PROCESS

TECHNOLOGY
STRATEGY
PRESENTED BY
BHANUPRIYA BEHERA(319SM1003)
SUBHASHREE PRIYADARSINI(319SM1011)
INTRODUCTION

■ WHAT IS PROCESS TECHNOLOGY?

The process technology is the ‘appliance of science to any operations process’.
■ In this chapter we shall focus upon process technology as distinct from product or
service technology:
In manufacturing operations, it is a relatively simple matter to separate the two.
. In service operations it can be far more difficult to distinguish process from
product/service technology
EXAMPLE:
Marmite’s energy recycling technology

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 DIRECT OR INDIRECT PROCESS
TECHNOLOGY
■ PROCESS TECHNOLOGY
■ LESS ‘DIRECT’ FORMS OF TECHNOLOGY.
■ INFORMATION DATABASES
MATERIAL, INFORMATION AND
CUSTOMER PROCESSING
■ We distinguished between operations that predominantly processed materials, information or customers.
Process technologies can be similarly classified. Note that some of these technologies may have secondary,
though important, elements in other categories.
For example, many material processing technologies used in manufacturing may also be processing
information relating to the physical dimensions, or some other property, of what is being processed. A machine,
while processing materials, may also be deciding whether tooling needs changing, whether to slow the rate of
processing because of rising temperature, noting small variations in physical dimensions to plot on process
control charts, and so on. In effect, an important aspect of the technology’s capability is to integrate materials
and information processing. Similarly, internet based technologies used by online retailers may be handling
specific order information but are also integrating this information with characteristics of your previous orders,
in order to suggest further purchases. Sometimes technologies integrate across all three types of technology. The
systems used at the check-in gate of airports is integrating the processing of airline passengers (customers),
details of their flight, destination and seating preference (information) and the number and nature of their items
of luggage (materials). Technologies are increasingly ‘overlapping’ to become integrating technologies.
 PROCESS TECHNOLOGY
STRATEGY
■ We define process technology strategy as: ‘the set of
decisions that define the strategic role that direct and
indirect process technology can play in the overall
operations strategy of the organization and sets out the
general characteristics that help to evaluate alternative
technologies’.
CONTD….
CONTD…

■ CANNOT AVOID INVOLVEMENT

■ ABLE TO ARTICULATE
■ MUST ACT AS ‘IMPRESARIO’
Operations managers need to be experts in engineering, computing, biology, electronics, or whatever is the core science behind
the technology, but they need to know enough about the technology to be comfortable in evaluating technical information, and
be able to ask relevant questions of the technical experts. These questions include the following:
● What does the technology do that is different from other similar technologies?
● How does it do it?
● What constraint does using the technology place on the operation?
● What skills will be required from the operations staff in order to install, operate and maintain the technology?
● What capacity does each unit of technology have?
● What is the expected useful lifetime of the technology?
TECHNOLOGY PLANNING –
TECHNOLOGY ROADMAPPING
■ A technology roadmap (TRM) is an approach that provides a structure that attempts to
assure the alignment of developments (and investments) in technology, possible future
market needs and the new development of associated operations capabilities.
■ . A TRM is essentially a process that supports technology development by facilitating
collaboration between the various activities that contribute to technology strategy. It
allows technology managers to define their firm’s technological evolution in advance by
planning the timing and relationships between the various elements that are involved in
technology planning.
CONTD…

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CONTD…

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BENEFITS OF TRMS

■ These are mainly associated with the way they bring together the significant stakeholders involved on
technology strategy and the various (and often differing) perspectives that they have. The approach
forms a basis for communication, and possibly consensus.
■ After all, it does tackle some fundamental questions that concern any technology strategy.
■ Why do we need to develop our technology?
■ Where do we want to go with our technological capabilities?
■ How far away are we from that objective?
■ How can we get to where we want to be?
■ In what order should we do things?
■ By when should development goals be reached?
PROCESS TECHNOLOGY SHOULD
REFLECT VOLUME AND VARIETY
■ High-variety, low volume processes generally require process technology that is general
purpose, because it can perform the wide range of processing activities that high variety
demands
■ . High volume, low-variety processes can use technology that is more dedicated to its
narrower range of processing requirements.
Within the spectrum from general-purpose to dedicated process technologies three
characteristics in particular tend to vary with volume and variety.
■ Its Degree Of ‘Automation’
■ Its ‘Scale’ Or ‘Scalability’.
■ Its Degree Of ‘Coupling’ Or ‘Connectivity’.
SCALE/SCALABILITY – THE CAPACITY
OF EACH UNIT OF TECHNOLOGY
■ Scale is an important issue in almost all process technologies and is closely related to the
dealing with capacity strategy.
■ For example, consider a small regional airline serving just one main route between two
cities. It has an overall capacity of 2,000 seats per day in either direction on its route. This
capacity is ‘defined’ by its two 200-seater aircraft making five return journeys each day
between the two cities. An alternative plan would be to replace its two identical 200-seat
aircraft with one 250-seater and one 150-seater aircraft. This gives the company more
flexibility in how it can meet varying demand levels throughout the day. It also may give
more options in how its aircraft are deployed should it take on another route and buy
additional aircraft. Of course, costs will be affected by the company’s mix of aircraft.
Generally, at full utilisation larger aircraft offer superior cost performance per passenger-
mile than smaller aircraft.
CONTD…

