Technology life cycle refers to the stages of the life of a technology. This life cycle has shown a consistent pattern across technologies and industries. Understanding this pattern will help you predict the key events in your industry. It will also help you understand the nature of competition and the key challenges at different stages of technology life cycle.
Stage 1: Technological Discontinuity
The life cycle of a technology starts with the birth of that technology. It often involves a radical departure from existing technology. A radical departure often refers to the new knowledge base in the new technology. It often provides a significant improvement in price performance ratio of the product. A LED light is a radically new technology and provides much longer lasting lighting products.
Stage 2: Old Technology Fights back
At the point of emergence of new technologies, old technologies do not throw in the towel. Instead, they often fight back ferociously. The old technologies witness a significant improvement driven by a need for survival.
As the digital camera emerged, the quality of film roll became better quickly. Eventually, the old technology loses out. Due to this technological fight, the old technology extends its life to some extent.
Stage 3: Many New Entrant Emerge
As the fight between new and old technology takes place, many new entrants emerge. Before the technological discontinuity, there may have been virtually no new entry for a long time. But after the discontinuity, a significant number of new entrants compete to gain market share.
As the fight between new and old technology takes place, many new entrants emerge
As fitness trackers emerged, there were dozens of new entrants in the market. Similarly, in lighting industry tens of companies began entering the market with the arrival of LED. Until LED, Osram, Philipps and GE dominated the market with no new entry for years.
Stage 4: Shakeout and Consolidation
After a few years of intense competitive activity, most of the new entrants exit the market. A handful of firms dominates the industry. The shakeout stage of the market is a critical time because the window for new entry rapidly closes after a shakeout.
The shakeout stage of the market is a critical time because the window for new entry rapidly closes after a shakeout.
Although dozens of digital camera companies entered the camera market, most of them existed. Even Apple offered a digital camera called Quick Take. It launched the camera in 1994 and discontinued it in 1997.
Stage 5: Stability
Once the shakeout takes place, the new technology becomes a dominant technology. After that, the industry experiences relative calm. This technology continues to improve but incrementally. This stability is marked by a lack of new entry and increase in profits of the new incumbent firms.
During the experimentation stage, consumers do not know whether they like the new technology or not. There is a race to build the product that the market will like. However, once the shakeout takes place, the challenge become a different one. After the shakeout, innovation still remains critical. However, the firms shift their focus on becoming more efficient while continuing to innovate incrementally.
Where do you think the following industries are today?