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Lecture Notes 02

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7 views26 pages

Lecture Notes 02

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nichal
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Session 3, 4 & 5

Technology Management

Dr Rahul V Altekar,
Director – Digital Supply Chain Solutions
SAP India
Agenda
Technology Adoption and Diffusion -Understanding
Demand for New Products
• Forecasting demand for new innovative products
• S – Curve of the Technology Process: How to
cross the chasm
• Bass Model
• Excel Models
• Sophisticated System – Live Demo
Technology Basics
Digital & IT System
Inventory Strategy
Technology Business Case
Forecasting Demand for New Innovative
Products
• Semi Conductor Industry
• Shree Cements Case Study
• Biocon India Case Study
• Drug Eluting Stents
• Reading Repository
– Chapter 3
– The Bass Model: Marketing Engineering Technical
Note
Principles of Forecasting
Many types of forecasting models that differ in
complexity and amount of data & way they
generate forecasts:
1. Forecasts are rarely perfect
2. Forecasts are more accurate for grouped
data than for individual items
3. Forecast are more accurate for shorter than
longer time periods
Types of Forecasting Methods
• Decide what needs to be forecast
– Level of detail, units of analysis & time horizon required
• Evaluate and analyze appropriate data
– Identify needed data & whether it’s available
• Select and test the forecasting model
– Cost, ease of use & accuracy
• Generate the forecast
• Monitor forecast accuracy over time
Types of Forecasting Methods
• Forecasting methods are classified into two
groups:
Types of Forecasting Models

• Qualitative methods – judgmental methods


– Forecasts generated subjectively by the
forecaster
– Educated guesses
• Quantitative methods – based on mathematical
modeling:
– Forecasts generated through mathematical
modeling
Qualitative Methods
Type Characteristics Strengths Weaknesses
Executive A group of managers Good for strategic or One person's opinion
opinion meet & come up with new-product can dominate the
a forecast forecasting forecast

Market Uses surveys & Good determinant of It can be difficult to


research interviews to identify customer preferences develop a good
customer preferences questionnaire

Delphi Seeks to develop a Excellent for Time consuming to


method consensus among a forecasting long-term develop
group of experts product demand,
technological
changes, and
Quantitative Methods
• Time Series Models:
– Assumes information needed to generate a forecast is
contained in a time series of data
– Assumes the future will follow same patterns as the past
• Causal Models or Associative Models
– Explores cause-and-effect relationships
– Uses leading indicators to predict the future
– Housing starts and appliance sales
Time Series Models
• Forecaster looks for data patterns as
– Data = historic pattern + random variation
• Historic pattern to be forecasted:
– Level (long-term average) – data fluctuates around a constant mean
– Trend – data exhibits an increasing or decreasing pattern
– Seasonality – any pattern that regularly repeats itself and is of a
constant length
– Cycle – patterns created by economic fluctuations
• Random Variation cannot be predicted
Time Series Patterns
Time Series Models

• Naive: Ft +1 = At
– The forecast is equal to the actual value observed during the
last period – good for level patterns
• Simple Mean: Ft +1 =  A t / n
– The average of all available data - good for level patterns
• Moving Average: Ft +1 =  A t / n
– The average value over a set time period
(e.g.: the last four weeks)
– Each new forecast drops the oldest data point & adds a new
observation
– More responsive to a trend but still lags behind actual data
Time Series Models con’t

• Weighted Moving Average: Ft +1 =  C t A t

• All weights must add to 100% or 1.00


e.g. Ct .5, Ct-1 .3, Ct-2 .2 (weights add to 1.0)

• Allows emphasizing one period over others; above


indicates more weight on recent data (Ct=.5)

• Differs from the simple moving average that weighs all


periods equally - more responsive to trends
Time Series Models con’t

• Exponential Smoothing: Ft +1 = αA t + (1 − α )Ft


Most frequently used time series method because of ease
of use and minimal amount of data needed
• Need just three pieces of

data to start:
– Last period’s forecast (Ft)
– Last periods actual value (At)

– Select value of smoothing coefficient, ,between 0 and 1.0
• If no last period forecast is available, average the last few
periods or use naive method

• Higher values (e.g. .7 or .8) may place too much weight
on last period’s random variation
Time Series Problem

• Determine forecast for periods 7 & Period Actual


8 1 300
• 2-period moving average
2 315
• 4-period moving average
3 290
• 2-period weighted moving average
4 345
with t-1 weighted 0.6 and t-2
weighted 0.4 5 320
• Exponential smoothing with 6 360
alpha=0.2 and the period 6 forecast 7 375
being 375
8
Time Series Problem Solution

Period Actual 2-Period 4-Period 2-Per.Wgted. Expon. Smooth.

1 300

2 315

3 290

4 345

5 320

6 360

7 375 340.0 328.8 344.0 372.0

8 367.5 350.0 369.0 372.6


Critical Topics Learned
• Product & Market Matrix vis-à-vis Technology Adoption
Priorities
• Technology Adoption & Diffusion
– Conceptual Note - pp 46 (Text Book)
– Adoption S-Curve – Figure 3 (pp 51)
• Demand Forecasting
– Concept (pp 56)
– Delphi Technique (pp 61)
• Information Diffusion Models (pp 57 – 58)
• Bass Model (pp 59-60)
Concepts Learned
• Pharmaceutical Industry – Business Specifics and Technology Adoption
Priorities
• Why & How Change Management is critical to Technology Strategy?
– Castrol India Example
– Design Thinking Workshops – Necessity
• Strategic Planning in Pharmaceutical Industry
– 5 years to 1 month Planning
– Failure to Serve Penalties
– Accurate Long Term Forecasting
• Sophisticated System for Forecasting
– End to end Demand Forecasting Process
– Outlier Corrections, Missing data substitution, Promotional Lift
– Historical Analysis v/s Analytics
• Case Study
– Examining the Adoption of Drug Eluting Stents
Concluding Thoughts
• Technology Adoption and Diffusion is critically
governed by Change Management
• Domain focus is imperative for Technology
Management & Innovation Strategy
• Demand Forecasting is much complex process and
key to business success. Most companies compelled
to invest technological elements here.
• Sophisticated Systems are much in use practically
than Conceptual Models
Questions?

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