Essential Readings 3: Technology Life Cycle Description

ESSENTIAL READINGS 3
TECHNOLOGY LIFE CYCLE

DESCRIPTION
The technology life-cycle (TLC) describes the commercial gain of a product through the
expense of research and development phase, and the financial return during its "vital life".
Some technologies, such as steel, paper or cement manufacturing, have a long lifespan (with
minor variations in technology incorporated with time) whilst in other cases, such as
electronic or pharmaceutical products, the lifespan may be quite short.
The technology life cycle is concerned with the time and cost of developing the technology,
the timeline of recovering cost, and modes of making the technology yield a profit
proportionate to the costs and risks involved. The TLC may, further, be protected during its
cycle with patents and trademarks seeking to lengthen the cycle and to maximize the profit
from it.
The "product" of the technology may just be a commodity such as the polyethylene plastic or
a sophisticated product like the ICs used in a smartphone. The development of a competitive
product or process can have a major effect on the lifespan of the technology, making it shorter.
Equally, the loss of intellectual property rights through litigation or loss of its secret elements
(if any) through leakages also work to reduce a technology's lifespan. Thus, it is apparent that
the management of the TLC is an important aspect of technology development.
The TLC may be seen as composed of four phases:
1. The research and development (R&D) phase (sometimes called the "bleeding edge")
when incomes from inputs are negative and where the prospects of failure are high.
2. The ascent phase when out-of-pocket costs have been recovered and the technology
begins to gather strength by going beyond some Point A on the TLC (sometimes called
the "leading edge")
3. The maturity phase when gain is high and stable, the region, going into saturation,
marked by M, and
4. The decline (or decay phase), after a Point D, of reducing fortunes and utility of the
technology.
S-curve: The shape of the technology lifecycle is often referred to as S-curve.
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Course-: MSL-723 (Telecom Systems Management)
Course Coordinator: Prof. Mahim Sagar
SUGGESTED READINGS
- Technology Management - Growth & Lifecycle, Shahid kv, Sep 28, 2009, Attribution
Non-commercial
- Bayus, B. (1998). An Analysis of Product Lifetimes in a Technologically Dynamic Industry.
Management Science, 44(6), pp.763-775
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TECHNOLOGY LEGACY
A definition of legacy technology describes the term as “an old method, technology, computer
system or application program, of, relating to, or being a previous or outdated computer
system.” This particular definition frames legacy technology in a negative light. There’s no
getting around the fact that legacy technology is pervasive. The reasons to move on from legacy
technology stretch further:
Data breaches: As Tesco discovered, legacy technology is open to cyber crime. Vendor support
is often non-existent, which limits valuable upgrades. Furthering security risks, advantages of
improvements in security measures are not easily accessible for old systems.
Expensive functionality: Revamping outdated technology can be an expensive proposition,
but running outdated technology increases operating costs also. Old hardware versions lack
modern power-saving technology and the systems’ maintenance is expensive.
Compliance penalties: Depending on your industry, legacy technology may not be in
compliance. In the medical industry, outdated software will fail to meet compliance standards,
such as the Health Insurance Portability and Accountability Act (HIPAA), resulting in severe
financial penalties.
Customer loss: No matter the industry, offering outdated solutions and ideas derived from
equally outdated technology will prompt customers to look elsewhere for better answers.
Unreliability: Many organizations hold on to legacy systems in the belief that the systems still
work. If that’s not the case, consider what happens when something goes wrong, as seen in the
detrimental examples above.
Perception issues: Leaders need to be aware of the message they’re sending to their
employees. Consider how a younger employee who’s comfortable with technology might react
to coping with the limitations of legacy technology. Aside from lost productivity, they may
consider a new employer more willing to invest in current infrastructures.
Source: https://www.business2community.com/strategy/the-risks-of-sticking-with-legacy-
technology-02199412
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PROSPECT THEORY
DESCRIPTION: A theory relating individual risk-aversion and risk-seeking tendencies to
gain and loss situations, where it is theorized and experimentally demonstrated that
individuals are significantly more risk averse when facing gains and significantly more risk
seeking when facing losses.
KEY INSIGHTS: According to prospect theory as developed and researched by Kahneman
and Tversky (1979), individuals facing favourable conditions tend to be more risk averse, as
opposed to risk seeking, because they feel they have more to lose than to gain. Conversely,
individuals facing unfavourable circumstances tend to be more risk seeking, as opposed to
risk averse, because they feel they have little to lose. The theory has received support as a
result of experiments conducted by the founders and subsequent academic researchers on
individuals confronted with gain and loss situations under a wide variety of controlled
conditions.
KEY WORDS: gains, losses, risk taking, risk seeking, risk, return, decision making, and
framing.
IMPLICATIONS: The theory has implications for explaining and predicting the tendencies
of people in evaluating information. Specifically, the theory provides an explanation for why
individuals and organizations may make decisions that vary from what might be considered
purely rational based on maximizing expected utilities. In the context of organizational
decision making, executives facing external threats might be expected to be risk seeking, and
executives facing external opportunities might be expected to be risk averse (Fiegenbaum and
Thomas 1988; Wiseman and Gomez-Mejia 1998; Chattopadhyay, Glick, and Huber 2001).
Executives and managers should, therefore, attempt to compensate for the possibility of
inadvertent biases in their decision making as a result of the way a decision is framed in
terms of gains and losses.
In the context of influencing consumer decision making, marketers should consider the fact
that consumers are likely to make product and service purchase decisions based on personal
valuations of gains and losses that differ significantly from a purely rational perspective.
Specifically, whereas losing a dollar should be just as painful as the pleasure of gaining a
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dollar, experiments based on prospect theory suggest that losing a dollar is about twice as
painful as the pleasure of gaining a dollar (Kahneman and Tversky 1991). Thus, according to
the theory, consumers buying and holding financial market instruments will tend to hold on
to losing positions in the hope of a recovery while also tending to move too quickly to sell to
secure any financial gains.
Astute marketers of a wide range of products and services (e.g. financial instruments,
disability insurance, electric utility services, equipment warranties) should therefore
recognize consumer biases in psychologically valuing gains and losses and make adjustments
to their marketing strategies and tactics in order to provide stronger psychological and actual
tangible appeals. In advertising and promotions, for example, marketers may potentially
increase consumer receptivity to a product or service by emphasizing the risk of significant
losses without the product or service as opposed to the opportunity for significant gains with
the same product or service.
SUGGESTED READINGS
1. Kahneman, Daniel, and Tversky, Amos (1979). ‘Prospect Theory: An Analysis of Decision
under Risk,’ Econometric, 47, 263–292.
2. Kahneman, Daniel, and Tversky, Amos (1991). ‘Loss Aversion in Riskless Choice: A
Reference-Dependent Model,’ Quarterly Journal of Economics, 106(4), November, 1039–
1063.
3.Chattopadhyay, Rithviraj, Glick, William H., and Huber, George P. (2001).
‘Organizational Actions in Response to Threats and Opportunities,’ Academy of
Management Journal, 44(5), October, 937–955.
RISK
DESCRIPTION: In the ordinary sense, the risk is the outcome of an action taken or not taken,
in a particular situation which may result in loss or gain. It is termed as a chance or loss or
exposure to danger, arising out of internal or external factors that can be minimized through
preventive measures.
In the financial glossary, the meaning of risk is not much different. It implies the uncertainty
regarding the expected returns on the investments made i.e. the probability of actual returns
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may not be equal to the expected returns. Such a risk may include the probability of losing
the part or whole investment. Although the higher the risk, the higher is the expectation of
returns, because investors are paid off for the additional risk they take on their investments The
major elements of risk are defined as below:
• Systematic Risk: Interest Risk, Inflation Risk, Market Risk, etc.
• Unsystematic Risk: Business Risk and Financial Risk.
Sources of Risks are of External and Internal Risks. Internal Risks categorized into Decision
related risk and technical risk.
Source: Sources of Risk (Larsen and Gray, 2011)
UNCERTAINITY
DESCRIPTION: By the term uncertainty, we mean the absence of certainty or something
which is not known. It refers to a situation where there are multiple alternatives resulting in a
specific outcome, but the probability of the outcome is not certain. This is because of
insufficient information or knowledge about the present condition. Hence, it is hard to define
or predict the future outcome or events.
Uncertainty cannot be measured in quantitative terms through past models. Therefore,