Factors influencing the desirability of large-scale technology include the following:

■ What is the capital cost of the technology?
■ Can the process technology match demand over time?
■ How vulnerable is the operation?
■ What scope exists for exploiting new technological developments?
FROM ‘SCALE’ TO ‘SCALABILITY’

■ Information processing technologies are an important exception to some of the issues

■ Information is transmitted far more easily between units of technology than between either materials or
customers.
■ Information technology also has the capability of overcoming traditional links between volume and
variety.
■ Both of these factors mean that information technology processes can be linked relatively easily to
combine their total processing capacity.
Scalability, however, does depend on the ability of IT systems to work together. Upgrading the functionality
(what it can do) of an IT system is usually a matter of evolution rather than revolution.
. Sometimes totally separate and only partially connected systems are installed alongside existing ones.
So, some IT systems finish up with patched and inconsistent system architectures.
 DEGREE OF AUTOMATION/‘ANALYTICAL CONTENT’

EXAMPLE:
■ It was a significant event in the development of artificial intelligence (AI). Between 9 and 15 March 2016 a five-game match was played in
the South Korean capital Seoul between arguably the best professional ‘Go’ player called Lee Sedol and AlphaGo, a computer Go program
developed by Google DeepMind. AlphaGo won the contest by 4 games to 1. Some commentators saw the event as a continuation of the
‘man versus machine’ chess battles that started when chess master Garry Kasparov lost to a computer named Deep Blue in a six-game
match played in 1997. In fact, games like chess really are a handy way to gauge a computer’s evolution towards genuine artificial
intelligence. Which is where Go comes in. Although seemingly simple, it is a far more complex game than chess. Played all over East
Asia, it is particularly popular with AI researchers, in particular, for whom the idea of truly mastering ‘Go’ has become something of an
obsession. Why? Because compared with Go, teaching computers to master chess is easy. The size of a Go board means that the number of
games that can be played on it is colossal: probably around 10170, which is almost a hundred of orders of magnitude greater than the
number of atoms in the observable universe (estimated to be around 1080). As one of DeepMind’s creators, Dr Demis Hassabis points out;
simply using raw computing power cannot master Go. Much more than chess, Go involves recognising patterns that result from groups of
stones surrounding empty spaces. Players can refer to seemingly vague notions such as ‘light’ and ‘heavy’ patterns of stones. ‘Professional
Go players talk a lot about general principles, or even intuition,’ says, Dr Hassabis, ‘whereas if you talk to professional chess players they
can often do a much better job of explaining exactly why they made a specific move.’
■ However, ideas such as ‘intuition’ are much harder to describe algorithmically than the formal rules of any game. Which is why, before
AlphaGo was developed; the best GO programs were little better than a skilled amateur. The breakthrough of AlphaGo was to combine
some of the same ideas as the older programs with new approaches that focused on how the computer could develop its own ‘instinct’
about the best moves to play. It uses a technique that its makers have called ‘deep learning’ that allows the computer to develop an
understanding of the instinctive rules of the game that experienced players can understand but cannot fully explain. It develops this leaning
by playing games against itself (or a slightly different version of itself) and analysing the vast amounts of data to sort out these ‘intuitive’
rules. However, as well as masses of data ‘deep learning’ also requires plenty of processing power. Yet it is the ‘deep learning’ that was
being seen as the exciting development that would lead to further applications. Such an approach could help computers to do complex
tasks like accurate face recognition or translate subtleties of meaning from one language to another. But, although the techniques used by
AlphaGo is an important step in the progress to, what in Dr Hassabis’s view, is the ‘same sort of broad, fluid intelligence as a human
being’, they still lack some of the abilities that humans take for granted. Arguably the most important of these is the ability to apply lessons
learned in one situation in another, what AI researchers call ‘reasoning by analogy’ or ‘transfer learning’.
DEGREE OF
COUPLING/CONNECTIVITY
■ Process technologies are increasingly coupled together. Many newer advanced
manufacturing technologies derive their competitive cost and quality advantages from
the ‘coupling’ or integration of activities that were previously separated. Coupling could
consist of physical links between pieces of equipment.
■ Many of the direct benefits associated with increased coupling echo those described
with respect to automation and scale.
 FROM ‘COUPLING’ TO
‘CONNECTIVITY’
■ Coupling in information processing technology once meant physically ‘hard-wiring’ together disparate
process elements and, as a result, was economically viable only at higher volumes and lacked the
flexibility to cope with very high variety.
■ The issues connected with connectivity are similar to those concerned with scalability and analytical
content:
. Low connectivity is often associated with idiosyncratically designed, bespoke and ‘legacy’ IT
systems.
High-connectivity technologies, on the other hand, are usually based on the platform independence
discussed above and have the bandwidth capacity to enable rich communications.
Two key drivers have allowed ‘connectivity’ to develop at such a phenomenal rate:
Hardware development
Software development
THE PRODUCT–PROCESS MATRIX

