Technology Management: An Introduction

1. Modern vs. Conventional Company Valuation:

Conventional Valuation:

 Focus on Physical Assets:

o What it Means: Traditionally, when evaluating a company’s worth, people looked
at its tangible assets. These include physical things like:
 Buildings: Offices, factories, warehouses.
 Machinery: Equipment used for manufacturing or production.
 Equipment: Tools and technology used in daily operations.
o Why It Matters: The value of a company was often seen as the sum of these
physical assets. More assets generally meant higher value.
 Example:
o Imagine a factory with expensive machinery and a large building. In the past, its
value would primarily be assessed based on the cost and condition of these physical
assets.

Modern View:

 Technology Adds Value:

o What it Means: In today’s world, technology plays a crucial role in adding value
to a company. It’s not just about having physical assets but how effectively
technology is used.
 Technology Management: The way a company manages and utilizes
technology—like software, digital tools, and innovative processes—can
greatly influence its success and value.
 Strategic Use: Companies that use technology to improve efficiency, create
new products, or enhance customer experiences can be more valuable than
those with just physical assets.
 Why It Matters: Effective use of technology can lead to:
o Increased Efficiency: Streamlining operations and reducing costs.
o Innovation: Developing new products or services that attract customers.
o Competitive Advantage: Outpacing competitors through better tech solutions.
 Example:
o Consider a tech startup with cutting-edge software and advanced algorithms. Even
if it has minimal physical assets, its value can be high due to its innovative
technology and potential for growth.
2. What is Technology?
1. Economic Development:

 Role of Technology: Technology is a key driver of economic growth. It creates new

business opportunities and makes processes more efficient.
 How It Works:
o Innovation: New technologies can lead to the creation of new products or services
that meet market needs.
o Efficiency: Advanced technologies improve the efficiency of production
processes, leading to cost savings and higher output.
 Example:
o Agricultural Technology: Innovations like precision farming use GPS and sensors
to optimize crop yields and reduce waste, contributing to the agricultural sector's
growth.

2. Strategic Resource:

 Definition: Technology is considered a strategic resource because it helps companies

achieve their objectives and gain a competitive edge.
 How It Works:
o Achieving Goals: Companies use technology to streamline operations, improve
customer service, and develop new products or services that align with their
business goals.
o Competitive Edge: Businesses that effectively leverage technology can
outperform competitors who don’t use technology as strategically.
 Example:
o Customer Relationship Management (CRM) Systems: A company using
advanced CRM software can better track customer interactions, leading to
improved sales strategies and customer satisfaction.

3. Competitive Weapon:

 Definition: Technology can serve as a "weapon" to outpace competitors and attract more
customers.
 How It Works:
o Innovation: By developing new technologies or using existing ones in innovative
ways, companies can offer unique products or services that attract customers.
o Market Position: Technology helps companies differentiate themselves in the
market, offering features or performance that competitors cannot match.
 Example:
o Smartphones: Companies like Apple use advanced technology to offer unique
features in their iPhones, setting them apart from competitors and attracting a large
customer base.

4. Alignment with Goals:

 Definition: For technology to be effective, it must align with a company’s vision and
strategic goals.
 How It Works:
o Strategic Fit: Technology should support the overall mission of the company and
help achieve specific business objectives.
o Integration: Technology should be integrated into business processes in a way that
enhances performance and supports long-term goals.
 Example:
o E-Commerce Platforms: An online retail company uses e-commerce technology
to reach a broader audience and enhance the shopping experience, aligning with its
goal of expanding its market presence.

Definitions of Technology
1. Ferré (1988):

 Definition: Technology is the practical use of intelligence to solve problems.

 Explanation: This definition focuses on how technology applies human knowledge and
thinking to address real-world issues. It emphasizes that technology is not just about tools
or machines but also about the smart application of ideas to find solutions.
 Example:
o Example: Using artificial intelligence to diagnose medical conditions based on
patient data. Here, intelligence (AI) is used practically to solve the problem of
accurate and timely medical diagnosis.

