The technology life cycle (TLC) illustrates the way in which technological developments of products create commercial gain over a particular timeframe. These gains are necessary to offset the research and development (R&D) costs inherent in their creation. Moreover, varying life spans make it important for businesses to understand and accurately project the returns on these investments based on their potential longevity. Due to the rapidly increasing rates of innovation (see "Technology as a Driver and Enabler of Innovation" on Boundless), products such as electronics and pharmaceuticals in particular are vulnerable to lower life cycles (when benchmarks such as steel or paper are considered). Thus, the TLC is focused primarily upon the time and cost of development as it relates to the projected profits.
The TLC could be viewed as having four distinct stages (see Figure 1):
- Research and Development - During this stage, risks are taken through investing in new innovations and technologies. Through strategically directing investments into the most promising projects, companies and research institutions slowly work their way toward new technologies. This eventually results in the beta version of a new innovation.
- Ascent Phase - This phase covers the timeframe from the invention of the product or service to the point where out-of-pocket costs have been recovered. At this junction the goal is to see to the rapid growth and distribution of the invention, leveraging the competitive advantage of having the newest and most effective product.
- Maturity Stage - As the new innovation becomes accepted by the general population, the market becomes saturated as competitors catch up. During this stage, returns begin to slow as the concept becomes normalized.
- Decline (or Decay) Phase - The final phase is when the utility and potential value to be captured in producing and selling the product begins dipping. This decline eventually reaches the point of a zero-sum game, where margins are no longer procured.
The product development, along with capitalizing upon the new invention, covers the business side of these R&D investments in technology. The other important consideration is the way in which consumers are willing to adopt new technological innovations. These have also been distributed into phases which effectively summarize the demographic groups presented during each stage of the TLC (see Figure 2):
- Innovators - Risk-oriented, leading-edge minded individuals extremely interested in technological developments (often of a particular industry). Innovators are a small segment of the population first to adopt new ideas.
- Early Adopters - A similarly small demographic, these individuals are generally risk-oriented as well along with highly-adaptable. Early adopters follow the innovators in utilizing new concepts. These often tend to be young and highly educated individuals.
- Early Majority - More careful than the previous two groups, and much larger, the early majority are open to new ideas but generally wait to see how they are received before investing.
- Late Majority - Slightly conservative and risk-averse, the late majority is a large group of potential customers that need convincing before investing in something new.
- Laggards - Extremely frugal and conservative, laggards are a small population of usually older and uneducated individuals who avoid risks and only invest in new ideas once they are extremely well established.
Taking these two models into consideration, a business unit with a new product or service must consider the scale of investment in R&D, the projected life cycle the technology will likely maintain, and the way in which customers will adopt this product. Through leveraging these models, businesses and institutions can exercise some foresight in ascertaining the returns on investment as their technologies mature.