Technology and Innovation Role in Business

8/18/2019 Technology and Innovation Role in Business

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Topic On


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“Technology and Innovation play a desire role to

enhance the value and goodwill of Business”. Explainthis statement. Write in detail about the feature of

technology effecting business.

ubmitted To! " ubmitted By!"

#rof. #awan $umar %i&as harma

'.B.(. )st emester

*oll.+o.),

Technology and innovation play a very important role in the business environment. It is become

necessary for all business to incorporate technology and innovation otherwise they will be out

from the market due to lack of their technology.

Innovation is the development of new customer’s value through solutions that

meet new needs, inarticulate needs, or old customer and market needs in new ways. This is

accomplished through different or more effective products, processes, services, technologies, or

ideas that are readily available to markets, governments, and society. Innovation differs from

invention in that innovation refers to the use of a better and, as a result, novel idea or method,

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Innovative

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whereas invention refers more directly to the creation of the idea or method itself. Innovation

differs from improvement in that innovation refers to the notion of doing something different

(Lat. Innovare "to change" rather than doing the same thing better.

Innovation may be defined as “the technical, industrial and commercial steps

which lead to the marketing of new manufactured product and to commercial use of new

technical process and equipment”.

Innovation -rivers

Technology is the making, modification, usage, and knowledge of tools,machines, techni!ues, crafts, systems, methods of organiation, in order to solve a problem,

improve a pree#isting solution to a problem, achieve a goal or perform a specific function. It canalso refer to the collection of such tools, machinery, modifications, arrangements and procedures.Technologies significantly affect human as well as other animal species$ ability to control andadapt to their natural environments. The word technology comes from %reek (technología)& from(téchnē), meaning "art, skill, craft", and ( logía ), meaning "study of'"The term can either beapplied generally or to specific areas e#amples include construction technology, medical technology, and information technology.

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The human species$ use of technology began with the conversion of naturalresources into simple tools. The prehistorical discovery of the ability to control fire increased theavailable sources of food and the invention of the wheel helped humans in travelling in andcontrolling their environment. )ecent technological developments, including the printing press,the telephone, and the Internet, have lessened physical barriers to communication and allowed

humans to interact freely on a global scale. *owever, not all technology has been used for peaceful purposes& the development of weapons of ever'increasing destructive power has progressed throughout history, from clubs to nuclear weapons.

Technology has affected society and its surroundings in a number of ways. In many societies,technology has helped develop more advanced economies (including today$s global economyand has allowed the rise of a leisure class. +any technological processes produce unwanted by' products, known as pollution, and deplete natural resources, to the detriment of the arth and itsenvironment. -arious implementations of technology influence the values of a society and newtechnology often raises new ethical !uestions. #amples include the rise of the notion of efficiency in terms of human productivity, a term originally applied only to machines, and thechallenge of traditional norms.

hilosophical debates have arisen over the present and future use of technology in

society, with disagreements over whether technology improves the human condition or worsens

it. /eo'Luddism, anarcho'primitivism, and similar movements criticie the pervasiveness of

technology in the modern world, opining that it harms the environment and alienates people&

proponents of ideologies such as transhumanism and techno'progressivism view continued

technological progress as beneficial to society and the human condition. Indeed, until recently, it

was believed that the development of technology was restricted only to human beings, but recent

scientific studies indicate that other primates and certain dolphin communities have developed

simple tools and learned to pass their knowledge to other generations.

!ccording to the "#$%!&'s &raft %% $ode, %echnology should e &escried as

“systematically knowledge for the manufacture of a product, for the application of products or for the rendering of ser*ice and does not e+tend transactions in*ol*ing mere sale or lease of

goods”

“%echnology includes not only knowledge or methods that are necessary to carry on or to pro*e

the e+isting production and distriution of goods and ser*ices, ut also entrepreneurial e+pertise

and professional knowhow”.

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/ew Invention eriod Technology Improvement eriod +ature Technology eriod

Technology urve

/ Ways Technology 0as hanged the Way We -o Business

In technology, it’s not about the last 01 years. It’s about the last 2 years. In the past 2 years, the rate of change in regards to technology has increased drastically. 3usinesses processes have changed and made organiations more efficient. 4t the same time, technology hasopened lines of communication, allowing businesses to communicate and collaborate beyond borders with ease. 5ollaboration is the future of business competitiveness as companies becomemore innovative, connect to people better, and overall act faster in the "flattened" marketplace of

Nature of

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today$s global, internet economy.