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probabilities cannot be applied to the potential outcomes, because the probabilities are
unknown.
Characteristics of Uncertainty
1. Uncertainty is state of unknowing
2. Uncertainty is lack of information.
3. Uncertainty is less susceptible to analysis, involving variability and ambiguity
4. The consequences of uncertainty are project risks.
5. Uncertainty is a subjective phenomenon.
6. Uncertainty can be positive or negative.
DIFFERENCE BETWEEN RISK AND UNCERTAINTY
Uncertainty Risk
We do not know how many engineering
We may not have sufficient resources to
resources will be made available to the
deliver the project to plan
project.
We do not know what changes the industry
We may need to do significant product
regulator may require to our proposed
redesign, delaying the project delivery.
product design.
We do not know what the impact of an We may need to incorporate new safety
external industry report into a previous features into our project, again delaying the
industrial accident on our project may be project delivery and increasing project cost.
We do not know what the end point of our We may not be able to deliver on time and
project is. to budget if the scope is not clearly defined
SUGGESTED READINGS
1. Chapman, C., & Ward, S. (2011). How to Manage Project Opportunity and Risk.
Chichester: 8 John Wiley and Sons Ltd.
2. Cleden, D. (2009). Managing Project Uncertainty. Farnham, UK: Gower Publishing
Limited.
3. Loosemore, M., Raftery, J., Reilly, C., & Higgon, D. (2006). Risk Management in Projects
(2nd ed.). Abingdon: Taylor & Francis.
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TECHNOLOGY UNCERTAINTY
Technology uncertainty can be defined as the lack of predictability or knowledge about the
future developments and adoption of new technologies. It can have a significant impact on
business and investment decisions, as it makes it difficult for companies to accurately forecast
future market conditions and make strategic decisions.
Some causes of technology uncertainty include:
• Technical complexity: The complexity of new technologies can make it difficult to
predict their development and adoption.
• Limited information: Lack of information or data about a new technology can make it
difficult to make accurate predictions about its future.
• Legal and regulatory environment: Changing laws and regulations can affect the
development and adoption of new technologies.
• Competition: The level of competition in a market can influence the rate at which new
technologies are adopted and the level of investment in their development.
To manage technology uncertainty, companies may use strategies such as:
• Real options approach: This method involves using options-based methods to manage
uncertainty by allowing firms to delay investment decisions until more information is
available.
• Scenario planning: This approach involves creating multiple scenarios of how a

