S-curve concept
The S-curve concept is an instrument of strategic innovation management . The model is based on the assumption that technology always comes up against technical performance limits with regard to its further development potential. It is therefore used to identify possible leaps in technology and supports companies in the decision to switch to a new technology or to develop one. The S-shape of the curve relates to the relationship between the performance of a technology and the associated research and development effort (alternatively, the time or the sales volume are also possible). The slope of the curve here describes the gain in efficiency by an additional effort in research and development work, so the productivity of research and development.
Basis of the S-curve concept
The S-curve concept according to Foster (employee of the management consultancy McKinsey) is based on the technology life cycle model according to Arthur D. Little, according to which technologies develop in an ideal-typical life cycle, similar to products in the product life cycle . With the help of this model, the competitive potential of technologies can be mapped over time. It is assumed that technologies develop in different phases over time. In this context, the following are divided:
- the development phase (research and development),
- the growth phase,
- the maturity phase as well
- the phase of aging or skimming.
Furthermore, various types of technologies can be classified for these time periods .
Special features of the technology life cycle
It is important to differentiate between the technological and the strategic life cycle phases of an industry . For example, it is possible that a certain industry has already reached the maturity phase while its key technology is still in the growth phase . Ideally, however, the technology goes through the phases in the order explained in point 3. The development of technologies is characterized by:
- their capacity utilization during the service life as well
- their strategic importance in the individual industries.
However, it is possible that technologies will not go through the entire lifecycle because they are displaced or abandoned while they are in the market. This happens, among other things, because:
- they are of reduced importance for competition or their original performance has been overestimated or
- they are not required by the economic environment or
- other technologies are recognized as being more powerful and their practical applicability comes to the fore.
Different characteristics of technologies in the individual industries are also possible. For example, it can happen that the same technology is already available as a basic technology in one industry , but is only used as a key technology in another. This is followed by a competitive advantage for companies in the former industry, as they benefit from a better developed technological position. Another consequence of this relationship is that the further development of technologies that are used in various industries is more likely to take place. However, it must be guaranteed that this technology also has competitive potential in the various industries.
Classification of technology types
Behind each type of technology there is different potential for competition. These influence the competitiveness of products with regard to their performance features and their production costs. Pacemaker technologies in this context refer to newly developed technologies whose applicability on the market is still relatively low. However, it can be seen that they can have a significant impact on competition; they are in the product development stage .
Key technologies can have a significantly greater influence on the competitiveness of products, which can be implemented, for example, by means of differentiations. Furthermore, they are equipped with considerable technical progress, which, although it has to be procured through a very high investment outlay, gives these technologies their performance. This type of technology thus enables a differentiation strategy, since advantages in the market can be exploited.
Basic technologies are former key technologies, which, however, have already lost their importance in competition due to their age. As the name suggests, these represent a certain developed base of all competitors in the market, as it is dominated by all competitors in the respective branch of industry. An example of this is, among other things, baking bread rolls with flour. Basic technologies thus reflect an indispensable component of technologies in industry, without which this would not exist in its current form. It should be emphasized, however, that this latter type does not bring any or hardly any competitive advantages with it. In order to be able to identify the true type of technology and to avoid confusing key and basic technologies, a strict separation of the meaning of technologies for industry and production is necessary.
Cross-sectional technologies are those basic or key technologies that are used in different industries and in different applications for rationalization, efficiency enhancement or z. B. (can) bring about energy saving effects.
Standard strategies of the life cycle phases
The use of pacemaker technologies is necessary to support the successful development of a business unit on the market. With regard to strategic leadership, companies should develop some of the already defined pacemaker technologies into key technologies themselves through investment and construction. Since this involves a high level of investment in the research and development phase, it is necessary to select profitable business units. This will drive investment activities in important pacemaker technologies.
Key technologies play an important role in successfully establishing business units on the market. Due to this, the control of the competitive position, the own development activities and, if necessary, the cooperation with suppliers of materials and components are of considerable importance. It is therefore important to protect this enormous investment through an increased strategic intensity of action and thus also to extend the time of the key technology phase.
