FAULT-TREE ANALYSIS OF TECHNOLOGICAL FAILURES

INSTITUTE OF RURAL W A G P l E N T , ANAND POST BOX NO. 60, H"L388 001, GWAHAT, a D I A .

Abstract

Technological development process a t f i r m legel i n a daveloping count.ry i s a complex l ong i tud ina l process -and i s laden w i t h a many a f a i l u r e . Fai lures can be e i t h e r a t adoption o r adaptation or i n n o v a t i m stages. This a r t i c l e , based on a f ie ld-s tudy o f a9 ma~ufactur- ing f i rms i n Ind ian ;:spit.al-g,iods sector, pre!;en%s t,er,hnolngii.a: f a i ?ures W.C. u r r i ng B t d i f fe r ent ti t.agas. Resu 1 t,s shcw that, inappropr iate se lect ion, lack n i f i,i;,ised adopt, i on, 7 x k o f ^cx0.t.seJ adnpt..:-tt.icm are t.he primary c ~ i i ~ c j s nf t.ec.l?r-ic>log ica: f a i lures.

I. In t roduc t i on

Techno1 ogy deve 1 opment r. i-c-r.esi TCP ; a t f i r m l eve l i n a i!e1e?cpi!i3 t>ntint,ry, i s a complev and long i tud ina l process laden w i t h many a fn i l u t -a . Fc,ill.,ras may occur .st 3doption fnr reiisons sur,h as i napprop r i a t e techno 1 og y ac.qu 1 s i - t i o n , f a i l u r e tc: estahl iah the produc- tint?, etc. [SI. Failures. may occur whi le adapt.ing :.he product f o r local condi t ions or Nh i l e incorporat ing mater ia l chanires, marginal scale and complex i t.y add5 t.ions , e tc . , [ 1 A 1 , [ A ] . Failures may also ncci ir when the f i rms at.t.empt ta deval np and i fit rcduc+ .?ew products and !)rocessi?.; [ 1 i. 1 , Real i z i ng thi! r.ompls* and some dkat. f i i r z y S I t.uat.innn i ri man;igment r > f t.er.knr,logy, it. Semmes i nper-at. ve t.a i ;lent. i i y , St.LJdy and c l s s s i f y ?.he V a r ' i l - > i J C , t.ypes o f i a i 1 u r . e ~ that, c.an i>C.T. i~r at. d i f f e r e n t s tayss O f tlIr technolnoy deuelspment process. 'This art.ir.1e :"sed on an fau l t - :re6 .ina;y.:.fS o f : I .? prodi1r.t. cases from Frq organ i za t i ons discusses varim:=. :./pes nf t,echnological f a i l u r e s and factcrs m % t l i k e l y t o have contr ibuted t.o t,he.;e f a i l u r e s .

I 111-1 i an mar, i ,.?<ir t 11 r i 17 J

Previous s tud ies have attempted t o i d e n t i f y f a c t o r s con t r i bu t i ng t o ' f a i l u r e of technological development process a t the f i r m l e v e l . Ghosh [SI, based on h i s study o f a f e r t i l i z e r complex i n I n d i a , observed that 1 ) government ins is tence on p a r t i c u l a r technology (an ungroven one), 2) pursua1 o f standard designs without conducting performmce analysis, 3 ) lack o f necessary design s k i l l s , and 4 ) pursual o f an over complicated design as the major reasons leading tc i n e f f i c i e n c i e s of t.he p l a n t . UNTO0 [ l R l case studies, on a c q u i s i t f o n and development of technology i n a few Ind ian manufacturing f i rms, reveal how the f a i l u r e t o se lect an appropr iate technology inrraased t.hc cost o f subsequent changes. Wanowe [I 71 st.udy o f technology imports and technological development. in Tanzania revealed t.hat several weakresses occur i n managsri a1 and technics! s k i l l s r e l a t i n g tm t.he se lec t i on of new technolnGy and i n the development OF e...ist.ing ir,vestment.s.