0. Technologyhas made business faster It is undeniable that technology has made business move much faster than before.ersonal computers and the Internet have revolutionied the way we work.'mail

interactions have replaced memos, phone calls, and fa#es.6martphones can connect you withyour entire business network while you are out of the office, allowing you to respond!uickly.7orkflows and automated tasking systems have cut down on organiational bureaucracy,streamlining operations.6peed, matched with technology, adds fle#ibility and responsiveness tointeractions.

8. Technology has allowed for far'reaching collaboration The Internet has allowed geographically dispersed teams to virtually meet fromanywhere in the world.5onference calling, video conferencing, e'mail, cloud computing, 6kype,and instant messaging have flattened the world.4dditionally, with social networking sites likeLinkedIn, businesses can connect to an even larger business network.The result is greater

productivity and a wider blend of talents, abilities, and viewpoints.

2. Technology has flattened the marketplace In the same way that technology has allowed for collaboration beyondgeographical borders, technology has also reduced the barriers to entering markets around theworld.This allows buyers and sellers from around the world to connect and do business.6kype,video conferencing, and online translation services help people to communicate and close deals.

9. Technology in business encourages innovation

:on’t like the way something works;:o you notice that customers have a certain

need that is not being met;:o something about it.4n e#ample is


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find new companies to do business with.

(dvantages 1 -isadvantages of Technology in 2our Business In today’s society, technology is a necessary component of business yet many businesses are hesitant to take on the additional e#pense. 4s technology progresses, oldersystems need updating. Implementing new technology within a business, offers many greatopportunities for your company to develop a distinct advantage in a highly competitive market.+any businesses have recognied this potential and are integrating the latest technologies intothe workplace with a strategic mindset.

To utilie technology to its fullest potential, upgrading can be viewed as ane#cellent chance to increase your competitive advantage. 6everal of the more traditional businessmodels are changing with the integration of technology and your company can creatively makeuse of upgrades, to achieve success from the benefits digital innovation offers.

(dvantages +ew Technology 3ffers!

• Waste *eduction"leads to lower costs and higher profitability.

• *educed Wor&force" fewer positions may be re!uired, when previous tasks performed

by personnel become automated. If the e#isting number of employees is minimal already,attrition may be the ne#t step.

• Increased #rofitability"due to increased efficiencies, which reduces e#penditures, new

technology allows >obs to be completed !uicker and more accurately, to allow a steadycash flow.

• Increased #roductivity"among team members coupled with the introduction and

implementation of new technology, creates additional efficiencies and overall production.

• 0igher Income"the greater the business profits, the greater opportunities there are for

employees to increase their income, via bonuses or raises.• Improved ommunications"allows information to be sent, received and responded to

instantaneously, whether through e'mail, computer networks and cell phone use. Longdistance communication of documents and information can be passed along much morerapidly. )emote based employees have immediate access to staff from cell phones, webcams, video conferencing and laptop use.

• ompetitive (dvantage"allows a business to reduce product?service costs, while

increasing profit levels, without compromising customer service.

Technology is a broad concept that has come to refer to breakthroughs in science that allow for a

better or automated solution. 7hile the most obvious benefit to technology in small business is

increased productivity''which translates into a lower cost structure''there are some other benefits

that can help the bottom line as well. Improved speed, the ease of sharing and storing

information and a decrease in human error through automation add up to a reduction in costs and

an increase in revenue.

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Technology helps the business to enhance the goodwill of the business. Goodwill is anaccounting concept meaning the *alue of an asset owned that is intangile ut has a quantifiale

prudent *alue in a usiness for e+ample a reputation the firm en-oyed with its clients

oodwill is an intangile asset deri*ed from other assets of the usiness. /ts e+istence depends

upon proof that the usiness generates and is likely to continue to generate earnings from the

use of the identifiale assets, locations, people, efficiencies, systems, processes and techniques of the usiness.

The factors?reason which affect the goodwill and value of business are as follows.

peed and Time

6mall businesses compete with large businesses by being more swift and agile. 4dditionally, asmall business can respond to change faster than a large business. 4 hundred years ago,electronic mail did not e#ist, and the only way to communicate with someone else in another geographical location was by postal service''the farther away your client or supplier, the longer the communication took. Today, with the advent of information technology, information is shared

at an astounding rate. This saves time, offering the ability to make decisions faster.