technology might develop and the impact it might have on the market.
• Flexibility: Companies may aim to maintain flexibility in their operations to allow them
to respond quickly to changes in technology and market conditions.
• Diversification: Companies may diversify their product or service offerings to mitigate

the impact of uncertainty in one area.
It's important to note that the best way to manage technology uncertainty is to keep a close eye
on the industry, monitor the latest trends and developments, and continuously gather new
information about new technologies and their potential impact on the market.
Bibliography
1. Technology Uncertainty and Investment Dynamics" by David G. Tawil and John J.

Wilder (Journal of Financial and Quantitative Analysis, 2003).
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2. "Managing Technology Uncertainty: A Real Options Perspective" by David G.
Luenberger and Yinyu Ye (Management Science, 2002)
3. "Managing Technology Uncertainty: An Empirical Study" by R. Scott Tannas and
Edward J. Zajac (Strategic Management Journal, 2002)
4. "Managing Technology Uncertainty: An Empirical Study of the Impact of
Organizational Antecedents" by R. Scott Tannas and Edward J. Zajac (Strategic
Management Journal, 2004)
MACROENVIRONMENT (PEST ANALYSIS)

DESCRIPTION
The set of societal forces that have a major influence on industries and markets (also called
macro marketing environment)
KEY INSIGHTS
The macroenvironment can be considered to consist of multiple forces of influence to

industries and markets. Examples of such forces, or pressures on the firm, include political,
economic, social, cultural, demographic, technological, legal, regulatory, environmental, and
natural forces. To ensure that a firm’s marketing efforts are compatible with these and other
broad societal forces, an analysis of the macroenvironment is recommended, where the
implications for the firm’s marketing efforts receive critical attention. Aside from the general
term environmental analysis, there are a number of generally equivalent terms used for such
an analysis, including PEST analysis (also called STEP analysis), which involves an analysis
of political (including legal and regulatory), economic, social, and technological forces of the
macron environment, and PEST analysis, which also involves analysis of the same set of forces
as for PEST but makes legal forces distinct from political forces and further includes
environmental forces. What is most important in the environmental analysis is not so much
the precise categorizations used but the identification of important forces of influence, both
current and potential, to the firm’s marketing efforts. For example, a firm involved in
developing new teleworking products may find that there are numerous important influences
in the area of technological forces, which may further include influences associated with
technological advances in both communications hardware and software. At the same time, the
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firm would not want to neglect analyses of cultural forces and economic forces, both of
which may be important in the firm’s plans to offer the product in multiple countries.
KEY WORDS Societal forces macro marketing
IMPLICATIONS
While the marketing strategies supporting a firm’s offerings must clearly take into account
the firm’s immediate operating environment (e.g. Competitor and customer environment),
astute marketers recognize the importance of understanding the firm’s macroenvironment to
ensure the firm’s marketing strategy fits with broader forces of influence. Such forces cannot
be influenced but trends and events associated with such forces may have a profound impact
on firm success, as when a food products firm anticipates a cultural trend toward healthier
eating and incorporates knowledge of the trend into new food offerings and their supporting
marketing communications.
APPLICATION AREAS AND FURTHER READINGS
1. Marketing Management Andrews, Jonlee, and Smith, Daniel C. (1996). ‘In Search of
the Marketing Imagination: Factors Affecting the Creativity of Marketing Programs
for Mature Products, ’Journal of Marketing Research, 33(2), May, 174–187.
2. Marketing Strategy Mavondo, F. T. (1999). ‘Environment and Strategy as
Antecedents for Marketing Effectiveness and Organizational Performance,’
Developments in Marketing Science,22, 363–370.
BIBLIOGRAPHY
Sheth, J. N. (1992). ‘Emerging Marketing Strategies in a Changing Macroeconomic

