to get management to believe the results are good. The second approach is one using a team of intuitive thinkers. This can obtain results quickly but it is difficult to get later acceptance. Chemco’s experience indicates that the best studies result from the second method. The favoured method within the company is therefore to choose a team, ideally of three people, with each member selected for the different nature of his knowledge. This group may have company or external advisers whose advice may be rejected. All three members of the team have to be convinced of the conclusions reached. Delphi is regarded as second best because of the extremely careful selection of Delphi participants required, where it is of importance not to mistake interest for knowledge. The utility of the wellknown methodological approaches has been carefully evaluated and the choice of a particular technique remains in the hands of the team members. The comment was made that “sophisticated methods are a gloss to give extra polish to results discovered by simpler methods. The method used is in itself an insufficient measure of forecast credibility. The question to be asked is “Is the result convincing?” For up to 5 years ahead extrapolative
LONG
RANGE
PLANNING
methods are used, but normative methods tend to be employed for ISyear forecasts. Likely technological developments in the remainder of this century have been examined. The technological forecasting is undertaken by the divisions and within the Planning Department of Central R & D where the teams may consist solely of company members or of mixed company and external participants. The forecasters are often divisional members who have been seconded for up to 3 years to the Planning Department. The forecasting has been employed to examine potential in certain technological areas as part of a programme to identifiy the broad technological areas of promise. It has been successful in identifying “markets and projects to keep out of”. A Chemical Company-Calchem
The company is fictitiously named Calchem to distinguish it from the chemical company in the last case study. For a small proportion of its activities this company extends backwards into extraction and forwards into consumer markets. It is a monopolist for part of its product range but at the same time certain elements of its business principally supply two customers. The apparent risks to the company are of competition in new areas, pricing and dumping, and in the possibility that customers will integrate backwards. Technological threats ensure from the pace of technological change and the specificity of the capital investment, though these features of the industry also act as a “barrier to entry”. The company has been employing the formal techniques of TF since about 1965. There was no momentous decision to do Its so, it was “a bloodless revolution”. objectives in using TF were and are: i. To look at what is likely to happen in the future and how this affects what research should be done. ii. To examine how customer requirements will change. It is the view in the company that “there is no such thing as technological forecasting in the sense of its being separate from sociological, economic and political forecasting”. The point was made that it is the delimiting of the areas of interest before undertaking the TF which is of prime importance and often the most difficult. The task is to spot the trends and then to examine their significance for technological development. Most of the principal techniques have been tried and often modified to suit the purpose in hand. The view is held that the formal techniques do not have the level of generality which is acclaimed for them. The techniques that have been used are
MARCH,
1972
the need for long-term demand forecasting for that customer, demand variability as a result of government action and its effect on productive capacity, and the size of capital investment decisions. The technological risks are associated with the expensiveness and specificity of the capital investment. In this industry the risk of a competitor making unforeseen technological progress or establishing a disadvantageous lead time is not considerable. Formerly implicit consideration was given to forecasting changes in technology within the Central R & D unit. In 1969 TF was first undertaken as an explicit function, This coincided with the establishment of a small corporate planning group at the same time. The realization of the need for formal studies had come to the fore over a number of years. The principal TF method used is described by the company as “modified Delphi”. The Head of Project Assessment requests project approaches and forecasts from R & D members and circulates these in an iterative feedback process. Morphological analysis has also been used, particularly for economic as well as technical considerations, but certain of the possibilities are ruled out from the beginning. It was further pointed out that the approach can change the analysis. What is forecast is the technical capability as modified by economic considerations. The two are seen to be essentially inseparable for project appraisal purposes. Forecasts are generally for up to 10 years ahead, particularly for areas in which production is involved. For basic research areas the technological forecasts go well beyond this. The forecasters are the scientists and engineers employed in the company, in a process of project appraisal which is co-ordinated by the Head of Project Assessment. Technical experts outside the company may be consulted. As a result of the decentralized nature of the company the planning of technological innovation is not a formally closely
trend extrapolation, brainstorming, Delphi and pseudo-morphological analysis. The brainstorming project was a failure in that it gave impossible co-ordinates in which to work. In a Delphi study everyone within the company appeared to have assimilated the company view. More than one technique might be used on the same problem in order to test the analysis; the analogy advanced was of the use of triangulation in surveying. The forecasts, which are made principally by chemical engineers, are for up to 20 years ahead, but most often for R & D and market planning for IO years only. Technological forecasts are made in the divisions, and there is a full time technological forecaster/co-ordinator in Central R & D. TF may also be undertaken in the new project teams of Central R & D and in Market Research. External forecasting consultants are not used. Calchem’s planning of technological development and the integration of such planning in the company’s total business plans is shown schematically in Figure 3. The role of Central R & D is to exert an influence on the forecasting studies and to try to persuade the divisions to undertake such studies where it thinks they may be appropriate. The co-ordination of technological planning in this way takes place in the Central R & D Department. TF is not the only preparatory step to this planning but it remains a key part since so much money is expended on research. Calchem’s attitude to the formal techniques of TF has changed and expectations have been At the beginning TF was reduced. originally considered as something of a panacea. Now it is regarded as part of the essential technical input to formal planning, but that it is not, in itself, the emollient it was once thought to be. An Electrical Engineering Company
The company is a supplier of intermediate products at home and overseas. The business risks are attributable to competition, a monopsonistic customer, Figure
3. The
Role of Technical Plans in the Company
Central Planning Department
Divisions
Central
Planning.