Easier torageTechnology eliminates the need for double or triple entry systems and reduces the need to filelarge amounts of paperwork. /ow, contracts and customer information can be stored in virtualdata warehouses and accessed in minutes, which cuts down on the need to purchase or rentstorage space.

Improved haring of InformationTechnology allows information, whether written or broadcast, to be shared more !uickly andwith fewer resources. +arketing can be accomplished by placing ads that reach millions of ready buyers on the Internet or through social networking sites. 'learning and other forms of onlinetraining have reshaped the readiness of the average small business workforce as employees canlisten to classroom lectures and share ideas with classmates from the comfort of their home or office. This eliminates the need for small business to hire training staff.

(utomationTechnology allows small businesses to automate certain functions that historically have re!uiredthe need to hire an employee. @or instance, bookkeeping functions now can be handled bysoftware applications such as Auicken and Auickbooks. The sales function is automated through

contact management sites such as 6ales@orce. This gives the small business owner the ability tofocus on strategy and cut down on labor e#penses.

Better *eporting 4unctions5ompanies that have multiple locations, whether nationally or globally, have usedtechnology to implement better communication services and software modules thatcommunicate to a home base via the Internet. This allows companies to penetrate neweconomic markets without sacrificing the needs of communication or financial and

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operational reporting. 4dditionally, companies can improve their management informationsystem (+I6 to capture information for specific locations when making business decisions.

@inancial reporting has also benefited greatly from technology& rather thansending e#ternal auditors to multiple locations, it is possible to create a centralied accountingoffice to record and report financial transactions. This improves financial reporting and

lessens the e#pense related to e#ternal audits.

Increased Employee #roductivity5omputers and business software packages have e#ponentially increased employees$ productivity by allowing them to provide data entry functions or review automated reports.5ompanies have automated several traditional manufacturing processes& instead of usingmanpower to manually create and assemble goods, machines and?or robots now completethese functions. 7hile these improvements may increase capital e#penditures, they lessen theimpact of consistent labor e#penses related to productions. @ewer employees are needed tomonitor the machines and ensure they are working properly.

Bther areas, such as customer service, accounting and administrative support, havealso seen an increase in employee productivity. mployees now review and reportelectronically collected data to ensure they are accurate and timely, rather than manuallygathering information.

Improved Business 'obilityTechnology has also improved companies$ sales and service departments by allowingemployees to use personal electronic devices to create sales displays and transmit orders andcustomer information to the home office. These electronic devices shorten the lead timecompanies spend on receiving and delivering goods or services, creating an instantcompetitive advantage in the industry. 5ompanies can also send sales representatives to

multiple markets at the same time, allowing them to penetrate multiple markets with fewoverhead costs. 5ompanies may allow their internal employees to work from home using acompany Internet connection, reducing the fi#ed overhead e#penses from a large corporateoffice

-isadvantages of +ew Technology!"

• 'anagement5s -ecision"to upgrade with new technology can be e#tremely

difficult. :o you buy now or wait for the ne#t technological advance; Thedecision to do so can and usually is an e#pensive one. 7hat’s more, theintegration of and training re!uired among the workforce, is a whole other task inits self.

•

*egular 'aintenance"of new technology will be re!uired to keep efficienciesflowing. +ore importantly, !uestions that must be answered in advance are, if themachinery on a production line breaks down, will this cease all production; 7hatalternatives are available that can be immediately implemented, if this occurs;

• osts"will be reduced if integrated properly and therefore, the decision is whether

or not the e#tra capital is available to purchase the new technology.

• (dditional Time"will be re!uired for training and if you have to reorganie the

workplace to accommodate the new technology. This is an important decision that


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must be taken into consideration, if your business works within tight deadlines.@urthermore, any IT issues that occur will need to be resolved !uickly, to ensurethe transition is as seamless as possible.

• (buse"of the technology made available to employees on their >ob can be

e#cessive and very costly to a company, i.e. constant instant messaging, personal

use of social media, non'work related emailing, inappropriate use of informationon the web.

The key to deciding whether or not to upgrade your business with newtechnology lies in your ability to fully understand the culture of your workplace. This isan important aspect of managing any workplace. The culture of your organiation iscritical in hiring and retaining effective employees. 5ulture involves how workers feelabout the organiation and how they feel about their >obs. 5reate an environment that’saligned with the company’s overall ob>ectives and mission. 4 culture where employeesnot only trust their leaders, but are willing to follow them, even when they’re uncertainabout change.