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 MOVING DOWN THE DIAGONAL
■ Operations will change their position in the matrix
■ The natural trajectory of movement ‘down’ the product/process matrix can be
observed in many different operational contexts.
■ Many financial service firms, for instance, have been able to make major
reductions in their back-office operations by reducing clerical and administrative
staffing and cost levels through investment in large-scale, integrated, automated
process technology
MARKET PRESSURES ON THE
FLEXIBILITY/COST TRADE-OFF?

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PROCESS TECHNOLOGY TRENDS

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THE CHALLENGES OF
INFORMATION TECHNOLOGY (IT)
■ One of the main issues was the degree of alignment and integration between IT strategy
and the general strategy of the firm.
■ FUNCTION IT
■ ENTERPRISE IT
■ NETWORK IT
 Enterprise Resource Planning (ERP)
■ Enterprise resource planning (ERP)  is business management software that allows an organization to
use a system of integrated applications to manage the business. ERP software integrates all facets of
an operation, including product planning, development, manufacturing processes, financials, sales
and marketing.

■ It is described as a complete enterprise-wide business solution that integrates the planning, resource
allocation and control activities of all parts of the business.
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Cont.

■ Arguably the most significant issue in many company’s decision to buy an off-the-shelf
ERP system is that of its compatibility with the company’s current business processes
and practices.
■ It is extremely important to make sure that the current way of doing business will fit (or
can be changed to fit) with a standard ERP package.
■ If a business’s current processes do not fit, they can either change their processes to fit
the ERP package, or modify the software within the ERP package to fit their processes.
 Supply Network ERP
■ The step beyond integrating internal ERP systems with immediate customers and suppliers is to
integrate it with the systems of other businesses throughout the supply network.

■ CRM (Customer Relationship Management) and ERP (Enterprise Resource Planning) software are

powerful tools for a business or enterprise to use. CRM handles the sales, marketing, and customer
service information.

■ Getting ERP and CRM systems to work together is itself often difficult. Web-integrated ERP
applications are emerging. Although a formidable task, the benefits are potentially great.
Criticisms Of ERP

■ ERP installation can be particularly expensive. In addition, there are also considerable
‘adjustment costs’ associated with many of the implementations.
■ ERP implementations have developed a reputation for exceeding their budgets.
■ In addition to the obvious investment of time and effort, there is also the cost of
providing training in new ways of working.
■ Inefficiency or incompetence in one part of the enterprise may hold back the whole
business.
Lessons From ERP

 Greater visibility of what is happening in all parts of the business.