B e l l et. 51. [ ? I ohserved i n a Thai p lan t , 1acC c:f inc.us t.0 Smpart. more than h ? q i c . . ?peret,inq s k i l l s hfid res i i l ted i n ric; s ign i f icar l t . changes i n the techno1 og 1 r.al a b i 7 i t y o f the f i r m . A study o f Tai..rsn m.achine-+.ool indiJst.ry suggestxxi that. exclusive dependence c.n experienc.es i n prndwt . ion retarded +.he progressive dovelcpment, o f the indi iwtr j [ l ] . Researchers have acknowledged t.he r o l e o f environment [market, p o l i c i e s ) both i n terms o f i t s const ra in ing inf luence on organizat ional , a c t i v i t i e s and i n terms o f p rov i s ion fo r growt-h [I213 [ A l .

Despite some i n t e r e s t i n g conclusinns, our understanding of the var ious f a i l u r e s that, occur a t d i f f e r e n t stages, i s p a r t i a l . There are two major hurdles i n our understanding o f dynamics cf the t.echnologica1 failures a t the f i r m l eve l . F i r s t l y , l ong i tud ina l s tud ies

technology-1 i f e cyc le a r e required t.0 spanning over a t l e a s t one

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understand the dynamics.of the process. However, t ime and cost const ra in ts , coupled w i t h lack o f s u f f i c i e n t data a t the f i r m l eve l t r i f l e s such an e f f o r t . Another dilemma i s t h a t the analys is o f technolcgical f a i l u r e s has not benef i ted from systematic s tud ies on a large number o f f i rms which had *itnessed problems associated w i t h TD?. Case h i s to r i es , anecdotal e> per iences and conjectura l w r i t i n g s have played t.he centra l r o l e w i th very 1 i m i t ~ s d c o n t r i but ions from empir ica l research. Wh,ile it. may not, be possfhle t.o search f o r a comprehensive .t.heor:.. and explanat ion o f technclogical f a ? lures .?F.

a r e s u l t of the complexity o f the process, it, ’ is important, t.o a n a l y w close1 int.9 what. t.;Jpes o f f a i l u r e s occur a t var ious st.ages o f the techno ogy development process. This paper analyses the dynamics o f techno ogica l f a i l u r e s from data based on 89 Ind ian manufacturing organira- t i ons . The paper i s orgartized as fo l lows. The fmmediate sec?,ion describes what we r e f e r t o as f a i l u r e s and sample char ‘acter ist icg. The r e s u l t s and discussions are present.ed i n the subsequent. sect ions.

What i s technological f a i l u r e

F a i l u r e general ly r e f e r s t o ‘ i n s u f f i c i e n t or be lack ing ’ or ‘st.op operat ing’ at- ‘unsuccessful i n obta in ing a desired end’ [la]. The technological f a i l u r e s t h a t occur i n a f i r m are bas i ca l l y o f t.wo types: 1 ) those which stop the process e n t i r e l y (e.g., r e j e c t i n n of the product by the market which seals o f f the f a t e o f the product) and ? ) t.hose which al low the process t o continue a t some time hut a f f e c t the q u a l i t y and cost e f f o r t s o f the development process ( f o r example, product q u a l i t y and r e l i a b i l i t y ) . For the purpose o f t h i s study, the technological f a i l u r e s r e f e r t o those events which i n the percept ion o f t he

executives had s i g n i f i c a n t l y af fected the product or process adoption or modi f icat ion and/or development. I t must be noted t h a t f a i l u r e s d e a l t w i th here are techno1 ogy speci f ic-(product! process), and should not be construed as t o t a l organizat ional f a i l u r e .

