Co-evolution of the Demand Opportunity and Technological Infrastructure

Technology Strategy Co-evolution of technological innovation and demand opportunity The process of theory-building Theory is a statement of what causes what, and why. ct cti ve Pr oc ess roc eP du tiv Categorization uc Ind rm nfi Co Theory i ed r P ess De The lenses of other disciplines Observe, describe & measure the phenomena Anomaly Nested research designs: the phenomena within the phenomena Technologies and technological innovation • Technologies emerge – can be push - supply, driven by new knowledge - or pull - demand, driven by demand opportunity • Learning takes place – either or both of over time, or as a result of accumulated experience – driven by what’s possible - technological feasibility - and by what’s worthwhile - commercial viability • Over time, performance improves and unit costs fall – along which parameters – at what rate – locally, or causing system change Parameter 1. one of a set of measurable factors…that define a system and determine its behaviour… 2. a factor that restricts what is possible or what results1 3. a distinguishing characteristic or feature Envelope 1. the technical limits within which an aircraft or electronic system may be safely operated 2. the maximum operating capability of a system (especially an aircraft) Trade-off 1. the exchange of one thing for another of more or less equal value, especially to effect a compromise 2. an exchange of one thing in return for another, especially relinquishment of one benefit or advantage for another regarded as more desirable Technology envelopes and trade-offs Parameter x Trade-off Parameter y Technologies are characterized by performance envelopes, the limits of what can be done with them, and the trade-offs amongst parameters for them Different technologies have different envelopes and trade-offs Technologies compete with each other for potential applications • At any time, there are typically a range of competing technologies that are candidates for each application • Each of these technologies can be characterized in terms of its key parameters • Each technology typically has a performance envelope, which defines the trade-offs inherent in the technology • Over time, technologies follow an innovation trajectory, a vector or function that describes how they have evolved and may evolve, either over time or in response to effort invested in their development – rate of change – direction Innovation trajectories Penetration Performance tends to be ultimately constrained by physical limits although these may be a long way off, or not relevant to what customers want done Time Innovation trajectories Performance Performance is often a non-linear function of effort invested, with rapid progress during rapid growth, slow improvement in maturity, and sometimes slowdowns Cumulative Effort The rate at which performance improves can vary dramatically Yearly Improvement Index Performance Improvement 100,000 90,000 80,000 100 90 80 70 60 50 40 30 20 10 0 PCs Digital cameras Personal stereos Vacuum cleaners 0 1 3 5 7 9 11 13 15 17 19 21 Years from Product Launch Users’ needs are diverse, and they change over time, and in response to technological innovation • Heterogeneous - actual or potential users and customers have a range of different needs - jobs they want done and value they put on getting those jobs done – may be related to demographic characteristics – but not necessarily, so that in many cases other bases of segmentation may be more useful • Exogeneous - what users and customers want changes over time in response to, amongst other things, their own changing circumstances and broad societal shifts • Endogeneous - users and customers’ beliefs and behaviour also change in response to technological innovation - new possibilities But it’s not easy to get them to adopt novel products that embody innovative technologies • Most customers most of the time are loath to change their behaviour – requires investment of time and effort – involves uncertainty and can induce anxiety • And are (necessarily) unfamiliar with novel products • Novel products almost always involve trade-offs • They evaluate products based on perceived value, relative to products they already use to do a job, and are overly sensitive to dis-benefits - “loss aversion” • At the same time, businesses (full of technologists) tend to underestimate the switching costs, and overestimate the potential benefits So we find ourselves with eager sellers and stony buyers Not much Easy sells Smash hits Sure failures Long hauls Behaviour change A lot Low Payoff High Over time, however, successful innovations diffuse amongst users and get widely adopted • Probit adoption – potential users or customers weigh costs and benefits – heterogeneity of preferences means that different users or customers adopt at different times • Epidemic adoption – adoption limited by availability of information – as potential users and customers become aware of what it does and how to use it, they will adopt • Information cascades and path dependence – a technology becomes established, it works and is better, and its features well known, legitimizing it – once established, network effects take over Diffusion of innovations Rate of adoption Penetration Time Everett Rogers’ segmentation # of units bought Early majority (34%) Late majority (34%) Early adopters (13.5%) Innovators (2.5%) Time Adopters can differ in many ways, such as resources, values (affinity for risk), knowledge, complementary assets and other factors Laggards (16%) Geoffrey Moore’s chasm focuses on psychographic characteristics of users or customers Early majority Late majority # of units bought Early adopters Innovators Time Making the transition from early adopters to the early majority of users or customers often requires significant changes in the offer, and new and different competences Laggards The rate at which new technologies diffuse can vary widely Market Penetration U.S. Households 100% 80 PCs 60 Telephones VCRs 40 Vacuum cleaners 20 0 0 10 20 30 40 50 60 70 Years from Product Launch 80 90 100 Together, these two phenomena often result in a characteristic industry life-cycle Early ferment Dominant design emerges Incremental innovation Early mainstream usability, cost more important Mainstream customers soft factors, aesthetics Business Ecosystem Many entrants - diverse business models Decisive battles for leadership Intensifying competition, early consolidation Technological Infrastructure Make it work innovate on performance, diverse integrative designs Figure out the optimal architecture, drive down costs, make it easy to use Demand Opportunity Lead users, early adopters - high payoff, low switching costs Maturity Saturation, segmentation, customization Fierce competition, consolidation around majors and minors Develop broad Broaden the offer, rationalize portfolio, build platforms, the portfolio, search for new build up options complementary assets Eclipse or renewal Dominant design Bit-mapped • After a technological display innovation and a subsequent era of ferment, a basic architecture that becomes the accepted Select market standard • Dominant designs may not be better than alternatives nor innovative 12 key • They have the benchmark keypad features to which subsequent designs are compared 2 soft keys Send and end Digital baseband, firmware