Technology Defined

Meet Barney. He has a problem. He's the president of a news magazine company, but
subscriptions are in the toilet, and newsstand sales are even worse. He doesn't know if the
company can survive another year. Barney has identified the problem as well as a possible
solution.

Ironically, the problem and solution are the same thing: technology. Technology is a much
more broader concept than many people today think it is. It is the application of knowledge to
the world that allows people to affect their environment by controlling or changing it.

Technological Change
Technological change is improvement in the 'art' of making products or developing
processes. Barney's biggest threat is new technological products and processes that are
destroying the traditional print industry. A technological product is just something that man
created using the application of knowledge to improve a person's life, environment or society.

In Barney's case, the new technological products wreaking havoc with his business are e-
readers and computer tablets. Every year, more and more consumers are ditching the printed
word for digital.

A technological process is a means to make and improve products and services. For example,
the traditional manner of 'printing' magazines involved a mechanical printing press. Now, a
new technological process has been developed to digitize the magazine to be transmitted and
stored electronically.

Barney figures if he can't beat technological change, then his company must embrace it. He
has decided to turn his print magazine into a digital one that will be readable on all major e-
readers and computer tablets. He may also have to adopt or develop new technological
processes for the production and distribution of his new e-magazine.

Advantages of Change
Technological change can bring about advantages and opportunities for businesses.
Obviously, new technology can create new products and services, thereby creating entire new
markets for a business. Moreover, improvements in technological products and processes can
increase productivity and reduce costs.

For example, Barney will not have to purchase paper and ink for printing if he takes his
magazine completely digital. He saves on space that is no longer needed for an industrial
printing press and warehouse space for temporary storage of the magazines. Barney also won't
have to pay a distributor to deliver paper copies to retailers.

Creative Destruction
While Barney's business may be able to survive the existential threat of changing technology,
not all businesses will fare so well. Some will fall prey to the creative destruction of change.
Creative destruction occurs when a new technology creates a new product or process but
destroys an old product or process at the same time. In fact, the process of creative destruction
can lead to the creation of entire new industries and markets, which destroy and replace old
ones. For example, the pen pretty much destroyed the quill as a writing instrument, and buggy
whips became unnecessary for most people with the advent of the automobile.

Lesson Summary
Let's review what we've learned. Businesses are affected by changes in the technological
environment. Technology is simply the application of knowledge to control or change our
environment. Technology can be divided between products and processes. Technological
products are finished goods for use by consumers, while technological processes are the
means by which new products and services are created or improved.

Technological change offers risks, opportunities and threats to businesses. Some businesses
can leverage changing technology to improve products and processes or even create new
products and processes that will expand markets and profits. Some businesses risk failure if
they refuse to adapt to technological change, like book publishers refusing to publish e-books.
Finally, sometimes technology is a giver and taker; it will create new industries and
opportunities but also destroy entire industries through the process of creative destruction.