 Forcing the business process-based changes that potentially make all parts of the
business more efficient.
 Improved control of operations that encourages continuous improvement.
 More sophisticated communication with customers, suppliers and other business
partners, often giving more accurate and timely information.
 Integrating whole supply chains, including suppliers’ suppliers and customers’
customers.
EXAMPLE: Legacy versus fintech in financial services

 Fintech is the term that commentators in the financial service sector use to refer to
innovation in all types of financial services.
 As Carolyn Wilkins, Senior Deputy Governor of the Bank of Canada, announced, ‘It is
no exaggeration to say that we are in the midst of a defining moment for innovation in
financial services. Some expect that new technology will cause a complete disruption of
traditional financial institutions, giving businesses and households access to more
convenient and customised services. Entrepreneurs are also finding applications well
beyond finance, and these new technologies could transform other fields, such as
humanitarian aid.’ Yet, arguably, what is more surprising is that this type of process
technology was not embraced faster by the financial services industry. As one
commentator put it, ‘after all money is mostly represented as an entry on a computer. It
can be moved rapidly from one account to another with virtually no cost’. Moreover,
finance firms as a whole spend more on IT, as a proportion of their revenues, than any
other sector.
 Three issues have (at the time of writing) inhibited the adoption of new fintech process
technologies. And they all could apply to any ‘disruptive’ and industry-wide process
technologies.
…..Contd.
 The first is the traditional structure of the industry. According to Andrew Haldane, the
Bank of England’s chief economist, the international payments system still looks like a
‘spaghetti junction’, with money passing through several hands on the way from payer to
recipient. Nor is it necessarily in the existing firm’s interests to change the system. Each
year huge revenues are earned by processing payments (around $1.7 trillion).
 The second reason is ‘legacy’. IT systems in banks have grown for the most part
incrementally, with updates and modifications over the years often ‘patched’ onto existing
systems until a large part of firms’ annual technology budget is consumed by maintaining,
rather than re-designing, existing systems.
 The third issue is risk. Understandably, financial services firms are very much concerned
with the reliability of any new technology, and new technologies are often unproven. A
good example is distributed ledger technology (DLT) – the ‘blockchain’ technology behind
the Bitcoin, the digital currency. Although many technology experts regarded a distributed
ledger as being more secure (any hacker would have to crack several sites rather than a
single, central register), doubts were expressed over the technology’s ability to cope with
the hundreds of thousands of transactions every second that the financial system needed to
process.
 Evaluating Process Technology
 The feasibility of the process technology – that is, the degree of difficulty in adopting it, and the
investment of time, effort and money that will be needed.

 The acceptability of the process technology – that is, how much it takes a firm towards its strategic
objectives, or the return the firm gets for choosing it.

 The vulnerability associated with the process technology – that is, the extent to which the firm is
exposed if things go wrong and the risk that is run by choosing the technology
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 Nestlé’s Flexible Factories
■ Nestlé has operations in almost 200 countries around the world. It also has over 400 factories
around the world, many of them in developing countries.

■ Nestlé has created a blueprint for a new type of factory that can be built in half the time of a
more traditional one for about 50 to 60 per cent of the cost.

■ The new modular factory could be complete, and up and running, in less than 12 months, at a
cost lesser than average factory. The modular factory uses a series of purpose-built factory
sections, which can be brought, ready-to-use, directly to the site and connected to each other
according to requirements.
Assessing Financial Requirements

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Evaluating Acceptability

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 Acceptability In Financial Terms
Financial evaluation involves predicting and analyzing the financial costs to which an option would
commit the organization, and the financial benefits that might add from acquiring the process
technology.

 The Life Cycle Cost

It involves accounting for all costs over the life of the investment that is influenced directly by the
decision. The total life cycle costing is impossible in any absolute sense. The effects of any
significant investment ripple out like waves in a pond, impinging on and influencing many other
decisions. Yet it is sensible to include more than the immediate and obvious costs involved in a
decision, and a life cycle approach proves a useful reminder of this.
 The time value of money: net present value (NPV)
The time value of money simply means that a rupee today is of more value today than it will be
tomorrow. NPV helps in deciding whether it is worth to take up a project basis the present value of
the cash flows. After discounting the cash flows over different periods, the initial investment is
deducted from it.

 Limitations of conventional financial evaluation

Conventional financial evaluation has come under criticism for its inability to include enough relevant
factors to give a true picture of complex investments. Here costs and benefits are uncertain, intangible
and often dispersed throughout an organisation.
 Acceptability In
Terms Of Impact On
Market Requirements

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Acceptability In
Terms Of Impact
On Operational
Resources

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Tangible and intangible resources

■ Tangible resources are the actual physical assets that the company possesses.
■ Intangible resources are not necessarily directly observable but, nevertheless, have value
for the company.
■ Depending on how the process technology is used, the value of the intangible aspect of
a process technology may be greater than its physical worth. If the usefulness of process
technology also depends on the software it employs, then this also must be evaluated.
 Evaluating Market And Resource Acceptability