11. Methodology

Samr, 1 e

The data fo r the study was obtain& from a f i e l d st.udy. Two hundred t . h i r t y f i rms i n c a p i t a l gmd sector , lscated across I n d i a were contacted of which eighty-nine responded. The capitsl-goods sector was chosen for t.he fo:lowing reason. The f ac to r -p r i ce adaptations and developments o f product var i ants are possible i n t h i s sector and thus + t al lows one t o t race the dynamics o f development completely. The sample consisted o f f i rms from I n d u s t r i a l machinery, Chemicals, Me ta l l u rg i ca l , E l e c t r i c a l and Elect ron ics indust ry . Most o f these f i rms incorporated around 1979-80, manufactured more than one product and were found t o employ d i f f e r e n t technologies. The sample o f R q included both pub l i c and pribEite sec,tcr f i rms i n machine t.oola, chemicals, and the e l e c t r i c a l and e lec t ron i cs inclusti-y. While some o f these operated i n monopol i s t i c markets, %he major i t)’ operated i n the competit.ive sector. A l l o f these f i rms had i n t e r n a l R 2, fi u n i t s and approximately one - f i f t h o f them occasi,onal 1 y manufactured nerr products. Table I presents the indust ry and ownership d e t a i l s o f the sample. The sample was c l a s s i f i e d based on the value o f the paid-up capita: i n t o three groups-small, medium and large. The large u n i t s are those having paid-up c a p i t a l of Rs 10 m i 11 ion, where as t.he medium ones between Rs.5 and Rs.10 m i l l i o n and small ones less than Rs.5 m i l l i o n s . The d e t a i l s o f paid-up c a p i t a l i s provided i n Table 11. The f a i l u r e s

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along the process o f adaptation and product development were traced, based on the dev iat ions from expected oppor tun i t ies and outcomes.

I d e n t i f i c a t i o n of f a i l u r e s

As the focus o f the study was on i d e n t i f i c a t i o n o f f a i l u r e s , i t was necessary t o perform long i tud ina l analysis on a large number o f f i rms. The only manageable way t o do t h i s was t o analyse several published organiza- t i o n a l h i s t o r i e s , covering a t l e a s t a technology l i f e - c y c l e . However, due t o non -ava i l ab i l i t y o f data f o r a large number o f f i r m s and problems i n i n t e r p r e t i n g and analyzing the data from e x i s t i n g sources, i t was necessary t o employ, questionnaires t h a t s o l i c i t e d informat ion from executives who had played key ro les i n the corporate h i s t o r i e s . The quest ionnaire used i n the study was so st ructured t h a t i t permit ted a mai l survey when interviews were could no t be conducted.

The Chief executives and key managers involved w i th the technology development were asked as t o what they considered as f a i l u r e s a t d i f f e r e n t stages and what probably inf luenced these f a i l u r e s . The c r i t i c a l incidence technique [ 5 ] , was used t o def ine the f a i l u r e s a t d i f f e r e n t stages. This technique has been found t o be useful f o r c l a s s i f i c a t i o n and researchers have e f f e c t i v e l y employed t h i s technique t o i d e n t i f y stages o f "echnol ogy development 1161. To generate t o t a l frequencies o f s i m i l a r type o f f a i l u r e s we used, the fo l l ow ing s t ra tegy. The c r i t i c a l incidence f o r each f i r m were abstracted i n t o s p e c i f i c f a i l u r e s . This step was performed by four independent ra ters , each o f whom wel l acquainted w i th q u a l i t a t i v e techniques and possessing doctora l - leve l t r a i n i n g i n managemept. The ra te rs , who were never i n communication w i t h each other, were

given no special i n s t r u c t i o n s except deta i 1s regarding the abstract ions ensuring the representabi 1 i t y . Raters were i n i t i a l l y evaluated using c r i t i c a l incidence f o r s ix teen f i rms and the spearman c o r r e l a t i o n were computed. The co r re la t i ons ranged from 0.70 t o 0 .52 reveal ing h igh concordance amongst t he raters .

Faul t - t ree Analysis

Fau l t t r e e analysis, i s a top down analys is wherein i d e n t i f i c a t i o n o f the primary, secondary and t e r t i a r y events i s used t o describe and analyse a s p e c i f i c operat ion o r f unc t i on [ 7 1 . Factors t h a t con t r i bu te t o the events are t raced t o the smal lest sub-div is ions termed as basic events. The cascading e f f e c t s o f several subsystems may be l i nked together and m u l t i p l e e f f e c t s may' be captured through l o g i c a l AND and OR re la t ionships. Head event p r o b a b i l i t y i s determined from const i tuent events i n the f a u l t - t r e e .

