ADOPTING NEW TECHNOLOGY FOR MODERNISATION PROJECTS IN INDIA - SELECT DIMENSIONS OF PRE &

POST INVESTMENT PERSPECTIVES

JAYANTACHATTERJEE DEVINDERK. BANWET SENIOR MEMBER, IEEE ALLEN-BRADLEY INDIA NEW DELHI NEW DELHI

INDIANINSTITUTE OF TECHNOLOGY

ABSTRACT

Geopolitical changes around the globe and massive economic compulsions within the country stimulated over the last ten years a series of strategic triggers to motivate corporate leaders in India to modernise their bushess as a whole and manufhcturing in particular. Adwmcd technology was initially welcome as a "cursall" with unbounded enthusiasm but the explosion in demand for CNC /FMS or DCS / PLC / CIM did not permeate all sectors of Indian industries at the expected speed.

On the basis of a survey of related research publications around the world and a survey of Indian managers who were involved in early modernisation projects, this study feveals an emerging gap between users' expectations M o r e investment and satisfaction level post iwestmtnt. The study reveals the importance of knowledge congruence between the vendor as a lifk time stakeholder in the new technology h " e n t . . Future fesearch directions which emerge from the users' perspectives are also recorded in conclusion.

INTRODUCTION

During early 1980s when Advanced U " h g Technologies (AM' ) and computer applications in production equipment wen changing the In&strial power balance around the world, Indian users became Iogically interested. The new policy emphasis on prodnctivity and the International Machine Tool exhiiition in Bombay in 1984 created widespread intenst in AMTs like CNC / PLC / FMC & FMS. That year the total no. of CNC m a c b of all types produced in the country were a mere 42 (Ref : Table I) though over 200

CAD / CAM / MRP & JlT or plantwide process & MIS integration were still topics of academic interest. There were few actually working installations.

machines were imported.

It was then expeckd in 1984-85 that the next

these Quality & productivity enhancement systems 28 f h s signed collabo&on agreements for foreign technology.

five years will see explasive growth- of use of

Indian users did adopt these new technologies enthusiastically for the next couple of years as shown in Table I. But compared to the explosive growth d adoption of these new techniques in other Asian "ICs - the Indian growth was negligible.

In 1986 while India produced 88 CNC machining centm, Japau 39,000, Taiwan 1917 and South Korea 1108. Actual no. of machines installed in India that year was about 250. But in Hong Kong, Taiwan, Korea the number d milestones crossed on the way from CNC to CIMweremanymore. Interms oftotal investment in Industries, India was not very far behind some of these countries which therefore shows that the percentage of investment utilized by Indian users for AMT was lower than many other countries.

The question that we first address in this project in the above backdrop is whether customer eduction, past warranty & continuous application assistance and support seMce plays a part, and if so, to what extent , on the

adoption by prospectve users.

NEW TECHNOLOGY ADOPTION : PRE- MVESTMENT PERSPECTIVES

dynamics of new manufmuring technology

An operating concern in India and possibly in other parts of the world (Ref. Skinner) does not opt for change of technology easily. Some sort of laws d inertia appear to be relevant in this context. Even when fums do feel the impetus for new technology adoption few significant facts emerge from research studies done in India:

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al Primary thrust for technology acquisition appears concentrated in the product area and very seldom in the process technology area. (Author's internal study for Allen-Bradley)

b/ In most cases thrust for new technology adoption is initiated by the chief executive4 top management & very seldom it is a bottom up process.

c/ Almost invariably external stimuli like competitive threat, product obsolescence or major shifts in customer choices pushed firms to adopt new equipment or technology. (Cases of reverse occuurrence are rare).

(Source S.C. Mehta, IIM, Ahmedabad, Indian Consumers, Chapter IO-Purchasing in Indian Industry, Tata McGraw Hill, 1989).

This shows that the thrust for acquiring new technology is driven primarily by strategic factors. In fact, whenever new technology is adopted due to short temi reactive reasons, rather than a long term holistic strategic thought process, the choices of success decrease rapidly. (Noori, Meredith, McMillan). [1,2 &3]

In most of the Indian research studies [4] on the purchasing pattern in the Indian industry (Mehta) it was found that when making capital purchase decisions, price was rated as the most important factor followed closely by technical specifications. Credit facilities also received high attention whereas delivery, service and long term support capability of the vendors were all considered relatively un-important.