2. Gendron (1977):

 Definition: Technology includes knowledge based on experimentation or science, used in

skills, organizations, or machinery.
 Explanation: According to this definition, technology is grounded in scientific knowledge
and experimentation. It’s applied in various domains such as skills (expertise),
organizational practices, or machinery to enhance their functions.
 Example:
o Example: The development of a new manufacturing process based on scientific
research. This process improves production efficiency and involves both the
application of scientific knowledge and practical machinery.

3. Hakkarainen (2006):

 Definition: Technology refers to the skills needed to apply techniques effectively.

 Explanation: This definition highlights the importance of skills and expertise in
technology. It’s not just about having technology but also about knowing how to use it
effectively to achieve desired outcomes.
 Example:
o Example: A software engineer's ability to write efficient code and utilize
programming tools effectively. The skills they possess enable them to apply various
techniques to build software applications successfully.

4. Webster (2010):

 Definition: Technology is the practical application of knowledge to create or provide

goods and services.
 Explanation: This definition emphasizes that technology involves applying knowledge in
a practical way to produce tangible results, such as products and services. It’s about turning
theoretical knowledge into something useful and functional.
 Example:
o Example: Using engineering principles to design and build a new type of energy-
efficient appliance. This involves applying knowledge to create a product that
serves a practical purpose.

Conclusion:

 Definition: Technology encompasses all knowledge, products, processes, tools, methods,

and systems used to create goods or provide services.
 Explanation: Technology is a broad term that includes various aspects, from theoretical
knowledge to practical tools and systems. It involves everything used to produce products
or deliver services, covering the full spectrum from ideas to implementation.
 Example:
o Example: The entire process of developing a smartphone—researching and
designing the hardware, writing the software, and manufacturing the device—
demonstrates the full scope of technology as defined.

Summary:

 Ferré views technology as the practical use of intelligence for problem-solving.

 Gendron sees it as knowledge from science and experimentation applied to various
domains.
 Hakkarainen emphasizes the skills required to effectively use technology.
 Webster focuses on the practical application of knowledge to create goods and services.
 Overall, technology involves all elements from knowledge and processes to tools and
systems that help in creating products and services.

Components of Technology
1. Hardware:

 Definition: The physical parts of technology, such as machines and equipment.

 Explanation: Hardware refers to the tangible, physical components of technology that you
can touch and see. It includes all the devices and equipment used in technology systems.
 Example:
o Computers: Desktop computers and laptops used for various tasks, including
office work and gaming.
o Smartphones: Mobile devices used for communication, internet access, and
applications.
o Factory Machines: Equipment used in manufacturing processes, such as conveyor
belts and robotic arms.

2. Software:

 Definition: Programs and applications that make hardware work.

 Explanation: Software consists of the instructions and programs that tell hardware how to
operate and perform tasks. It enables hardware to execute various functions and
applications.
 Example:
o Operating Systems: Software like Windows, macOS, and Linux that manage
computer hardware and provide a platform for other applications.
o Productivity Software: Applications such as Microsoft Office (Word, Excel) used
for creating documents, spreadsheets, and presentations.

3. Brainware:

 Definition: Understanding how technology functions and why it works a certain way.
 Explanation: Brainware refers to the human knowledge and expertise needed to
understand and manage technology. It involves grasping the principles behind how
technology works.
 Example:
o IT Specialists: Professionals who understand the technical details and underlying
principles of both software and hardware, enabling them to manage and
troubleshoot technology effectively.

4. Know-how:

 Definition: Practical knowledge or skills to use technology effectively.

 Explanation: Know-how involves the hands-on skills and practical experience required to
operate and make the best use of technology.
 Example:
o Operating Machinery: Skilled operators who know how to run complex machines
in a factory setting.
o Troubleshooting Software: Technicians who can identify and fix issues in
software applications.

Classification of Technology
1. New Technology:

 Definition: Recently introduced technologies that impact products or processes.