Environment: A Commentary,’ International Marketing Review, 9(1), 57–63. marketing-
led actions positively or negatively influence their current and future levels and vice versa.
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CONTENT AGGREGATION
“Content aggregation” means the act of collecting content (blogs, newsletters, news articles,
social media posts, etc.) from various feeds to the same place online. Aggregation can be done
manually by people or automatically by software tools. Often the content aggregation process
is part of an organization’s content marketing strategy. Aggregating content helps them write
their own blog posts and deliver value to users. At the same time, some companies use it for
news intelligence to always be knowledgeable of their industry.
A “content aggregator” is an application or website designed to pull content from a variety of

sources and then publish it all into the same place. Facebook, YouTube, Instagram are all
content aggregators that close the gap between content publishers and users. Publishers submit
their own content to social media platforms, while another great example of an aggregator,
Google News, crawls and pulls the new content from many websites on its own. It is often the
case that aggregators specialize in different types of content or content format (video, blogs,
academic journals, etc.), such as technology specific news, or aggregating content from social
media channels only.
With that said it becomes obvious that no aggregator can fit all your needs, so choosing your
content aggregator mix depends to a large extend on which sources you plan to pull content
from and whether the specific aggregator supports those platforms.
Bibliography
1. "The Filter Bubble: What the Internet is hiding from you" by Eli Pariser (2011), this
book offers a comprehensive view of the concept of filter bubble, and how it affects the
way people are exposed to information.
2. "Content Marketing: The Future of Branding" by Joe Pulizzi and Newt Barrett
(Journal of Marketing Development and Competitiveness, 2010)
CANIBALISATION
DESCRIPTION: In marketing strategy, cannibalization refers to a reduction in sales volume,

sales revenue, or market share of one product as a result of the introduction of a new product
by the same producer.
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KEY INSIGHTS: While this Cannibalization seem inherently negative, in the context of a
carefully planned strategy, it can be effective, by ultimately growing the market, or better
meeting consumer demands. Cannibalization is a key consideration in product portfolio
analysis. For example, when Apple introduced the iPad, it took sales away from the original
Macintosh, but ultimately led to an expanded market for consumer computing hardware.
Another example of cannibalization occurs when a retailer discounts a particular product. The
tendency of consumers is to buy the discounted product rather than competing products with
higher prices. When the promotion event is over and prices return to normal,
however, the effect will tend to disappear. This temporary change in consumer behaviour can
be described as cannibalization, though scholars do not normally use the phrase
"cannibalization" to denote such a phenomenon. In e-commerce, some companies intentionally
cannibalize their retail sales through lower prices on their online product offerings. More
consumers than usual may buy the discounted products, especially if they'd previously been
anchored to the retail prices. Even though their in-store sales might decline, the company may
see overall gains.
In project evaluation, the estimated profit generated from the new product must be reduced by
the earnings on the lost sales. Another common case of cannibalization is when companies,
particularly retail companies, open sites too close to each other, in effect, competing for the
same customers. The potential for cannibalization is often discussed when considering
companies with many outlets in an area, such as Starbucks or McDonald's.
BIBLIOGRAPHY
M.F., Goodchild (1984). "ILACS: A Location Allocation Model for Retail Site Selection.".
Journal of Retailing (60): 84–100. doi:10.1111/j.1538-4632.1989.tb00900.x.
Dimock, Matt (July 25, 2013). "The Keyword Cannibalization Survival Guide". Retrieved
November 11, 2013
MBO – MANAGEMENT BY OBJECTIVE
Management by objectives (MBO), also known as management by results (MBR), was first
popularized by Peter Drucker in his 1954 book The Practice of Management. Management by
objectives is the process of defining specific objectives within an organization that
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management can convey to organization members, then deciding on how to achieve each
objective in sequence. It is a continuous process. This process allows managers to take work
that needs to be done one step at a time to allow for a calm, yet productive work environment.
This process also helps organization members to see their accomplishments as they achieve
each objective, which reinforces a positive work environment and a sense of achievement. An
important part of MBO is the measurement and comparison of an employee's actual
performance with the standards set. Ideally, when employees themselves have been involved
with the goal-setting and choosing the course of action to be followed by them, they are more
likely to fulfill their responsibilities. According to George S. Odiorne, the system of
management by objectives can be described as a process whereby the superior and
subordinate jointly identify common goals, define each individual's major areas of
responsibility in terms of the results expected of him or her, and use these measures as guides
for operating the unit and assessing the contribution of each of its members.
The mnemonic S.M.A.R.T. is associated with the process of setting objectives in this paradigm.
"SMART" objectives are:
• Specific - Target a specific area for improvement.