The customer dissonance on account of inadequate technical support from high technology vendors in India which came out through this study, in a way has its roots in the very process of new technology acquisition. The high weightage of the first price is a source of later trouble. Adoption of new technology to succeed must link engineering, manufacturing and other critical management disciplines, must address the planning development and implementation of the priority new technology "as a whole" to shape and accomplish the strategic objectives of an organisation. (Sumanth - a total system approach to technology management for organisational competitiveness, Technology Management -

Editor T.M. Khaleel, Inter Science Engerprises Ltd., Miami, 1988).

The challenge of the market place compels firms to employ new production methods to improve product quality and deliver reliability, to reduce costs and above all, to achieve greater flexibility. Companies that fail to recognise the potential of advanced technologies are not able to respond to the changes in the market place and are doomed to failure. Hence the popular saying. "Automate, Emigrate, or Evaporate!". A look at the decline of the Indian engineering, machine tool or jutehextile industries in the 1970s illustrates this point. Protectionist policies curbed free competition thus deactivating the urge to modernise on a continuing basis.

Generally, therefore, the need for new technology stems from three factors :

I/ A slowdown in productivity growth

21 Increased international competition

3/ Advances in technologies

Skinner fiuther suggests that improving productivity (maximizing production per labour hour and per machine hour) is not the only rule for success in today's environment. Firms must also be concerned with improving quality. Flexibility, and Reliability. Yet it is possible that managers shy away from these objectives as they tend to worsen traditional productivity measures. Productivity must be evaluated in the context of other important factors.

The growth of international competition is arguably the most sigmficant factor that has stimulated the reassessment of Indian business practices in general, and need for new technology in particular. Increased global competition has shaken the manufacturing sector and changed the competitive game. It has caused Indian firms to lose customers, to suffer shrinking profit margins, and in some cases, to fail.

There are a number of reasons for the acceleration of international competition in recent years, including the following :

I/ Improved transportation and communication networks - for example, Texas Instruments'

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global Bangalore, India.

network of design centres including

21 A rectuction of trade barriers.

31 Universal access to both basic and advanced industrial knowhow and technology.

4/ A colossal increase in manufbctuhg output by countries outside India.

51 New types of international technology agreements & decline of joint ventures in mow ofdirectly controlled subsidiaries.

61 The ability of small firms to compete with larger multinationals by focussing on niche markets.

With more advanced design and production flexibility a firm can easily switch its reswrces from producing products geared to one market to manufacturing others intended for another. The market fragmentation, as well as new entries and blurred industry boundaries, make it ditl6cult for firms to anticipate sources of competition. Consequently, more contingency planning and greater flexibility are required. This stimulates the corporate planner to search for more & more flexile technologies.

Forecasting the demand for products has always been fiar from an exact science. However, shorter product life cycles, more new product introductions, fragmented markets, and unexpected competitors have all contributed to thetrendtowardincreasingdemanduw;ertainty. This makes it riskier for firms to follow a high volume, low cost strategy (mass production) because products may become obsolete before costs can be mered. Firms today can benefit greatly from the ability to adapt (rather than scrap) their operations. if the forecasted demand for a particular product does not materialize. This also is a stimulator for adopting new flexiile manufacturing technologies.

The preceding discussion and literature review clearly demonstrate that new technology acquisition not only in the Indian context but also elsewhere in the world is still a very top down process. The strategic perceptions d strength, weakness, threat & opportunity (SWOT) analysis of the environment - market -

customer desire and competitive offerings most often start the search for new technology.

The dominance of the strategic reasons for acquiring and the top management involvement paradoxicaUy preclude quite often a detail bottom up - participative evaluation process. This lays the foundation of customer dissonance at operator or ustf level at post sales period. G o i i by the research findings cited by Mehta regarding Indian purchasing pattem for idustrial products, we hnd post sales support, SeMce, user operators ease are low priority ktrs in buying decisions for capital g ~ / s y s t e m s .

POST INVESTMENT PERSPECTIVES FROM NEW TECHNOLOGY PROJECTS

In the backdrop of the preceeding discussion on why customers invest in modernisation projects & their expectations fnun the adoption of new technology we formulated a questionnaire for this study to do a survey of Indian users' post investment perceptions. We concentrated on firms where major technology upgradations were done more than two years but less than four years back -that is the initial phase of post watfanty stage when the shift from 'free to fee' puts the users' maintenance and operation teams totest.

These questions covered the hllowing ObjeCtVeS:

a/ To what extent cutomers I users link their corporate objectives with capital equipment I technology acquisition ?

W To what extent Indian industrial buyers are satisfied with new technology vendors' ~ r t a f € e r s a l e s ?

d customer's support need while using technology product / system ?

