1. Characteristics of Innovation
New or improved product, service or process from market point of view, which contains new technological solutions and has been commercially successfully introduced to the market
Radical, disruptive, sustained, incremental, architectural, service and process innovations
Innovator gets competitive advantage through timing advance and IPR protection by patents – short monopoly
Monopoly will loosen through trade of patents and licenses or knowledge spillovers when competitors copy the technology and proprietary technology gets common to all players in the industry
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2. Innovation process Market appeal Technology push
Process innovation
Market appeal
Service innovation
GSM, Internet, fax, I-mode, Ethernet, IN, ADSL, CATV data
Product innovation
Proprietary
technologies
R&D
investment
X.400, ISDN, WAP, ERMES, ATM, 3G/UMTS?
Generic
technologies
Science base
Technology push
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3. Discontinuous technology
Improvement trajectory of incumbents
Magnitude of Change
Discontinuous change
Incremental change
Time
Source Tushman, 1997
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4. Technology cycle Technological Substitution Variation Selection
Discontinuity
Variation
Era of
Incremental
Change
Era of
Ferment
Technological
Discontinuity
Selection
Variation
Dominant
Design
Era of
Incremental
Change
Era of
Ferment
Selection
Dominant
Design
Source: Anderson & Tushman, 1997
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5. Disruptive innovation in mobile data
Performance
1-3 G
Performance which customers can utilize
Technological trajectories
WLAN
Time
Source: applied from Christensen 1997, Gilbert 2002
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6. What is market uncertainty
Market uncertainty relates to the inability of vendors and service providers offering new communications solutions to predict what are the latent end users needs
The uncertainty exists partly also because users do not know what they want until they see and use it
When users are first introduced to new technology they tend to view it in the context of the older technology
Users needs evolve hiearchically from basic features to more sophisticated ones along with the technology evolution as they become more educated about the benefits it provides
Source Gaynor, 2003
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7. Managing market uncertainty
The only way to meet uncertain markets is to experiment several ideas and hope at least one will work
When market uncertainty is high, being lucky with correct guess about the market is likely to produce more revenue than being right in markets with low uncertainty
In high uncertainty competition is feature based and low price based
The use of distributed architecture in the introduction phase of new communications platform when the market uncertainty is high
Centralized management structure should then be used in later phases of the cycle when the technology and market is mature
Source Gaynor, 2003
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8. Lock-in
Investments in varying complementary assets related to the actual ICT investment influence switching costs
When the switching costs from one brand to another are substantial, customers face lock-in
Sonera & Radiolinja example: low number of moving customers before portability of telephone number
iki.fi solution to reduce switching cost
Proprietary interfaces
Source: Shapiro, Varian 1999
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9. Lock-in
Existing installed customer base with high switching cost is significantly valuable asset
Collective switching costs, group pricing of mobile calls
Total switching cost = costs the customer bears + costs the new supplier bears
The present discounted value to a supplier of locked-in customer is equal to total switching costs, plus the quality or cost advantage of current supplier’s product
Source: Shapiro, Varian 1999
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10. Networks and Positive Feedback
Increasing returns to scale (economies of scale) exist when the cost per unit decreases as more units of the good are produced.
Recently, the term "increasing returns to scale" has been used to describe more generally a situation where the net value of the last produced unit [= (€ amount consumers are willing to pay for the last unit) - (average per unit cost of production)] increases with the number of units produced. This effect can be called also demand side of economies of scale.
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11. Networks and Positive Feedback
A network exhibits network externalities when the value of a subscription to the network is higher when the network has more subscribers.
Metcalfe´s law: n * (n-1) = n2 – n
Dominant design is a technology that wins the allegiance of the market place, it usually takes the form of a new product (or a set of features) synthesized from individual technological innovations introduced independently
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12. Positive Feedback Winner Market Share (%) Battle zone Loser Time 10050
Battle zone
Loser
Time
Source: Shapiro, Varian 1999
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13. Demand-side Economies of Scale
Virtuous
cycle
Value to User
Vicious
cycle
Number of Compatible Users
Source: Shapiro, Varian 1999
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14. Adoption Dynamics Laggards (16%) Late majority (34%)
Saturation
Number of Users
Laggards (16%)
Late majority (34%)
Early majority (34%)
Early adopters (13,5%)
Innovators (2,5%)
Takeoff
Launch
Critical
mass
Time
Source: Rogers, 1995
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15. Innovation diffuson
Relative advantage (price and performance) over competing technologies substitutes
Compatibility with the values, norms, and experience of the end-users
Innovations that are connected to already proven technology
Complexity
Easy trialability of the early adopters
Observability of innovation, the visibility among the user community 
Characteristics of the implementation decision: centralized, group, individual
Source: Rogers, 2003
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16. Fax
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Source: Varian

17. Mobile communications
Source: Srivastava, Lara, “from the mobile internet to the ubiquitous internet”, ITU, July 24, 2006
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