• Measurable - Quantify or suggest an indicator of progress.
• Assignable - Specify who will do it.
• Realistic - State what results can realistically be achieved, given available resources.
• Time-Related - Specify when the result(s) can be achieved.
The aphorism "what gets measured gets done", is aligned with the MBO philosophy.
Management by Objectives is still practiced today, with a focus on planning and development
aiding various organizations. The most recent research focuses on specific industries,
specifying the practice of MBO for each. In addition, following criticism of the original MBO
approach, a new formula was introduced in 2016, aiming at revitalizing it, that is the OPTIMAL
MBO, which stands for its components, namely: (O) Objectives, Outside-in; (P) Profitability
(budget) related goals; (T) Target Setting; (I) Incentives & Influence; (M) Measurement; (A)
Agreement, Accountability, Appraisal, Appreciation; and (L) Leadership Support.
While the practice is used today, it may go by different names – the letters "MBO" have lost
their formality, and future planning is a more standard practice.
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Bibliography:
Drucker, P., The Practice of Management, Harper, New York, 1954; Heinemann, London,
1955; revised edn, Butterworth-Heinemann, 2007
MANAGEMENT INFORMATION SYSTEM
A management information system (MIS) is an information system used for decision-making,

and for the coordination, control, analysis, and visualization of information in an
organization; especially in a company. The study of management information systems
examines people, processes and technology in an organizational context.
In a corporate setting, the ultimate goal of the use of a management information system is to
increase the value and profits of the business.
The following are types of information systems used to create reports, extract data, and assist
in the decision-making processes of middle and operational level managers.
Decision support systems (DSS) are computer program applications used by middle and
higher management to compile information from a wide range of sources to support problem
solving and decision making. A DSS is used mostly for semi-structured and unstructured
decision problems.
Executive information systems (EIS) is a reporting tool that provides quick access to
summarized reports coming from all company levels and departments such as accounting,
human resources and operations.
Marketing information systems are management Information Systems designed specifically

for managing the marketing aspects of the business.
Accounting information systems are focused accounting functions.
Human resource management systems are used for personnel aspects.
Office automation systems (OAS) support communication and productivity in the enterprise
by automating workflow and eliminating bottlenecks. OAS may be implemented at any and
all levels of management.
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School Information Management Systems (SIMS) cover school administration, often
including teaching and learning materials
Enterprise resource planning (ERP) software facilitates the flow of information between all
business functions inside the boundaries of the organization and manage the connections to
outside stakeholders.
Local Databases, can be small, simplistic tools for managers and are considered to be a primal
or base level version of a MIS.
Bibliography:
Costa, A; Ferreira, C.; Bento, E.; Aparicio, F. (2016). "Enterprise resource planning adoption
and satisfaction determinants". Computers in Human Behavior. 63: 659–671.
“THE BLACK SWAN: THE IMPACT OF THE HIGHLY IMPROBABLE”