What are the dimensions of an W a n high

The underlying assumptions while designing the queshionnaire in search ofanswerstothe above were inspired by Hide0 Takanaka's research abaut critical success factors in factory automaiton [9] and Berry, and ZeiM's publication on "Understadng customer expectations of service" [ 101. The five

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dimensions of service identified in these studies were brought out in the current questionnaire :

Service Dimension

Reliability -------I-

Tangibles

Responsiveness

Assurance

Definition

---------- The ability to perform the promised service depend- ably and accurately.

The appearance of physical facilities, equipment, per-

sonnel & comniunication effectiveness

The willingness, the readi- -ness to help customers.

The knowledge and cour- tesy of employees and their ability to convey confidence.

The caring, individualized attention provided to the customer.

Data Acquisition

The questionnaire was mailed to about 80 executives (on a stratified sampling principle) in Indian engineering industries who can be categorised as interested and knowledgeable decision makers, users and influencers for new technology acquisition, implementation, maintenance for manufacturing productivity improvement.

Out of eighty target respondents, eight local executives were interviewed personally to get a feedback about the clarity of the questionnaire and also to collect additional inputs, views and comments on their experience with high tech products.

Twenty two responses were received i.e., little over twenty five percent. For a study like this a much larger sample size would have been very welcome. However, such a sample size while investigating strategic issues is not uncommon (Porter, 1979)[ 111. Extensive multivariate analysis have been carried out on even smaller sample sizes @ess & Davis, 1984) [ 121.

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Criticism & Future Plan

It was clear during the inteviews that for such an indepth study the mailed questionnair is inadequate. However, interviews conducted by practitioners can also bias the reporting. Ideal plan for fbture pursuit will be to use independent surveyors conducting the inter- views after a short appreciation session on the terminologies.

Results & Analysis

The following kev observations emerge.

a/ One third of the users are not happy with the quality or functionality of the high tech products but half of them are unhappy with the technical support received from the vendors.

bl Response time is satisfactory to majority but the problems seem to emerge from inadequacy of technical information available to make 111 use of the purchased high value equipment or system.

cl Interviews revealed a creeping dis- illusion about the efficacy of these high tech products in an Indian plant and some of the respondents felt that they "possibly expected too much during the initial euphoria (1984-87)" when specacular results were being reported in foreign jounals from Western Companies and Japanese I Far Eastem installations.

These findings prompted us to search for published data on whether similar user diappointments were experienced in other countries. It was interesting to find several articles on barriers experienced in imple- mentation of high technology in numerous plants in USA and Europe and many users reported the 'feeling of being let down'.

C.A. Beathy's research findings reported in Business Quarterly in Februar 1986 entitled "Tall Tales & Real results: Implementing a Technology for Productivity" [pp. 70-741 and more recent study reported by Gorden & Beatty from Queen's University in Sloan Management Review (Summer 1988) provide data on the subject from extensive users' opinion surveys.

It is relevant to cite here the Table proposed by Gordon & Batty on "Barriers, causes and remedies in implementing new technologies".

Further study on this line of several related publications and repeat discussions with some major users (cited in Bibliography) led us to two streams approaching the common ground of Quality Customer Service for customer satisfktion and full productive use of customer's investment in high technology.

The first stream of recommendation is for the user to appreciate the life cycle cost of high technology investment. During the interviews with the eight respondents mentioned earlier it was identified that the importance of life time service - life time cost of a high technology syskm while in use are often ignored at the acquisition stage. Purchase decisions are still made largely on the basis of first cost of initial price through a tendering system which is definitely inadequate for the level of sophistication of the new manufacturing technologies being acquired.

The second stream relates to developing a scheme for Strategic Service - a holistic systemic aproach for high technology vendors for concurrent development of product - technology & service strategy.

DISCUSSION & CONCLUSION

It is important to recognise that service is largely based on perception rather than reality. This is particularly true with respect to price. Quite often customers equate price to service quality. Their perception is that a high price equates to high service quality and performance in the futufe and that a low price means poor performance and slower response in the future. Thus, pricing services at a higher level creates a strong perception of quality.

