University:
Massachusetts Institute of Technology
Course:
15.501/516 | Accounting
Academic year:

2023
Views:

371

Pages:

26
Author:

gannwegodfk4c

Technology Strategy Innovation, diffusion and life-cycles Working arrangements • • • • Apologies for posting the questions for Kodak so late All subsequent classes begin at 12:45 and end at 14:15 We are going to allow more time for wrap-up slides The article “The Half-Truth of First Mover Advantage” did not reproduce properly – and they are also included in this deck • We are going to facilitate some case study discussions to ensure that we integrate the distant participants fully into the program • At the end of the session today, I would welcome feedback from any and all participants First short interim paper • Form a group and pick a technology and domain – subsequent papers in same groups – about same technology and domain • Maximum four (4) pages – 1.5 line spacing – 10-12 point – ≥1” margins • The technology should be interesting • You should be able to research its past evolution effectively • You should be able to anticipate how it is likely to co-evolve with the demand opportunity • If in doubt, please ask! Your marks will depend on how well you answer the key questions! • Why is this technology and its domain interesting and important? • What stage of evolution is this technology and its domain now in, and what have been the episodes in its evolution over time? • What are the implications of these data for technology strategy? • How do you anticipate that the key technologies within this domain will evolve? 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 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 Performance 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 S-curves in the rigid disk drive industry 60.0 50.0 40.0 30.0 100.0 70.0 40.0 20.0 10.0 7.0 Areal Density Areal Density 20.0 4.0 2.0 1.0 0.7 10.0 7.0 4.0 2.0 1.0 0.7 0.4 0.4 0.2 0.2 0.1 70 72 74 76 78 80 Time 82 84 86 88 90 0.1 400 700 1000 2000 4000 10,000 20,000 40,000 $100,000 Cumulative Industry Revenues as Proxy for Engineering Effort Within this smooth overall progression, individual businesses went slower or faster 40 30 Areal Density 20 Fujitsu 15 10 8 6 5 4 Control Data 3 2 1 76 77 78 79 80 81 82 83 84 85 86 87 88 (Densities in Millions of Bits per Square Inch) …and make key technology transitions at quite different times 1,000,000 80,000 60,000 30,000 a To s hib lis M i cri crop be o nis Mi e at Se ag CD Qu ex or em Ro dim e M C ST IBM 4,000 C 10,000 8,000 6,000 EC um N m ant 15,000 ia su hi Pr tac 20,000 jit DEC Fu Hi Areal Density (mbpsi) 40,000 Hewlett Packard 3,000 2,000 1,500 1,000 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 Year Industry avearge for ferrite-oxide models Highest available density in ferrite-oxide Individual firms' movement from ferrite-oxide to thin film Highest available density in thin film 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 measn 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’ work categorized potential users or adopters into five categories # 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%) Everett Rogers identified five product-based factors that governed the rate of diffusion • Relative advantage - the degree to which a product is better than the product that it replaces • Compatibility - the degree to which a product is consistent with the users’ context, in particular their values and experiences • Complexity - the degree to which a product is difficult to understand and use • Trialability - the degree to which a product may be experimented with on a limited basis • Observability - the degree to which product usage and impact are visible to others 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 As a result, 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 • After a technological Bit-mapped innovation and a display subsequent era of ferment, a basic architecture that becomes the accepted market standard • Dominant designs may not be better than Select alternatives nor innovative • They have the benchmark 12 key features to which keypad subsequent designs are compared 2 soft keys Send and end Digital baseband, firmware The relative speed with which technology and demand co-evolve results in different scenarios Slow Fast Pace of Technological Evolution Pace of Market Evolution Slow Fast Calm Waters The Market Leads Scotch Tape The Technology Leads Digital Cameras Sewing Machines Rough Waters Personal Computers …and determines how likely a business is to be able to achieve first-mover advantage The Situation Your Company Faces First-Mover Advantage Key Resources Required Short-Lived Durable Unlikely Even if attainable, advantage is not large. Very likely Moving first will almost certainly pay off. Very likely Even if you can't dominate the category, you should be able to hold onto your customer base. Likely Make sure you have the resources to address all market segments as they emerge. Large-scale marketing, distribution, and prodction capacity The Technology Leads Very unlikely A fast-changing technology in a slow-growing market is the enemy of short-term gains. Unlikely Fast technological change will give later entrants lots of weapons for attacking you. Strong R&D and new product development, deep pockets Likely A quick-in, quick-out strategy may make good sense here, unless your resources are awesome. Very unlikely There's little chance of long-term success, even if you are good swimmer. These conditions are the worst. Large-scale marketing, distribution, production, and strong R&D (all at once) Calm Waters The Market Leads Rough Waters Brand awareness helpful, but resources less crucial here