BY NASSIM NICHOLAS TALEB
Before the discovery of Australia, people in the old world were convinced that all swans
were white, an unassailable belief as it seemed completely confirmed by empirical evidence.
The sighting of the first black swan might have been an interesting surprise for a few
ornithologists (and others extremely concerned with the colouring of birds), but that is not
where the significance of the story lies. It illustrates a severe limitation to our learning from
observations or experience and the fragility of our knowledge. One single observation can
invalidate a general statement derived from millennia of confirmatory sightings of millions of
white swans. All you need is one single (and, I am told, quite ugly) black bird.
I push one step beyond this philosophical-logical question into an empirical reality, and one
that has obsessed me since childhood. What we call here a Black Swan (and capitalize it) is
an event with the following three attributes.
First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in
the past can convincingly point to its possibility. Second, it carries an extreme impact. Third,
in spite of its outlier status, human nature makes us concoct explanations for its occurrence
after the fact, making it explainable and predictable.
I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not
prospective) predictability. A small number of Black Swans explain almost everything in our
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world, from the success of ideas and religions, to the dynamics of historical events, to
elements of our own personal lives. Ever since we left the Pleistocene, some ten millennia
ago, the effect of these Black Swans has been increasing. It started accelerating during the
industrial revolution, as the world started getting more complicated, while ordinary events,
the ones we study and discuss and try to predict from reading the newspapers, have become
increasingly inconsequential.
Just imagine how little your understanding of the world on the eve of the events of 1914
would have helped you guess what was to happen next. (Don't cheat by using the
explanations drilled into your cranium by your dull high school teacher). How about the rise
of Hitler and the subsequent war? How about the precipitous demise of the Soviet bloc? How
about the rise of Islamic fundamentalism? How about the spread of the Internet? How about
the market crash of 1987 (and the more unexpected recovery)? Fads, epidemics, fashion,
ideas, the emergence of art genres and schools. All follow these Black Swan dynamics.
Literally, just about everything of significance around you might qualify.
This combination of low predictability and large impact makes the Black Swan a great
puzzle; but that is not yet the core concern of this book. Add to this phenomenon the fact that
we tend to act as if it does not exist! I don't mean just you, your cousin Joey, and me, but
almost all "social scientists" who, for over a century, have operated under the false belief that
their tools could measure uncertainty. For the applications of the sciences of uncertainty to
real-world problems has had ridiculous effects; I have been privileged to see it in finance and
economics. Go ask your portfolio manager for his definition of "risk," and odds are that he
will supply you with a measure that excludes the possibility of the Black Swan-hence one that
has no better predictive value for assessing the total risks than astrology (we will see
how they dress up the intellectual fraud with mathematics). This problem is endemic in social
matters.
The central idea of this book concerns our blindness with respect to randomness, particularly
the large deviations: Why do we, scientists or non-scientists, hotshots or regular Joes, tend to
see the pennies instead of the dollars? Why do we keep focusing on the minutiae, not the
possible significant large events, in spite of the obvious evidence of their huge influence?
And, if you follow my argument, why does reading the newspaper actually decrease your
knowledge of the world?
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It is easy to see that life is the cumulative effect of a handful of significant shocks. It is not so
hard to identify the role of Black Swans, from your armchair (or bar stool). Go through the
following exercise. Look into your own existence. Count the significant events, the
technological changes, and the inventions that have taken place in our environment since you
were born and compare them to what was expected before their advent. How many of them
came on a schedule? Look into your own personal life, to your choice of profession, say, or
meeting your mate, your exile from your country of origin, the betrayals you faced, your
sudden enrichment or impoverishment. How often did these things occur according to plan?
What You Do Not Know
Black Swan logic makes what you don't know far more relevant than what you do know.
Consider that many Black Swans can be caused and exacerbated by their being unexpected.
Think of the terrorist attack of September 11, 2001: had the risk been reasonably conceivable
on September 10, it would not have happened. If such a possibility were deemed worthy of
attention, fighter planes would have circled the sky above the twin towers, airplanes would
have had locked bulletproof doors, and the attack would not have taken place, period.
Something else might have taken place. What? I don't know. Isn't it strange to see an event
happening precisely because it was not supposed to happen? What kind of defence do we
have against that? Whatever you come to know (that New York is an easy terrorist target, for
instance) may become inconsequential if your enemy knows that you know it. It may be odd
to realize that, in such a strategic game, what you know can be truly inconsequential.
This extends to all businesses. Think about the "secret recipe" to making a killing in the
restaurant business. If it were known and obvious then someone next door would have
already come up with the idea and it would have become generic. The next killing in the
restaurant industry needs to be an idea that is not easily conceived of by the current
population of restaurateurs. It has to be at some distance from expectations. The more