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Importance of %oodwill

Cust as a good reputation is vital for the social standing of a person, goodwill is vital to the long'term success of any business. 6ome of the ways in which business goodwill affects a business arementioned below.%oodwill in a business increases the number of return customers and recommendations based ontheir pleasant e#periences.4 well'established business goodwill increases the chances of loan sanctions from a bank and theinterest of potential investors.It strengthens the business networks, opens new avenues and creates opportunities for e#pansionin business.

In case of a blunder or mistake, people are more forgiving to a business based on the goodwill itgarners, much like the mistakes of an individual with a $good name$ will be given the benefit ofdoubt.In any business, goodwill provides ammunition against resistance and sabotage.The e!uity value and the accounting value of a business are greatly affected by the goodwill ofthat business.4s mentioned in the beginning of this article, goodwill is one of the ma>or intangible assets ofany business. %reater the goodwill of a business, greater the value of its intangible assets andthus, greater the ac!uisition price in a takeover.*ow to :evelop %oodwill

%oodwill in a business takes a considerable amount of time, efforts and resources to bedeveloped. The key factors for developing goodwill in a business are listed belowAuality roduct and 6ervices /othing is more important for the life of goodwill in a businessthan the standard and !uality of the products and services it offers.Dni!ue 6elling roposition 4 good business always has a D6 by which it is identified ' therehas to be something in the business for people to be attracted to it.6atisfied 5ustomer 3ase 4 customer is more likely to return or recommend the services of a business if he?she has a pleasant and satisfactory e#perience in the first instance. @ollowing good


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business ethics goes a long way in impressing customers and investors.+arketing and 4dvertisements 4 business which is under the spotlight for the right reasonscreates goodwill for itself. Bffers, discounts and even 6amaritan deeds in a business ensures its place in the good books.6trategy and +anagement %oodwill has to be deliberately developed and it is possible to do so

only if the employees are well'trained, reputed and capable. 4 good strategy or $game plan$ isessential to keep the business on track and motivated.Innovation and #pansion @or a business to be viewed as valuable, it has to be one step ahead of its competitors. Though it sounds clichEd, stagnancy has no place in the goodwill of a business.rofits and %ains 5ustomers and investors are more willing to deal with a business if it is profitable or if they believe that it has the potential of making profits (given a chance.Bnce goodwill has been developed, there is a constant need to keep up and protect it from becoming stagnant or turning negative. 3ut the benefits of goodwill in business make all theefforts worthwhile and satisfying. The adage $the whole is greater than the sum of its parts$reinforces the importance of goodwill in a business ' even a business with low real value canincrease its market value if it can boast about a significant value of goodwill in the business.

goodwill must be of an enduring nature&

• goodwill is attributable to cash flows e#pected from future business activity& and

• goodwill must have commercial value (i.e., must be transferable to a third party.

%oodwill by its very nature cannot e#ist independently of the business which created andmaintains it.

Fgoodwill is not something which can be conveyed or held in gross it is somethingwhich attaches to a business. It cannot be dealt with separately from the business with

which it is associatedG. 3arwick 5C in %eraghty v. +interH0JK *54 98 at 00

The value of goodwill is tied to the fortunes of the business in terms of its profitability andcashflow and the value of the net tangible assets utilied in the business. The value of goodwillwill therefore fluctuate with the performance of the business.

It should be noted that the legal definitions of goodwill and the accounting definitions ofgoodwill are very different. 4 legal definition may result in a finding that the business hasgoodwill but an accounting definition may result in the goodwill having no value.

%oodwill can be derived from one or more of the following sources

• Location based on the notion that a company’s success is, to some e#tent, based on the

physical location of the premises&• roduct?6ervice where a particular product?service offered by the company has

developed name brand recognition?reputation in the market place, the favourable attitudeof consumers often results in incremental cash flow to the company& and

• Bperations a company which has fostered a superior working relationship with its

employees and lenders, investors, suppliers and customers, or has assembled a superiormanagement team, etc. is at a competitive advantage vis'M'vis other companies in the

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industry. This competitive advantage often results in incremental cash flow to thecompany.

In general, goodwill is classified as commercial or personal.

ommercial 6oodwill

5ommercial goodwill refers to goodwill which is sellable and which will provide theinvestor?purchaser with future economic benefits (measured in terms of cash flow. 6ince theeconomic benefit supporting the calculation of commercial goodwill is transferable to third parties, commercial goodwill is a valid consideration in the determination of value.