 Explanation: New technologies are the latest innovations that have been developed and
are starting to make a difference in various fields.
 Example:
o 3D Printing Technology: A modern manufacturing technique that creates three-
dimensional objects by layering materials.

2. Emerging Technology:

 Definition: Technologies still in development with future commercial potential.

 Explanation: Emerging technologies are those that are being researched and developed
but are not yet widely used or commercially available.
 Example:
o Quantum Computing: An advanced form of computing that uses quantum-
mechanical phenomena to perform complex calculations much faster than
traditional computers.

3. Low Technology:

 Definition: Basic technologies used widely for fundamental needs.

 Explanation: Low technology refers to simple and traditional tools or methods that have
been used for a long time to meet basic needs.
 Example:
o Hand Tools: Basic tools like hammers, screwdrivers, and pliers used in everyday
tasks and repairs.

4. Medium Technology:

 Definition: Technologies that are more advanced than low-tech but not as high-tech.
 Explanation: Medium technology falls between basic tools and cutting-edge technology.
It includes equipment that is more advanced but not as sophisticated as high-tech solutions.
 Example:
o Standard Manufacturing Equipment: Machinery used in industrial settings that
is more complex than simple hand tools but not as advanced as the latest high-tech
equipment.

5. Appropriate Technology:

 Definition: Technology that is well-suited for the task and maximizes productivity.
 Explanation: Appropriate technology is chosen based on its suitability for a specific task
or environment, ensuring it works efficiently and effectively.
 Example:
o Solar Panels: Used in areas with abundant sunlight to generate renewable energy
efficiently.

6. Tacit Technology:
 Definition: Knowledge that is not easily written down or explained, learned through
experience.
 Explanation: Tacit technology involves skills and knowledge gained through personal
experience and practice, which are difficult to document or teach formally.
 Example:
o Craftsmanship Skills: Skills such as woodworking or pottery techniques passed
down through generations and learned through hands-on practice.

7. Codified Technology:

 Definition: Documented knowledge about how technology works but not necessarily why.
 Explanation: Codified technology involves knowledge that is formally documented and
explained, detailing how technology functions but not always the underlying reasons.
 Example:
o Technical Manuals: Detailed guides and documentation that explain how to
operate and maintain machinery, including step-by-step instructions and
specifications.

Summary:

 Components of Technology: Hardware, software, brainware, and know-how are the

essential elements that make up technology.
 Classification of Technology: Technology can be categorized as new, emerging, low,
medium, appropriate, tacit, or codified, each with specific characteristics and uses.

Roles Relative to Technology

1. Producer:

 Role: Creates or manufactures technology.

 Explanation: Producers are responsible for the actual creation or assembly of
technological products. They design, build, and bring new technologies to the market.
 Example:
o Apple Inc.: Apple designs and manufactures iPhones, including everything from
hardware components to the final product.
o Tesla: Tesla produces electric vehicles and their essential components, such as
battery packs and electric drivetrains.

2. Integrator:

 Role: Combines different technologies into a cohesive system.

 Explanation: Integrators take various technological components and combine them to
create a unified system. This often involves ensuring compatibility and functionality
between different technologies.
 Example:
o Smartphone Manufacturers: Companies like Samsung integrate various
technologies, such as processors, cameras, and operating systems, into a single
smartphone.
o Home Automation Systems: Companies that integrate smart home devices (like
thermostats, security cameras, and lighting systems) into a single control system.

3. Distributor:

 Role: Gets technology from producers to users.

 Explanation: Distributors handle the logistics of moving technology products from
manufacturers to end-users. They may operate retail stores, online platforms, or other sales
channels.
 Example:
o Amazon: An online marketplace that sells a wide range of technology products,
from laptops to smart home devices.
o Best Buy: A retailer specializing in electronics and technology, providing access
to products from various manufacturers.

4. Creator:

 Role: Innovates and invents new technologies.