unexpected the success of such a venture, the smaller the number of competitors, and the
more successful the entrepreneur who implements the idea. The same applies to the shoe and
the book businesses-or any kind of entrepreneurship. The same applies to scientific theories
nobody has interest in listening to trivialities. The payoff of a human venture is, in general,
inversely proportional to what it is expected to be.
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Consider the Pacific tsunami of December 2004. Had it been expected, it would not have
caused the damage it did-the areas affected would have been less populated, an early warning
system would have been put in place. What you know cannot really hurt you.
Experts and "Empty Suits"
The inability to predict outliers implies the inability to predict the course of history, given the
share of these events in the dynamics of events.
But we act as though we are able to predict historical events, or, even wore, as if we are able
to change the course of history. We produce thirty year projections of social security deficits
and oil prices without realizing that we cannot even predict these for next summer-our
cumulative prediction errors for political and economic events are so monstrous that every
time I look at the empirical record I have to pinch myself to verify that I am not dreaming.
What is surprising is not the magnitude of our forecast errors, but our absence of awareness
of it. This is all the more worrisome when we engage in deadly conflicts: wars are
fundamentally unpredictable (and we do not know it). Owing to this misunderstanding of the
casual chains between policy and actions, we can easily trigger Black Swans thanks to
aggressive ignorance-like a child playing with a chemistry kit.
Our inability to predict in environments subjected to the Black Swan, coupled with a general
lack of the awareness of this state of affairs, means that certain professionals, while believing
they are experts, are in fact not based on their empirical record, they do not know more about
their subject matter than the general population, but they are much better at narrating-or,
worse, at smoking you with complicated mathematical models. They are also more likely to
wear a tie.
Black Swans being unpredictable, we need to adjust to their existence (rather than naÔvely
try to predict them). There are so many things we can do if we focus on anti knowledge, or
what we do not know. Among many other benefits, you can set yourself up to collect
serendipitous Black Swans by maximizing your exposure to them.
Learning to Learn
Another related human impediment comes from excessive focus on what we do know: we
tend to learn the precise, not the general.
18
What did people learn from the 9/11 episode? Did they learn that some events, owing to their
dynamics, stand largely outside the realm of the predictable? No. Did they learn the built-in
defect of conventional wisdom? No. What did they figure out? They learned precise rules for
avoiding Islamic prototerrorists and tall buildings. Many keep reminding me that it is
important for us to be practical and take tangible steps rather than to "theorize" about
knowledge. The story of the Maginot Line shows how we are conditioned to be specific. The
French, after the Great War, built a wall along the previous German invasion route to prevent
reinvasion-Hitler just (almost) effortlessly went around it. The French had been excellent
students of history; they just learned with too much precision. They were too practical and
exceedingly focused for their own safety.
We do not spontaneously learn that we don't learn that we don't learn. The problem lies in
the structure of our minds: we don't learn rules, just facts, and only facts. Metarules (such as
the rule that we have a tendency to not learn rules) we don't seem to be good at getting. We
scorn the abstract; we scorn it with passion.
Why? It is necessary here, as it is my agenda in the rest of this book, both to stand
conventional wisdom on its head and to show how inapplicable it is to our modern, complex,
and increasingly recursive environment.
But there is a deeper question: What are our minds made for? It looks as if we have the
wrong user's manual. Our minds do not seem made to think and introspect; if they were,
things would be easier for us today, but then we would not be here today and I would not
have been here to talk about it-my counterfactual, introspective, and hard-thinking ancestor
would have been eaten by a tiger while his non-thinking, but faster-reacting cousin would
have run for cover. Consider that thinking is time-consuming and generally a great waste of
energy, that our predecessors spent more than a hundred million years as non-thinking
mammals and that in the blip in our history during which we have used our brain we have used
it on subjects too peripheral to matter. Evidence shows that we do much less thinking
than we believe we do-except, of course, when we think about it.
Bibliography:
Taleb, N. N. (2007). The Black Swan: The Impact of the Highly Improbable. Random House.
19
GANG PLANK
The Gangplank refers to the need for ‘level jumping’ in a hierarchical organisation. Although
Fayol places emphasis on formal organisation, he is alive to the dangers of conformity to
hierarchy and formalism. ‘It is an error to depart needlessly from the line of authority, but it
is even greater one to keep it when detrimental to the businesses, asserts Fayol.
He illustrates the problem with reference to the figure given below. If ‘F’ follows the
principle of proper channel of communication, he has to send his message or file to ‘P’
through ‘E’, ‘D’ and so on, covering nine levels. It is, however, possible for ‘F’ to use
‘gangplank’ and avoid going through ‘A’ and all the other intervening layers as
intermediaries. Recourse to ‘gangplank’ is possible only when the immediate superiors (in
the case, ‘E’ and ‘O’) authorize such a relationship. Whenever a disagreement develops
between ‘F’ and ‘P’, they must turn the matter to their superiors. While suggesting
‘gangplank’, Fayol is rather cautions. He feels that it may be less relevant to Government
agencies in which the lines of authority are less clear than in private organisations.
20
CAPITALISM
Capitalism is an economic system characterized by private ownership of the means of

