Technological Change

Technology is perhaps the most dynamic element of the external environment. It reshapes how businesses design, produce, market and deliver products; how they communicate with customers and employees; and how entire industries are structured. This lesson covers the technological dimension of AQA specification topic 3.7.6.

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The Pace of Technological Change

The pace of technological innovation has accelerated dramatically. It took the telephone 75 years to reach 100 million users; Instagram achieved the same milestone in two years. ChatGPT reached 100 million users in just two months after launch. This acceleration means that businesses face constant pressure to adapt — and that competitive advantages based on technology can be eroded rapidly.

Disruptive vs Sustaining Innovation

Clayton Christensen (1997) distinguished between two types of technological change:

Type	Description	Example
Sustaining innovation	Incremental improvements to existing products and processes that serve current customers better	Each new generation of iPhone offering a better camera, faster processor
Disruptive innovation	Entirely new technologies or business models that initially serve niche or underserved markets but eventually displace established players	Netflix disrupting Blockbuster; digital photography destroying Kodak; ride-hailing apps disrupting traditional taxi services

Disruptive innovation is strategically significant because established firms often fail to respond in time. Their existing customers do not initially want the disruptive product, so managers focus on serving their current market — until the disruptive technology improves to the point where it captures the mainstream market.

Real-World Example: Kodak

Kodak invented the digital camera in 1975 but chose not to develop it because digital photography threatened its highly profitable film business. By the time digital cameras became mainstream, Kodak had lost its competitive position. The company filed for bankruptcy in 2012. This illustrates the "innovator's dilemma" — the risk that protecting existing revenue streams prevents a business from embracing disruptive technology.

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Impact on Functional Areas

Technological change affects every function within a business:

Operations

Technology	Impact
Automation and robotics	Reduces labour costs, increases consistency and speed; particularly significant in manufacturing, warehousing and logistics
3D printing (additive manufacturing)	Enables rapid prototyping, customisation and small-batch production; reduces the need for large inventories
Internet of Things (IoT)	Sensors and connected devices enable real-time monitoring of equipment, supply chains and product performance
Artificial Intelligence (AI)	Predictive maintenance, quality control, demand forecasting and process optimisation

Marketing

Technology	Impact
Social media	Direct engagement with customers; influencer marketing; user-generated content
Data analytics / Big Data	Personalised marketing, micro-segmentation, predictive modelling of consumer behaviour
Search engine optimisation (SEO)	Businesses compete for visibility in search results; content marketing has become essential
Programmatic advertising	Automated, data-driven ad placement that targets specific consumer profiles in real time

Human Resources

Technology	Impact
Remote working technology	Video conferencing, cloud collaboration tools and project management software enable flexible and hybrid working
AI in recruitment	Automated CV screening, chatbot-based initial interviews, skills-based matching algorithms
Learning management systems	Online training platforms enable continuous professional development at scale
HR analytics	Data-driven insights into employee engagement, turnover prediction, and workforce planning

Finance

Technology	Impact
Cloud accounting	Real-time financial data accessible from anywhere; reduces costs of bookkeeping
Blockchain	Potential for secure, transparent transactions; smart contracts that execute automatically
Fintech	Alternative lending platforms, digital payments, and cryptocurrency challenge traditional banking
AI in financial planning	Automated budgeting, cash flow forecasting, and fraud detection

Exam Tip: When discussing technology's impact on a business, avoid vague generalisations ("technology makes things more efficient"). Instead, identify the specific technology, the specific functional area it affects, and the specific strategic consequence. For example: "AI-powered demand forecasting in the operations function could reduce inventory holding costs by 15%, directly improving the firm's inventory turnover ratio and freeing up working capital."

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Digital Disruption

Digital disruption occurs when digital technology fundamentally changes the way an industry operates, creating new business models that displace established ones.

Examples of Digital Disruption