With a transition from key technologies to basic technologies, investment activity should be reduced. A skimming or disinvestment strategy is recommended here. It should be noted that this does not mean reducing the output volume, as the technology is still necessary to be successful on the market. This norm strategy only refers to the amount of possible investments. This transition in particular often represents a major practical problem in business management, as companies have specialized in certain technologies and these former key technologies were considered the basis for success on the market. As a result of the development towards basic technologies, an important competitive advantage is often lost. Nevertheless, it makes sense to keep the development effort to a minimum, since technologies are used and mastered by all competitors in this phase.
Practical implementation of the S curve
In practice, this concept is used to determine the optimal point in time for the transition from an existing technology to an innovative technology. This means that investments in unprofitable technologies can be reduced and promising innovative technologies can be promoted. By determining the optimal transition time, companies gain competitive advantages over their competitors, since the potential of technologies can be optimally exploited. To determine this optimal point in time, however, it is necessary to set up the S-curve. Foster recommends proceeding in the following four steps:
a) Identification of technological alternatives
In the first step, the previous approach to solving the problem should be identified and then further possible alternatives listed. In this context, however, there is no evaluation of the alternatives.
b) Identification of relevant performance parameters
Now, relevant product user groups should first be filtered out in order to subsequently identify their performance parameters or demands on the product. In this way, a connection to the technological characteristics of the respective technology should be established. It should be noted, however, that the demands on a technology change over time, but that historical data can be used as a guide.
c) Determination of technological performance limits
In the third step, the limits of the performance parameters should be assessed in order to be able to determine the limits of the entire technology. It is also important to make a numerical estimate of the limiting mechanisms identified. The result of this step is of considerable importance in practice, since the technological development potential can now be determined as the difference between the estimated limit of the new technology and the current state of technology.
d) Determination of the S curve
The last step deals with the graphic implementation. This is possible using a mathematical approach. To do this, three points should be found on the curve. These can be, for example, two historical data points and the calculated limit of the technology. It is important to determine and deduct the research and development effort required for this. Finally, the limits of the technology can be drawn in as horizontal lines, which supports a forecast of future performance performance.
Limits and problems of the models
As already described, the S-curve concept is based on the idealized technology life cycle model. The very concept of idealization alone suggests that there are points of criticism of these models and that they should therefore be used in practice with great awareness. In the technology life cycle model, for example, very different criteria are used to classify a technology. There is no weighting for these either. However, points of criticism can be neglected due to the further development of the S-curve model, namely the lack of clear recommendations for action and the lack of the possibility of comparing technologies with regard to their advantageousness. However, this model is also problematic. Difficulties are encountered in practice, especially when operationalizing this theory, as company-specific and situational aspects play a significant role in the decision to change technology. Furthermore, estimating the properties of a technology that has not yet been developed is complicated. In addition, the input variable is a problem as it is sometimes not possible to determine the research and development expenses. Because time is often calculated as an influencing variable, the S curve is again distorted. Furthermore, the existence of the S-shape is required as a necessary condition, without a substantive justification being provided. In practice, there are also technologies that do not follow this curve. The use of this instrument does not allow for clear recommendations for action for investment strategies of companies, but a link with compatible instruments appears to be useful.
literature
- Baum, H.-G./ Coenenberg, AG / Günther, T .: Strategisches Controlling , 4th edition, Stuttgart 2007, chap. 4.3
Individual evidence
- ↑ a b Wirtschaftslexikon Gabler: Definition of the S-curve concept [1]
- ↑ Beats Biblionetz terms: S-curve model [2]
- ↑ a b c d e Philipp Goos / Svenja Hagenhoff: Strategic innovation management: An inventory [3]
- ^ A b Arthur D. Little International: Management in the Age of Strategic Leadership , Wiesbaden 1986, p. 52ff
- ↑ Service portal for external IP exploitation ( PDF )
- ^ Arthur D. Little International: Management in the Age of Strategic Leadership , Wiesbaden 1986, p. 52ff
- ↑ Geesa Theessen / Kerstin Urban: The S-curve concept [4]
- ^ I. Höcherl: The S-curve concept in technology management , 2001
- ↑ a b Strategy for Innovations: Overview and Technology Analysis ( PDF ( page no longer available , search in web archives ) Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice. )