 Explanation: Creators are the inventors and innovators who come up with new
technological ideas or improvements. They push the boundaries of what is possible and
develop new solutions.
 Example:
o Engineers at R&D Labs: Engineers who develop new types of batteries with
higher energy density and faster charging times.
o Inventors: Individuals who create new inventions, such as new types of medical
devices or novel software applications.

5. Suppliers/Partners:

 Role: Provide necessary components or services.

 Explanation: Suppliers and partners offer the essential parts, materials, or services
required for technology production. They work closely with producers and integrators to
ensure the smooth operation of technology development.
 Example:
o Intel: Supplies processors and other semiconductor components to various tech
companies.
o Contract Manufacturers: Companies that produce parts or assemble products for
technology firms, such as circuit boards or custom enclosures.

6. User:

 Role: Utilizes technology in daily activities.

 Explanation: Users are the end consumers or organizations that apply technology in their
everyday tasks. They benefit from the technology’s functionalities and features.
 Example:
o Consumers: People using smartphones, laptops, and smart home devices to
improve their personal and professional lives.
o Businesses: Companies using enterprise software solutions to manage operations,
track sales, and communicate with customers.

7. Investor:

 Role: Provides funding for technology development.

 Explanation: Investors supply the financial resources needed for technology research,
development, and commercialization. They often seek returns on their investment through
the success of the technology.
 Example:
o Venture Capitalists: Investors funding tech startups with innovative ideas, such
as new software applications or advanced robotics.
o Angel Investors: Individuals who invest their own money into early-stage
technology companies to support their growth.

8. Government:

 Role: Regulates, supports, and sometimes funds technology initiatives.

 Explanation: Governments play a key role in overseeing and supporting technology
through regulations, grants, and public projects. They may also invest in research and
development to drive innovation and address societal needs.
 Example:
o Government Grants: Funding for research projects in renewable energy or
healthcare technologies.
o Regulatory Agencies: Entities that establish standards and regulations for
technology, such as the Federal Communications Commission (FCC) regulating
telecommunications.

Technological Change
1. Definition: Technological change refers to any alteration in physical processes, materials,
machinery, or equipment that impacts how work is performed and influences the efficiency and
effectiveness of an enterprise.

Explanation:

 Physical Processes: Changes in how tasks are done, such as new methods for
manufacturing or processing.
 Materials: Use of new or improved materials that affect the quality or performance of
products.
 Machinery or Equipment: Upgrades or new types of machinery that improve productivity
or efficiency.
 Work Organization: Changes in how work is organized or managed, leading to improved
workflows.
 Management Techniques: New methods for managing resources or operations that
enhance effectiveness.

Impact:

 Output: Changes in the products or services produced by the company.

 Raw Materials: Shifts in the materials used in production.
 Work Organization: Modifications in how tasks are assigned and managed.
 Management Techniques: New approaches to managing resources and processes.

Effect on Production Factors:

 Labor: How technological changes affect the role of workers, possibly altering job
requirements or creating new roles.
 Capital: Changes in the use of financial resources, such as investing in new technology.
 Other Factors: How technological changes impact other resources or inputs used in
production.

Measurement of Technological Change

1. Economic Indices:

 Explanation: Measures technological change by evaluating the average change in the

prices of factors (like labor and materials), keeping the quantities of inputs constant.
 Example: If the price of machinery decreases due to technological advancements, the
economic index helps measure this change relative to unchanged input quantities.

2. Geometric Index:

 Explanation: Measures technological change by looking at changes in output that cannot

be explained by changes in labor and capital. It isolates the impact of technology on
productivity.
 Example: If a company’s output increases but the inputs (labor and capital) remain the
same, the geometric index helps determine how much of that output increase is due to
technological improvements.

3. Patents:

 Explanation: Uses the number and type of patents filed as indicators of technological
innovation and change.
 Example: A rise in patents for new technology, like advanced AI algorithms, indicates
progress in the field and reflects technological change.
Rate of Technological Change
1. Rate of Improvement of Technology:

 Explanation: Measures how quickly technology advances or improves over time.