T o i d e n t i f y marginal p r o b a b i l i t i e s o f events we r e l i e d on the fo l l ow ing s t ra tegy. I n i t i a l l y executives were explained what technological f a i l u r e re fers , o f t e n w i th examples. Once they i d e n t i f i e d a f a i l u r e , causes and independence o f events was e l i c i t e d . Wherever the executives were unclear about the con t r i bu t i on o f a p a r t i c u l a r cause, we chose t o i d e n t i f y the dominant f a c t o r ( e l i c i t e d again from the execut ive) thus t rea ted as the source.

111. Results and Discussions

Table I11 l i s t s the d i s t r i b u t i o n of f a i l u r e s as observed i n the sample o f 108 product h i s t o r i e s from 89 manufacturing f i rms. Executives across the sample f i rms i d e n t i f i e d t h i r t e e n f a i l u r e modes ( f o r a b r i e f descr ip t ion o f some o f these f a i l u r e s , r e f e r Appendix 1 ) . Important ly, i t was

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observed t h a t the sample f i r m s had had no s i g n i f i c a n t technological innovat ion experience. The learn ing i n the f i rms centered mostly on technological adaptations. Figure 1 presents the fau l t - t ree model o f the process o f f a i l u r e s . Three primary events were evinced;

* improper se lec t i on * lack o f focused adoption * lack o f focused adaptation

The event F1, was a t t r i b u t e d t o 1 ) f a i l u r e t o evaluate the co r rec t need, 2 ) f a i l u r e t o i d e n t i f y the technology, and 3 ) f a i l u r e o f content se lect ion. The choice o f technology normally r e f e r s t o uses o f primary fac to rs , i . e . , a l l v a r i e t i e s o f capit,al equipment and a l l classes o f labour. It may a l so r e f e r t o inputs o f raw mater ia ls and intermediate products. The e f f e c t i vsness of technology se lec t i on not, on ly depends upon t h e systematic evaluat ion of a s e t o f technologies, but a lso i n i d e n t i f y i n 9 a t what mode o f agreements the technology i s t o he imported. Technical complexity o f t.he product., s i ze and age o f the f i r m , manufactitring experience, donor character ist . ics, vendor character- i s t i c s , regulat icna and the f i n a n c i a l i n s t i t u t i o n s &re some o f the important. dimensions t h a t determine a t what mode technology i s t o be imported. A l te ra t i ons o r modi f icat ions i n the p lan t , subs t i t u t i ons and redesigning. of sub-assembl i e s may be required t o s t a b i l i z e the production. Examples of Ind ian Drugs and Pharmaceutical Ltd. [SI, Hindustan Photo Films Ltd. [ 1 5 1 , and incidence o f f a i l u r e i n our sample, support the argument. t h a t appropr iat.e technology se lec t i on pre-empts some post-adoption problems of technology development .

The event F 2 , lack o f sustained adoption, encompasses planning foi- both ce r ta in t y and uncer ta in ty . I n scaled-down technology co l laborat ions, t he process

may requi re re-dasigning o f the p lan t , process, mater ia ls and human resources. Product mod i f i ca t i on t o accommodate market requi rements and/or process changes may t.hus raq i4 i re planning a t var ious f ron ts . E;iiCutives observed t h a t lack o f s,;.st.ematic planning systems contr i Outed to improper se1 e c t i on and f a i l u r e t c i d e n t i f y technological oppor tun i t ies. Managers need t o appreciate the importance o f systematic continuous technology planning systems i n t rack ing new developments, but a lso a id ing i n the assessment o f the c r i t i c a l i t y o f technological t ra jec to - r i e s pursued by the f i r m .

