Technology Adoption – How Technology Markets Evolve

When you are trying to sell an innovative technology, it is important that you understand how people integrate technological innovation into their lives because it is the source of energy driving market growth.

Established markets resist change. In 1900 a lot of people owned horses and buggies. Most technological innovations require people to change their behavior to embrace the benefits of the applied technology. Markets don’t grow until people believe the potential benefits of the new technology outweigh the risks and effort of change.

The more “discontinuous” an innovation, the longer it takes the market to adopt it. Discontinuous innovations are new ideas, products, services, etc. that require us to change our current behavior to something very new and different – the automobile, telephone or personal computer. By contrast, continuous innovation doesn’t require a change of behavior, because it is merely a better way of doing what we are already doing – the automatic gearshift, the cell phone or the next generation of word processing programs. A new technology representing a discontinuous innovation is one that has the greatest potential to create wealth. It is also the hardest kind of innovation to sell because it means you have to convince people to dramatically change their behavior.

The laws of physics teach us that it takes a lot of energy to overcome inertia. Human inertia is what keeps people from adopting your new technology. It takes a lot of energy to get people to change their behavior. So if you want to sell into an early market, you must find and use market energy.

S-curve Adoption Theory

The S-curve adoption model helps you figure out who will adopt when, so you can focus your sales efforts and harness the energy created by market evolution. It also helps you find new opportunities and approach prospects before your competition does.

S-curve adoption theory has three principles:
1. Traditionally, innovations move very slowly into niche markets, then mushroom into the mainstream. Early markets often develop slowly – the more “discontinuous” the innovation, the harder it is for people to figure out how to apply it. The car was around for 30 years before you saw very many on the road.

2. It typically takes the same amount of time for a product to reach 10% acceptance as it does to reach 90% acceptance. Widespread market adoption often happens very quickly. In the fourteen years between 1914 and 1928, household adoption of the automobile grew from 10% to 90%.

3. Once a new technology reaches 50% market penetration, it starts to noticeably impact the economy and productivity. Propelled by the incredible productivity of the assembly-line revolution pioneered by Henry Ford in 1914 and by installment financing offered by General Motors in 1920, the wide-scale adoption of the automobile fueled the booming economy of the Roaring Twenties.

Since technology markets tend to consolidate as they grow, early market share is very important to the long-term viability of your solution and your company. As technologies mature, the market tends to weed out many of the smaller players in favor of one or two major alternatives. This helps the market to standardize on one approach, which makes using the technology much easier. Once the market has chosen a market leader – Microsoft Office, Cisco Routers, Apple iPhones – it is almost impossible to unseat them. The benefits of market leadership are longer product lifecycles, repeat business and economies of scale, all of which serves to reinforce their market dominance over time.

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