 Example: The speed at which smartphones evolve, with new models offering better
features, faster processors, and enhanced functionalities each year.

2. Rate of Substitution of Technology:

 Explanation: Measures how quickly new technology replaces older technology.

 Example: The transition from DVDs to streaming services like Netflix, where streaming
technology quickly replaced physical media.

3. Rate of Diffusion of Technology:

 Explanation: Measures how quickly new technology is adopted and spread across
different markets or user groups.
 Example: The widespread adoption of smartphones and apps, showing how fast these
technologies become common in everyday life.

Technological Change Theories

1. Neo-Classical Theory
Overview:

 Production Function: This theory defines a production function as a mathematical

relationship that shows how inputs (such as capital and labor) are converted into outputs
(like goods or services).
 Technology Level: At any given time, a specific level of technology determines the
available production techniques. This means that technology sets the boundaries for how
inputs can be used to produce outputs.
 Technological Change: According to Neo-Classical Theory, technological change is
represented by shifts in the production function. These shifts are viewed as movements that
improve production efficiency or capability.

Explanation:

 Production Function: Imagine a factory that uses machines (capital) and workers (labor)
to produce products. The production function shows the relationship between the number
of machines and workers and the amount of product produced.
 Shifts in Production Function: Over time, improvements in technology might allow the
factory to produce more with the same amount of machines and workers, shifting the
production function upwards and to the right, which means higher productivity.
Limitations:

1. Limited Factors of Production:

o Issue: Neo-Classical Theory only considers labor and capital as the factors of
production. It does not account for other important factors like technology itself or
natural resources.
o Example: If a company uses new software (technology) to improve its
productivity, this change isn't fully captured by the Neo-Classical Theory.
2. Unrealistic Assumptions:
o Issue: The theory assumes there are infinitely many techniques available at any
given level of technology, which is not practical.
o Example: It suggests that there are endless ways to use current technology to
produce goods, which oversimplifies the reality where technology and techniques
are often limited and specific.
3. Focus on Cost-Reduction:
o Issue: The theory primarily describes cost-reducing improvements rather than
enhancements in performance or the creation of new services.
o Example: If a new technology improves the quality of a product rather than
reducing production costs, Neo-Classical Theory might not fully capture this
benefit.
4. Dynamic Problems:
o Issue: Neo-Classical Theory struggles to address dynamic problems or ongoing
technological changes.
o Example: It may not effectively explain how technology evolves over time or how
new technologies disrupt existing processes and markets.

Summary: Neo-Classical Theory provides a framework for understanding how inputs and outputs
are related through a production function and how technological changes can shift this function to
improve productivity. However, it has limitations, including its narrow focus on labor and capital,
unrealistic assumptions about production techniques, and its inability to address dynamic
technological changes or improvements beyond cost reduction.

1. Marxist Theory
Overview:

 Labor-Saving Innovations: According to Marxist Theory, technological innovations are

primarily aimed at saving labor. The idea is that technology should reduce the amount of
human labor needed in production processes.
 Role of Conscious Effort: Technology is not seen as something that develops on its own.
Instead, it is driven by deliberate actions of individuals and shaped by historical and social
forces. This means that technological advancements result from the conscious decisions
and activities of people within a given socio-economic context.
 Entrepreneurial Motivation: Entrepreneurs invest in and develop new technologies
either to maximize profits or to ensure their survival in a competitive market. The focus is
on how technological changes are linked to economic incentives and survival strategies.
Explanation:

 Labor-Saving Innovations: If a factory introduces a new machine that requires fewer

workers to produce the same amount of goods, this innovation is considered labor-saving.
It aims to reduce the reliance on human labor.
 Role of Conscious Effort: Think of a tech company that develops a new software tool.
This tool wasn't created by chance; it was developed intentionally by the company’s leaders
to address a market need or to gain a competitive edge.
 Entrepreneurial Motivation: A startup might invest in new technology because it
believes the technology will offer a significant profit potential or because it's essential for
staying competitive in the industry.