■ For instance, a Windows-based data management system for a police force to help manage their
crime laboratory. The lab is where samples from a range of crime scenes are tested in a large variety
of different processes (DNA testing, fingerprint analysis etc.) that vary widely in their sophistication
and complexity.
■ Although speed is often of the essence in the lab, accuracy and dependability are equally critical, as
is their legal requirement to store and access information over extended periods of time (for legal
appeals, long-term investigations etc.). While this operation does not have a market position as such,
it still has a set of social and legal priorities that are its direct equivalent.
■ While this operation does not have a market position as such, it still has a set of social and legal
priorities that are its direct equivalent.
■ In other words, if a resource (such as knowledge or experience) is difficult to move or copy, this can
contribute to sustainable advantage in a competitive marketplace. However, such characteristics can
act against critical public sector objectives such as effective information transfer or even
accountability over performance.
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Evaluating Vulnerability

 Evaluating the risks associated with new process technology can be based on a very
similar type of analysis that is used for assessing acceptability; namely, by assessing risk
in terms of market, resource and financial perspectives

 The ‘vulnerability’ of technology indicates the extent to which the firm is exposed if
things go wrong. It is the risks that are run by choosing that specific technology
EXAMPLE: Rampaging robots
 It is not a big problem (at least not at the moment), but it could become one as robot
technologies start to mix directly with customers.
 Robots can be dangerous, and not just in a highly automated factory environment.
(Although factory robots can be dangerous: in 2015 a factory worker at a Volkswagen
factory was picked up and killed by a robot. He was installing it when he was lifted up
by the robotic arm and crushed against a metal plate, suffering fatal chest injuries.)
 It is the introduction of robotic technologies into the customer environment that could
give rise to new areas of reputational risk for companies.
 For example, in 2016, a robot that was intended to guard against shoplifters accidentally
ran over a 16-month old boy at a shopping centre in Palo Alto, California – ironically, a
town famous for high-tech industries. The 130-kg robot, which looks like R2-D2 from
Star Wars, apparently did not sense that the child had fallen in its path and failed to stop
before they collided. According to the boy’s mother, ‘the robot hit my son’s head and he
fell down – facing down – on the floor, and the robot did not stop and it kept moving
forward’.
…..Contd.
 It is an issue that was causing concern (or discussion) decades ago, before robots existed. The
author, and visionary, Isaac Asimov devised his Three Laws of Robotics to protect humans.
 Don’t hurt a human being, or through inaction, allow a human being to be hurt.
 A robot must obey the orders a human gives it unless those orders would result in a human
being harmed.
 A robot must protect its own existence as long as it does not conflict with the first two laws.
 The robot makers, Knightscope, said the incident was ‘absolutely horrifying’ and that the
company would apologise directly to the family. It also pointed out that its fleet of similar robots
had covered 25,000 miles on patrol duty and there had never been an incident like this before.
Nevertheless, the Shopping Centre said it would temporarily take the robot out of service.
 Other concerns that have been raised by companies fearing legal liability and reputational risk
include domestic devices like robot vacuum cleaners hurting pets or humans. A South Korean
woman was sleeping on the floor when her robot vacuum ‘ate’ her hair. Also some ‘automated’
services that could lead to customers confusing what’s real and what isn’t, resulting in customers
revealing more than they intended. For example, ‘Invisible Boyfriend’, is a service that, for a
monthly fee, sends ‘pretend’ romantic texts and voicemails to your phone – but not all customers
realise it is not fully automated, and that there are human operators involved.
 Market Vulnerability
■ Any investment in new technology needs to make an assumption concerning the market (and
more generable environment) that will exist when the technology is ‘up and running’.

Six factors creating the uncertainty that leads to vulnerability in the innovation process can be
identified.

 Market vulnerability
 Regulatory vulnerability
 Social and political vulnerability
 Acceptance and legitimacy of vulnerability
 Timing vulnerability
 Response vulnerability
■ Resource vulnerability- All process technologies depend, for their effective operation,
on support services. Specific skills are needed if the technology is to be installed, maintained,
upgraded and controlled effectively. In other words, the technology has a set of ‘resource
dependencies’.

■ Financial vulnerability - By ‘financial vulnerability, we mean the financial exposure

that adopting a new technology poses to the adopting organization. It can result from market and/or
resource vulnerability. Revenues, running costs, capital requirements and the resulting cash flows
will all be affected by market and resource vulnerabilities.