R &D
Technical Total Company Business Plan
/Plans -
Business Plans
-
-Other Functional Plans
,’ Other Technical Elements
Total Company Technical Plan
75
integrated exercise. The R & D Unit carries out the long-term studies from basic research and is thus responsible for technological planning. TF is not considered to be an irreplaceable element in the planning of technological development in this company. The methodology of TF is certainly not a key feature in project appraisal, nor part of a systematic appraisal of the technological opportunities open to the company. The forecasting of technological progress has, however, become an explicit, although not formal, consideration in project appraisal. It is one element that assists in the evaluation of basic research along with other financial, technical and psychological criteria. A Semiconductor Company This is a division of an electrical engineering company. The two principal business problems encountered by the division are attributable to the competition and low net profit margins. The company’s strategy in this situation is to operate in the interstices of the market, picking fields where it is possible to avoid direct competition with the bigger companies. The technological risks of a catastrophe from product mistakes are negligible. It is easy to license but not profitable because of the need to pay royalties. The company is required to anticipate the technological capability that would be demanded by customers. The employment of technological forecasts as part of the input to project and process analysis has always been an implicit task within this company. TF is essentially an informal process that is part of a more formal planning procedure. There has been to date no catalytic event that has resulted in more explicit attention being paid to the forecasting problem but a trend that has brought the problem of project selection to the fore. The company is of the opinion that many of the TF techniques available take too much time for the amount and type of forecasting that is required. Trend extrapolation is employed which is conditioned by opinion as to technology or economics. Detailed TF is not undertaken because such forecasting requires belief in the data which is available. Short-term technological forecasting, i.e. up to 2 years ahead. takes place relating to the improvements in new products. Longer term TF is undertaken preparatory to new product research. For example, the decision to undertake specific new product research in semiconductor materials is based upon a technological forecast of the material’s capabilities and then an examination of the market’s response to these capabilities.
76
The technological forecasters are members of the R & D department engaged in the research activity. There is no formal system for planning technological development. Being a division of a larger company the technological planning relates to the well defined product area of the division. Thus any need that exists for TF within the company is &fined largely to development work and some basic research. The principal need arises in the selection of R & D projects. To accomplish this effectively technological forecasting is required but it is not worthwhile to employ any of the formal techniques. The company perceives that if it grew bigger it might require a more formal forecasting system because of the greater risks involved. Otherwise it is satisfied with its present ability to forecast technological change. A COMPARATIVE ANALYSIS from the case studies briefly summarized here that there is some uncertainty within companies as to what amounts to technological forecasting and to whether or not technological forecasting can be considered as separate from longterm forecasting.
It is evident
The Technological Planning System in the study have not 1. The companies adequately appraised their use of TF in technological planning. ii. There is an absence of a systematic approach to technological planning in most of these companies. Not all of them are employing TF as part of a strategic analysis of the technological areas that are, and will be, of interest to them. Rather it is being used in an ad hoc manner. .. forecasting 111. Most of the technological is undertaken within R & D departments. iv. Three criticisms can be advanced of the use made of TF in the planning of technological development in that: (a) lnadequate use is made of objective setting. (b) The uncertainties associated with the technological forecasts are represented in an imperfect manner. (c) Little attention has been paid to an assessment of the effectiveness of technological forecasting. The Technological Forecasting Function i. The process that leads to the adoption of explicit technological forecasting often involves a change in top management and the establishment of corporate planning. It may be the result of
ii.
111.
iv.
V.
vi.
vii.
pressure from below. The formal techniques. and the literature describing them, are criticized for not being generally applicable as it believed and for the considerable human and data input required. The use of the techniques in itself is not considered to be the important part of the forecasting. The most popular techniques are Delphi. trend extrapolation and morphological analysis. There is a failure to integrate the TF techniques utilized within a total forecasting system. The technological forecasters are predominantly technical experts. Professionals in TF are used as co-ordinators. There are mixed attitudes to the use of external forecasting input. Technological forecasts are made for both products and processes, for usually IO-15 years. though for longer periods for focal interests.
The Role of Technological Forecasting in Technological Planning encountered in practice 1. The problems in TF relate to barriers of acceptance and credibility, bias of forecasters. the demands made on time and effort and the difficulties for other departments, like Marketing, in keeping pace with the sophistication of technological planning. of TF spring from ii. The benefits changed policies and directions and the involvement in technological planning of executives, which is useful experience for top management. TF is further one of the pressures for improved marketing. future use of TF within the 111. The companies is directed towards reviewing utilization of techniques and effecting a greater orientation of technological planning to end consumer needs. CONCLUSION This study, although based upon a small sample, generally supports the recent evidence in the *U.K. and the United States concerning the state of current practice in technological forecasting. The weight of this evidence points to the conclusion that the formal techniques of TF are not widely practiced, although the need for TF is generally accepted, and that those companies which are using these techniques do so with some reservation. Some companies in the U.K., however, do have considerable experience in technological forecasting, diffusion of the knowl-
LONG
RANGE
PLANNING
edge of which would be of benefit bulk of British industry. E
to the
READING LIST D. L. Currill, The role of technological fofecasting in the integrative planning of technological development, M.Sc. Dissertation, Management Centre, University of Bradford (1970).
MARCH,
1972
D. L. Currill, The implications of technological forecasting for research and development, Research Report, Management Centre, University of Bradford (June 1970). P. D. Wilmot, A review of technological forecasting in some British companies. A study of the European Technological Forecasting Association.
S. Skoumal, Review of present state of TF art in British Industry. A study of the European Technological forecasting Association. J. P. Dory and R. J. Lord, Does TF really work? Harvard Business Review (November-December 1970).
77