production and the creation of goods or services for profit. In a capitalist economy, businesses
and individuals are free to produce and exchange goods and services according to the laws of
supply and demand in the market.
Some key features of capitalism include:

• Private property: the ability of individuals and businesses to own and control property,
including the means of production (e.g. factories, land, resources)
• Profit motive: the drive to make a profit by producing and selling goods and services
• Competition: the existence of multiple businesses competing for customers and market
share
• Laissez-faire: the idea that government should not interfere in the economy and that the
market should be left to operate on its own
Critics of capitalism argue that it can lead to income inequality, environmental degradation,
and a lack of access to basic goods and services for certain groups of people. Supporters argue
that capitalism is the most efficient and effective way to create wealth and promote economic
growth.
Capitalism has been the dominant economic system in the world since the 18th century and has
been adopted in various forms in countries around the world. It is often associated with the rise
of industrialization and the growth of the middle class in Western countries.
There are different variations of capitalism, some of the most notable are: -
• Social Capitalism: where the state intervention in the economy is directed to address
social issues such as poverty, unemployment, income inequality and access to education
and health services.
• State Capitalism: where the government plays a dominant role in the economy, either
through ownership or control of the means of production or through heavy regulation.
• Conscious Capitalism: where the business is driven by purpose and values, not just
profit, as well as the well-being of all stakeholders
21
Bibliography
1. Handlin, O. (1963). Capitalism and Freedom. By Milton Friedman with the
assistance of Rose D. Friedman. Chicago, The University of Chicago Press,
1962. Pp. vi+ 202. $3.95. Business History Review, 37(3), 315-316.
2. Acemoglu, Daron, Camilo García-Jimeno, and James A Robinson. 2015. “ The
Role of State Capacity in Economic Development.” The Political Economist
XI (1): 7-9.
CONSCIOUS CAPITALISM
Conscious Capitalism is a philosophy and movement that aims to create a more equitable and
sustainable form of capitalism. It emphasizes the importance of a company's purpose beyond
profit, and encourages businesses to consider the impact of their actions on all stakeholders,
including employees, customers, suppliers, and the community. Conscious capitalism also
stresses the importance of strong corporate culture and ethical leadership. The movement is
based on the idea that businesses can be a force for good in the world, and that by aligning the
interests of all stakeholders, companies can create value for everyone involved.
Conscious Capitalism has several key principles, which include:
1. Higher Purpose: A company's purpose should go beyond making a profit and should
serve a higher goal that is meaningful to all stakeholders.
2. Stakeholder Orientation: Businesses should consider the impact of their actions on all
stakeholders, including employees, customers, suppliers, and the community.
3. Conscious Leadership: Ethical and values-based leadership is crucial to creating a
successful and sustainable business.
4. Conscious Culture: A strong corporate culture that aligns with the company's values
and purpose is essential to creating a positive impact on all stakeholders.
5. Conscious Communications: Transparency and open communication are important for
building trust with stakeholders.
6. Conscious Innovation: Businesses should strive to create innovative solutions that
benefit all stakeholders and contribute to a sustainable future.
22
7. Conscious Governance: Companies should have a strong governance structure that is
accountable to all stakeholders.
Bibliography:
1. "Conscious Capitalism: A New Business Philosophy" by John Mackey and Raj Sisodia
2. "Conscious Capitalism: Liberating the Heroic Spirit of Business" by John Mackey and
Raj Sisodia.
3. "Conscious Capitalism and Employee Well-being: A Study of the Conscious Capitalism
Credo Companies" by J. Kim
EXAMPLE DISCUSSED IN THE CLASS
• RISK: Nokia was largest phone manufacturer in the world but lack of innovation and No
risk take in Innovation/ new product development
• Blackberry: died out because of not Open OS
• Google: android OS is successful because of innovation and risk-taking ability
• All MNO became the content aggregator e.g. Reliance Jio acquire all the Bollywood and
Tollywood entertainment (to increase the data consumption).
• Black Swan:2008 Economic crisis, 9/11 attack, Digital economy, Ukraine war, Covid 19.
• TLC: Telecom Generation 1G to 5G, From Floppy disk to DVS to Pen drive to Cloud
Storage technology.
Suggested Books
• Essentials of Management by Koontz
23

Essential Readings 3: Technology Life Cycle Description

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ESSENTIAL READINGS 3

TECHNOLOGY LIFE CYCLE

Source: Sources of Risk (Larsen and Gray, 2011)

Uncertainty cannot be measured in quantitative terms through past models. Therefore,

DIFFERENCE BETWEEN RISK AND UNCERTAINTY

To manage technology uncertainty, companies may use strategies such as:

• Scenario planning: This approach involves creating multiple scenarios of how a

• Diversification: Companies may diversify their product or service offerings to mitigate

1. Technology Uncertainty and Investment Dynamics" by David G. Tawil and John J.

MACROENVIRONMENT (PEST ANALYSIS)

The macroenvironment can be considered to consist of multiple forces of influence to

KEY WORDS Societal forces macro marketing

APPLICATION AREAS AND FURTHER READINGS

Sheth, J. N. (1992). ‘Emerging Marketing Strategies in a Changing Macroeconomic

A “content aggregator” is an application or website designed to pull content from a variety of

DESCRIPTION: In marketing strategy, cannibalization refers to a reduction in sales volume,

MBO – MANAGEMENT BY OBJECTIVE

• Specific - Target a specific area for improvement.

1955; revised edn, Butterworth-Heinemann, 2007

MANAGEMENT INFORMATION SYSTEM

A management information system (MIS) is an information system used for decision-making,

Marketing information systems are management Information Systems designed specifically

Accounting information systems are focused accounting functions.

Human resource management systems are used for personnel aspects.

“THE BLACK SWAN: THE IMPACT OF THE HIGHLY IMPROBABLE”

Capitalism is an economic system characterized by private ownership of the means of

Some key features of capitalism include:

Conscious Capitalism has several key principles, which include:

EXAMPLE DISCUSSED IN THE CLASS

• Essentials of Management by Koontz

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