1. Dominant design
Timing of entry
Dr Marianna Sigala

2. Why dominant designs exist
The more a product is adopted, the more valuable it becomes
The more products are used, the more they are improved
The more a product is used, the more complementary assets are developed

3. Two sources of increasing returns of products
Learning effects – learning curve
Performance increases, or costs decrease, with the number of units of production
Absorptive capacity: as firms accumulate knowledge, they also increase their future ability to assimilate information
Network externalities
The benefit of using a good increases with the number of other users of the same good, e.g. telephone, internet, itunes, motorways
Installed base: the number of users of a good

4. Complementary goods and network externalities
A good installed base attracts producers of complementary goods
Availability of complementary goods attracts users, increasing installed base, which in turn increases complementary goods etc etc etc

5. When a firm is able to lock its good as a dominant design, then not only it gains monopoly rents in the short term, but it is also able to shape the evolution of the industry influencing the future generations of products / goods

6. Companies can also shape users’ expectations of the future installed base and availability of complements through announcements of pre-orders, licensing agreements and distribution arrangements

7. Use of vaporware
Goods that are not actually in the market and may not even exist but are advertised in order to:
Prompt rapid adoption of the good when is actually is available
To buy valuable time in bringing a good to the market
User vaporware to persuade customers to delay purchase of a competing product until the firm’s good is out in the market

8. Timing of entry

9. Type of entrants First movers: first to sell a good
Early followers: early to sell a good but not the first
Late entrants: which enter the market after the good begins to penetrate the mass market

10. First mover advantage
Brand loyalty and technological leadership: increase image, leadership and shape customer expectations
Preemption of scarce assets such as key locations, government permit, access to distribution channels and relationships with suppliers
Exploiting buyer switching costs : changing good as well as complements
Self-reinforcing positive feedback mechanisms

11. First mover dis-advantages
Research and development expenses : a later entrant can save development expenses as well as make a good that has a closer fit with market preferences (i.e. learn from mistakes of first mover and first adopters)
Undeveloped supply and distribution channels
Immature enabling technologies and complements
Uncertainty of customer requirements

12. Factors influencing optimal timing of entry
How certain are customer preferences ?
How much improvement does the innovation provide over previous solutions? It affects customer adoption
Does the innovation require enabling technologies (or complementaries) and are these technologies sufficiently mature?
Maybe develop complementary goods as well

13. Factors influencing optimal timing of entry
Can the firm withstand the early loses?
Does the firm have the resources to accelerate market acceptance ?
Is the firm’s reputation able to reduce the uncertainty of customers, suppliers and distributors ?
Is the industry likely to experience increasing returns of adoption?

14. Thank you ! Any questions ?
Dr Marianna Sigala