Wednesday, December 10, 2008

Avoid the Bleeding Edge

Below is the Technology Adoption Lifecycle curve as defined by Joe M. Bohlen, George M. Beal and Everett M. Rogers from Iowa State College:


The curve describes how new ideas and technologies spread across cultures. The researchers have found that the bell curve above is a standard model for the adoption or acceptance of new technologies. Both demographics and psychological characteristics play a significant role at each stage in the curve.

Their findings indicated that:
  • innovators - more educated, more money and more risk-oriented
  • early adopters - younger, more educated, tended to be community leaders
  • early majority - more conservative but open to new ideas, active in community and influence to neighbours
  • late majority - older, less educated, fairly conservative and less socially active
  • laggards - very conservative, little money, oldest and least educated
Ultimately it is your risk tolerance that determines where you fall on the curve. Obviously familiar technologies related to your business may lead you to an earlier stage on the curve. However, I usually advise all my customers to avoid the Innovator and Early Adopter stages of any new technology. Typically, these are the users that absorb the greatest amount of risk associated with new technologies.
Think of every new gadget that has caught your attention on release. On June 29, 2007, Apple Computer released the iPhone; innovators and early adopters stood in line for hours to pay $599 per phone. By September of 2007 Apple announced a $200 discount on the high end iPhone which caused a massive customer backlash. Because of the incredible hype, normally rational people rushed out to overspend on a new cell phone. If they had waited three months they could have gotten the same phone for 30% less. Innovators and early adopters tend to absorb the highest costs for new technology. They are the consumers that repay the lion's share of the research and development costs.
There is also the risk posed by bugs and problems. Everyone has a story of a new product or gizmo they bought that didn't work right. Innovators and early adopters always bear the brunt of these problems as the company hasn't had time to iron out the bugs. There is significant business risk associated with errors and problems with new technologies. Could you imagine a new productivity software that paralyzed your business because of bugs? The hidden costs of these problems can be astronomical. A great example of a product failure caused by excessive bugs is Microsoft's Windows Vista. Vista suffers lackluster sales after computer geeks worldwide largely dismissed it as error prone and faulty. Regardless of the number of updates and repairs issued by Microsoft, the damage was done and Vista never fully recovered.
Finally, there is the very real danger from a failure to capture sufficient market share. If a company cannot launch their new technology and capture enough market share, there is no future for the product. A great recent example is HD-DVD which lost the high definition format war to BluRay. How many people purchased HD-DVD equipment only to have it become obsolete? I am certain you can think of other examples. If you are old enough you may remember the battle between LaserDiscs and DVDs. The technical history books are full of examples of failed technologies that left innovators and early adopters high and dry.


Continued: When to Buy In

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Source: Wikipedia Technology Adoption Lifecycle

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