The event FB, lack o f focused adaptation, r e f e r s t o organizat ional f a i l u r e t o manage praduc.t and process adaptations. T f the imprirted mater ia l cost i s high, and i f the l oca l suppl iers can provide subs t i t u te mater ia ls , then a l te rna te mater ia ls are t r i e d . But there may be s i t u a t f o n s i n which the subs t i t u ted mat.eria1 cost i s unaccapt- ab162 o r the deviat ions from the subs t i t u t i ons are not. favorably received by the market. I n e i t he r o f these cases, the technology adoption e f f o r t s mugt be d e e y d a f a i l u r e . Apart from the knou- how and a v a i l a b i l i t y r r f e f f i c i e n t and capable down- stream un i t s , the SUCCRSS o f mater ia l subst i tu t . ion i n many f i rms i s re la ted t o the firm-vendor i n te rac t i ons . Mathews [ l o ] , based on a comparative aria1y.si.s o f Ind ian and Japanese machine-tosl manufacturing f i rms observed that, l$ck o f f ac to r e x p l o i t a t i o n by Ind ian f i rms ( f o r both i n te rna l and external markets) was a primary reason which render them non- competit ive. A s i g n i f i c a n t f a i l u r e r a t e from our sample seem t o support h i s arguments and ind i r .> t rs t h a t e f f e c t i v e exploi tat . ion o f vendor nets may y i e l d technolngica: adv.3nt39es t c the f i r m .

Systematic marlufa:.t.uri ng evaluat ion o f f e r s the f i r m oppor tun i t ies t o opt imize operat ing .3nd con t ro l systams

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(such as scheduling, inventory e tc . ) . The process mod i f i ca t ion e f f o r t s may a lso depend upon evaluat ion o f the technology. Mohanty and Na i r 1111, assessed t h a t most Ind ian f i rms conduct manufacturing aud i ts on somewhat ad hoc basis, a f f e c t i n g t h e i r manufacturing performance. Emergence o f f a i l u r e t o conduct manufacturing a u d i t as a major cause r e i t e r a t e s t h e i r arguments ‘and suggests t h a t systematic manufacturing appraisals a i d i n i d e n t i f y i n g both product and process improvements and thus adding t o the technological edge o f the f i r m .

Apart from complexity o f the technology and ef fect iveness o f the organization, there are two important issues t h a t fo l low: the technology agreements al low f o r dev ia t ion a t the rec ip ien t ’ s p lan t , and the mater ia ls supply from vendors does no t substan- t i a l l y increase the cost o f production. I n some cases, due t o non-standardiza- t i o n of t he manufacturing process a t the donor’s p l a n t o r i nco r rec t i d e n t i f i c a - t i o n s o f production noise, the product cha rac te r i s t i cs may ’ d i f f e r from the spec i f i ca t ions provided i n the t rans fe r agreements. I n es tab l i sh ing production i n these s i t ua t i ons , deviat ions e i t h e r i n the form o f re-designed process parameters o r product cha rac te r i s t i cs may be necessary t o promote ea r l y adoption. I f the donor dominance i s high and the co l l abo ra t i ve agreements do no t al low deviat ions, i n s p i t e o f the product recept ion a t test-market being healthy, the rec ip ien t f i r m reso r t s t o two s t rg teg ies . E i ther i t would wa i t t i l l the co l labora t ion expires successful 1 y incorporate the changes yL s p i t e o f the agreements. Enos and Park [ A I , based on t h e i r observations o f Korean industry, r i g h t l y assert t h a t t he choice of.technology i s o f n e g l i g i b l e consequence wh i le the choice o f supp l ie r i s of grave consequence.

The event F3, a lso encompasses f a i l u r e s t o develop and e x p l o i t s t r a t e g i c all iances-vendors, I n s t i t u - t i o n s and R & D labs. Inadequate l inkages w i t h i n industry-academia, lack of concerted e f f o r t s towards vendor development and lead-user management and thus, lack o f sustained s c i e n t i f i c b e l t was s la ted as a cause o f technological f a i l u r e s .