The most important perception about service is related to time for delivery of service; the waiting time between the user'organisation's request for a service (to make a repair because of equipment failure, for exmaple) and the completion of that task. For every service task and in every market environment, most customers (typically 80% in any survey) have a very precise view of how long they will or want to wait. Thus if one can determine that

,

customer t imehne requirement and then commit to and deliver the seMce on the basis of that commitment, one generates the highest level of perceived customer satisfaction. Taking longer will obviously negatively affat service satidaction levels. Interestingly, improving service (i.e., too rapid a response compared to the "optimum customer waiting time") does not improve customer satisfaction perceiption. The customer cannot diffemtiate between the seMce that meets his time and needs and more rapid service. He can, and in fact does, however, differentiate between good and bad service if he had to wait too long. Thus service is primarily perceived and the perceiptions are largely related to waiting time. The greatest negative impact on customers satisfaction for service occurs in the absence of the service being delivered within that timeframe.

In summary, for high technology companies service is not just an adjunct to a product, it is or can become, a major strategic line of business, and at the same time, enhance product life cycle. What is required is a new philosophy toward the customer and to service that, properly implemented, affects all aspects of an organisation's business. It affects the product development and marketing processes. It affects sales, distribution, and the logistics functions.

Linking all the customer -focucsed functions together, and insuring that all have the same information about a customer and that all are marching to the , m e customer service "drum", is one of the challenges for today's organisations.

This life cycle, approach to customer satisfaction and continued emphasis on finding ways to optimise the customers' investment in the post purchase phase and a reciprocating preference for such vendors by purchasers and benchmarking them, to give quality of service deliverance equal or perhaps a higher weightage to first price appear to be the best bridge between pre-investment expectation and post investment appreciation of new technology benefits. In the larger context of the competitive challenge facing Indian industries to 'shape up and ship out' (i congruence of strategies of users and suppliers of new technology in this respect becomes imperative.

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BIBLIOGRAPHY:

1. Hamid Noori, managing the Dynamics of new Technology, Prentice Hall NJ, 1989.

2. Metedith J., The Strategic advantages of the factory of the future, Calfornia Management Review, Vol. 29, N0.3, spring 1989.

3. Business quarterly, Vol. 52, N0.2, 1987.

McMillan C.J., The automation triangle,

4. Hill, 1989.

S.C. Mehta, IIM Ahmedabad, Tata McGraw

5. A. Kapur Mehta, The Indian Machine Tool Industry, Council for Research on International Economic Relations, 1990, New Delhi.

6. McDougall & MUNO, The new product process, Jounral of Small Business, Canada, Fall 1984.

7. high tech age, Fortune, march 5, 1984.

Fraker S. High Speed Management for the

8. Bullinger H., Toward the Factory of the Future, Springer-Verlagm NY, 1985.

9. Takanaka H, Critical Success factors in Factory Automation, Long Range Planning, Vol 24, No. 4, 1991.

10. Berry, Parasuraman, Zeithaml, Under- standing Customer Expectations of Service, Sloan Management Review, Spring 199 1.

11. Odord & IBH, 1987.

Oswald & Mascarenhas, New Product,

12. Dess & Davis, Porter's generic strategies as determinants of organisational performance, Academy Management Journal, Vol 27. No.3, 1984.

13. Chatterjee & Banwet, Evaluating Automation Strategy using AHP & Fuzzy Decision Theory, OR Society of India Conference, Dec. 90 proceedings.

15. Heskett & Schlesinger, Breaking the Cycle of failure in services, Solan Management Review, Spring 1991.

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BARRJERS, CAUSES, & REMEDIES IN IMPLJCMENTING NEW TECHNOLOGIES :

r Causes Remedies

Excessivefocus on Obsolete decision Careful analysis of direct labour & ratios criteria real costs & benefits

Failure to perceive true benefits

High risk for managers

Lack of coordi- nation and coop- eration

High Hopes & hidden costs

Lack of measures of intangible benefits

Reward systems discourage risk taking

Organisational fragmentation

Overselling

Analysis of total p r o d u d i and "intangibles".

Different reward systems for managers.

Devices to integrate and coordinate

Planning strategic objectiies & Life Cycle support

HUMAN

Uncertainity avoidance

Resistance

Hasty decisions and chronic fire fighting

Fear of change & uncertainty

Involvement and communication

Fear of loss of power &status , mentation, Champion

Careful imple

Action orientation impatience with planning & waiting

Preimplementation planning, long term objectives

~ C H N I C A L

Incompatibility Purchase of a Buy an integrated or of systems variety of hardware interoperable system,

8 software for cost write your software saving

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The 1986 & 1987 estimates do not include CNC equipment of 5 units worth R s . 17 Million in

1986 and 130 units worth Rs. 53.9 million in 1987

SOURCE : IMTMA, ANNUAL REPORTS & BULLETINS.

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