Limitations:

1. Undermining Capital-Saving Innovations:

o Issue: Marxist Theory tends to downplay innovations that save capital (financial
resources) rather than labor. It focuses more on how technology affects labor rather
than how it can also impact financial efficiency.
o Example: A new technology that reduces the cost of raw materials might not be
fully appreciated in Marxist Theory, even though it is a significant innovation.
2. Underemphasizing Productivity:
o Issue: The theory may not place enough emphasis on how technological changes
improve overall productivity, which includes aspects beyond just labor savings.
o Example: A technology that enhances the speed or quality of production, even if it
doesn’t directly save labor, might not be adequately covered by Marxist Theory.

Summary: Marxist Theory views technological change as a process driven by the need to save
labor and shaped by the actions of people within historical and social contexts. Entrepreneurs
innovate to maximize profits or ensure survival. However, this theory has limitations, such as its
tendency to overlook innovations that save capital and its limited focus on broader aspects of
productivity.

Schumpeter's Theory
Overview:

 Innovation as Economic Development: According to Schumpeter, innovation is the

driving force behind economic growth and development. He views technological change
as a major disruptive force that creates economic opportunities and shifts market dynamics.
 Disequilibrium Phenomenon: Schumpeter describes technological change as a
"disequilibrium" phenomenon, meaning it disrupts the existing balance in markets and
industries. It introduces new technologies, methods, and market structures that challenge
the status quo.
 Innovation Defined: Schumpeter defines innovation broadly. It includes:
o The introduction of a new product or a significant improvement in an existing
product.
o The development of a new method of production.
o The creation of a new market or the opening of new sources of raw materials.
o The implementation of a new organizational structure in an industry.

Explanation:

 Innovation as Economic Development: Imagine a company that develops a revolutionary

technology, such as a new type of electric car. This innovation can transform the
automobile industry, drive economic growth, and create new business opportunities.
 Disequilibrium Phenomenon: If a new technology disrupts traditional industries, such as
how smartphones affected the market for traditional cell phones, it creates a disequilibrium,
forcing existing companies to adapt or risk becoming obsolete.
 Innovation Examples:
o New Product: A company introduces a breakthrough health app that changes how
people monitor their wellness.
o New Method: A factory adopts a novel manufacturing process that increases
production efficiency.
o New Market: A startup enters an untapped international market with its innovative
tech solution.
o New Organization: A tech company restructures its organization to improve
innovation and efficiency.

Limitations:

1. Psychology of the Entrepreneur:

o Issue: Schumpeter’s theory does not provide a clear explanation of the
psychological factors that drive entrepreneurs to innovate. The motivations and
mental processes behind entrepreneurial actions remain ambiguous.
o Example: The internal drive and vision of an entrepreneur like Elon Musk, which
lead to innovations in space travel and electric vehicles, are not thoroughly
addressed by the theory.
2. Lack of Explicit Attention to Innovation Generation:
o Issue: The theory does not explicitly detail the processes through which
innovations are developed and brought to market. It focuses more on the outcomes
of innovation rather than the steps involved in creating it.
o Example: The specific stages of research, development, and commercialization of
a new technology are not thoroughly explored.
3. Lack of Empirical Evidence:
o Issue: Schumpeter’s theory has been criticized for lacking empirical evidence to
support its claims. The real-world data on how innovations impact economic
development may not always align with the theoretical framework.
o Example: Studies may show varying impacts of innovation on different industries,
challenging the broad claims made by Schumpeter’s theory.

Summary: Schumpeter's Theory emphasizes that innovation is crucial for economic development
and acts as a disruptive force in markets. It defines innovation broadly, covering new products,
production methods, markets, and organizational changes. However, the theory has limitations,
including its vague treatment of the psychology of entrepreneurs, the lack of focus on how
innovations are generated, and the absence of strong empirical evidence.