A major determinant o f t he success o f product mod i f i ca t ions o r . innovations i s the congruence between the market- need vector and ob jec t i ve vector o f the product as perceived by the corporate R & D. I f the ob jec t i ve vector i s congruent, then the next c r u c i a l step i s i d e n t i f i c a t i o n o f design parameters. I f the c r i t i c a l parameters are obtained, then technological adaptation i s successful i f a) the market desired operat ional requirements are met and b) c r i t i c a l design features can be maintained under r e p e t i t i v e production. I f, however, t he market-product mix i s no t optimal and/or the c r i t i c a l parameters (process re la ted parameters i n production scale up, and others product re la ted ) can no t be maintajned, then design changes become imperative. I f the required parameters are obtained bu t the added cos t associated w i t h t he adaptive e f f o r t s i s unacceptable, then the technology adaptation e f f o r t must be deemed a f a i l u r e . Schnaars [13J regards t h i s as the main mistake o f managerial f a i l u r e s : decis ion makers seduced by the al leged wonders o f technological developments and po ten t i a l p r o f i t s t h a t would accrue i f exp lo i ted fas te r than competitors, f a i l t o recognize t h a t customers are res i s tan t i f changes are no t j u s t i f i e d by lower p r i ces o r added features. Determining when and what i s p r o f i t a b l e t o innovate wh i le a t the same ti- ho ld ing against premature o r uneconomical technologies must be emphasized.

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IV. Conclusions

The causes o f technological failures presented above reveal that, although the process of technological development is complex and uncertain, effective managerial tools and

~ techniques can check and ward off potential failures. Avoiding potential technological f ai 1 ures requ i res checking of judgmental biases, higher segmentation, attractive packages for wientist4 and managers commensurate with their expertise, investments and support to R EL D and inculcating an organizational culture to maintain and control its success. Irr the authors view studies of failures requires as much focus as strategy, creativity and policies to provide more answers to the challenge of knowing when and how fast to

1.

2.

3.

4.

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innovate and what changes to be made.

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Table I. Industry and ownership de ta i ls

Industry Type No. of firms Type of .firms No.of firms

Machines & mchani cal

42

Electr ical 8 8

Electronics 24

Chemical s 15

Pub1 i c sector

Private Sector

Joint Sector

18

63

8

Total 89 Total 89

Table 11. Size o f the firms i n the sample (based on paid-up cap i ta l )

s i ze of the f i r m (capital i n Rs mil l ions)

No of firms

> 10 a

5 < > I O 50

< 5 31

Table 111. The distribution o f failures

F 1 ( Fa

F 1 ( Fa

F 2 (Fa P t-0

1 2 / 1 0 8 2 lure of technology selection)

3 16/108 lure of content selection)

1 lure to establish ucti on 1

F 2 . 1 (Failure due to agreements)

F 2 . 2 (Failure to conduct manufacturing evaluation)

F 2 . 5 (Failure to attain reasonable productivity)

F 2 . 7 (Failure to attain market)

F 3 . 1 . 2 (Fai lure due to coordination)

F 3 . 3 (Failure due to identification)

F 3.4

neffective

neffective

( E , S, T linkage failure)

F 5 . 1 (Failure due t o corporate emphais!

9 / 1 0 8

2 /108

3 6 / 1 OR

18/108

3/10!?.

A/108

12 /108

17 /108

8 / 1 0 8

141

AND

lack of focused adoptation

Lack of Focused Adoption - Improper Selection

yR (0.06*)

0.09

(0.15*) OR I

0.19

A A Lack of Sustained

Adoption Factor Pnce Lack of Focus

0.02 0.03 0.06 0.08 0.02 0.01 0.01 0.01 0.04 0.02 0.05 0.02 0.03

Fig . 1 Fault-Tree showing the dynamics of * Corrected for Combined Probabilities Technological Failures

Time and Cost Effects r r: a

\f Switching / longitudinal effects ' 3r,n<t5

142