#ersonal 6oodwill

ersonal goodwill pertains to the favorable attitudes of customers, suppliers, etc., which arederived from the efforts of a particular individual in the business. In many cases, personalgoodwill can be transferred to a potential purchaser through client introductions, and so on. Thisis a common operating model for the sale of service businesses, including medical practices andaccounting practices. In some cases, goodwill associated with a particular individual may also be

secured using non'compete contracts, management contracts or other prudent businessarrangements. In these cases, personal goodwill as it is transferable would be commercialgoodwill.

ersonal goodwill resides with the individual and technically cannot be transferred. ersonalgoodwill would apply for e#ample to the skills, training and reputation of medical specialists, barristers, sports people and celebrities.

)elated Terms 3usiness 4ppraisers

%oodwill is a type of intangible business asset. It is defined as the difference between the fairmarket value of a company$s assets (less its liabilities and the market price or asking price forthe overall company. In other words, goodwill is the amount in e#cess of the company$s book

value that a purchaser would be willing to pay to ac!uire it. 4 combination of advertising,research, management talent, and timing may give a particular company a dominant market position for which another company is willing to pay a high price. This ability to command a premium price for a business is the result of goodwill. If a sale is realied, the new owner of thecompany lists the difference between book value and the price paid as goodwill in financialstatements.

The sale of a business may involve a number of intangible assets. 6ome of these may bespecifically identifiable intangiblesNsuch as trademarks, patents, copyrights, licensingagreementsNthat can be assigned a value. The remaining intangiblesNwhich may include the business$s reputation, brand names, customer lists, uni!ue market position, knowledge of newtechnology, good location, and special skills or operating methodsNare usually lumped into the

category of goodwill. 4lthough these factors that contribute to goodwill do not necessarily havean assignable value, they nonetheless add to the overall value of the business by convincing the purchaser that the company will be able to generate abnormally high future earnings.

4lthough goodwill undoubtedly has value, it is still an intangible asset and as such is notrecorded on a company$s books. In fact, many companies use a value of one dollar for goodwillin their everyday accounting procedures. +any companies could be sold for a premium price based on the good reputation they have established. 3ut such goodwill is never recorded on the books until an actual ac!uisition occurs. The ac!uisition price determines the amount of goodwill

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that is recorded following the purchase of a company. @or e#ample, if a small business withassets of O91,111 is purchased for O=1,111, then the purchaser records O01,111 of goodwill.

In general, determining the sales price of a business begins with an assessment of its e!uity,which includes tangible assets such as real estate, e!uipment, inventory, and supplies. Then anadditional amount is added on for intangible assets (sometimes called a "blue sky" amount,

which may include things like patent rights, a trade name, a non'compete clause, and goodwill.#perts note that in small business sales, the combined total of "blue sky" additions should rarely be more than a year$s net income, because few purchasers are willing to work longer than that for free. @or public companies, the amount of goodwill is often dependent on the vagaries of thestock market. 6ince the share price determines the purchase price, the value attributed togoodwill may fluctuate wildly during the course of an ac!uisition.

6tandard accounting procedures state that, following an ac!uisition, the purchaser shouldamortie goodwill over a period of 0= years using the straight'line method. In other words, one'fifteenth of the original amount attributed to goodwill is deducted each year. 6ince this writeoff period is longer than that re!uired for most tangible assets, it is usually a good idea to allocate asmuch of the purchase price as possible to business e!uipment. The shorter depreciation period

would enable the purchaser to accelerate deductions and thus achieve earlier ta# savings.

Bn occasion, the goodwill booked after the sale of a business may be written down or reduced.6uch occasions usually occur because of some larger shift within the market in which the business is active, a shift that causes a reevaluation of the business. 4n e#ample of such is themobile phone market. :uring the 8111s the market grew !uickly, as many new companiesentered the market, and many mergers and ac!uisitions occurred. In late 811= and early 811P T'+obile and -odafone announced large write'downs of the goodwill on their books in order tomore accurately reflect the competitive marketplace in which they operate.

Bver the years, there has been some dissatisfaction e#pressed with the way that goodwill ishandled for accounting purposes. @irst, since goodwill is sometimes a huge component of a

company$s ac!uisition price (particularly in the case of large public companies, the amortiationof goodwill can have a significant negative effect on the purchaser$s net income. 6econd, thetreatment of goodwill under D.6. law differs from many other countries, which sometimes puts

Technology and Innovation Role in Business

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