1. Lecture 3 Fundamentals of Technological Change ©2009 Prentice Hall 2-1

2. Static Models Incremental vs radical innovation Abernathy-Clark Henderson-Clark Innovation Value-added Chain Strategic Leadership Familiarity Matrix Quality and Quantity of New Knowledge Appropriability and Complementary Assets Local Environment Strategic Choice

3. Dynamic Models Foster  S-curve Barras  Reverse product life cycle Utterback-Abernathy Tushman Rosenkopf Tushman-Anderson Rogers  Typology of Adopters

4. 11 - 4 Time (Effort) NEW INVENTION PERIOD Embryonic Maturity Performance parameter Aging Growth TECHNOLOGY IMPROVEMENT PERIOD Physical Limit MATURE TECHNOLOGY PERIOD

5. FOSTER’S S CURVE WITH VARIATIONS Chart Physical limit Curve is not smooth because of variance in effort and resources Effort

8. 11 - 8 Changes in Natural Limits for Old and New Technologies Time Limit of Technology A Technology A’ Technology B Technology A Performance Parameter Limit of Technology B Performance Differential

9. 11 - 9 Overall Technology Cycle Composed of Subtechnology Lifecycles Time Subtechnology II Life Cycle Overall Technology Life Cycle Subtechnology III Life Cycle Subtechnology I Life Cycle Performance Parameter Limit of Technology

10. ©2009 Prentice Hall 3-10 Distribution of Adopters Normal distribution is the most common pattern of adoption of new products and services

11. ©2009 Prentice Hall 2-11

12. ©2009 Prentice Hall 3-12 The Normal Distribution of Adopters

13. ©2009 Prentice Hall 3-13 Groups of Adopters Innovators: adopt new technology immediately Early adopters: follow the innovators Early majority: adopt new technology just before the average for the market Late majority: adopt after other customers have adopted the technology successfully Laggards: prefer to avoid adoption as long as possible

14. ©2009 Prentice Hall 3-14 S-Curves of Adoption The S-shaped pattern indicates that there is an acceleration point at which a market “takes off” by:  Pointing out that different groups of customers adopt new products at different points in time for different reasons  Providing information about the right promotional strategy  Indicating appropriate pricing strategy  Providing estimated demand growth over time  Providing information about the financial attractiveness of a market at different points in time

15. ©2009 Prentice Hall 3-15 The Adoption S-Curve

16. ©2009 Prentice Hall 3-16 Crossing the Chasm The need to sell to the mass market to achieve an adequate return on investment For companies to segment the early majority of the market and focus on the portion of the majority that is underserved by existing products

17. ©2009 Prentice Hall 3-17 Crossing the Chasm

18. ©2009 Prentice Hall 3-18 Identifying the Take-off Stage If there is an accelerated rate change in demand When the customer base begins to shift away from the innovators and early adopters

19. ©2009 Prentice Hall 3-19 How to Cross the Chasm Need to show how it provides value to customers Need to develop a complete solution to customers’ problems Need to pursue a vertical marketing strategy rather than a horizontal marketing strategy

20. ©2009 Prentice Hall 3-20 Choosing the Customer Concentrate on a single vertical market  Target the one that has the greatest need for the new product by estimating the product’s value to different markets  Estimate the time it takes to payback the cost of the product

21. ©2009 Prentice Hall 3-21 Beachhead Strategy Segment the early majority of the market and focus on the portion of the majority that is underserved by existing products