Transcript Information Society - TKK

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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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Innovation process
Process innovation
Service innovation
Product innovation
Proprietary
technologies
Market appeal
GSM, Internet, fax,
I-mode, Ethernet,
IN, ADSL, CATV
data
R&D
investment
X.400, ISDN, WAP,
ERMES, ATM,
3G/UMTS?
Generic
technologies
Technology push
Science base
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Magnitude of Change
Discontinuous technology
Discontinuous change
Incremental change
Time
Source Tushman, 1997
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Technology cycle
Technological
Substitution
Technological
Discontinuity
Variation
Technological
Discontinuity
Era of
Incremental
Change
Variation
Era of
Incremental
Change
Era of
Ferment
Era of
Ferment
Selection
Dominant
Design
Selection
Dominant
Design
Source: Anderson & Tushman, 1997
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Performance
Disruptive innovation in mobile data
Performance which
customers can utilize
Time
Source: applied from Christensen 1997, Gilbert 2002
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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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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
Source Gaynor, 2003
mature
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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 e-mail solution to reduce switching cost
• Proprietary interfaces
Source: Shapiro, Varian 1999
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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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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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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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Market Share (%)
Positive Feedback
100
Winner
50
Battle zone
Loser
Time
Source: Shapiro, Varian 1999
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Demand-side Economies of Scale
Value to User
Virtuous
cycle
Vicious
cycle
Number of Compatible Users
Source: Shapiro, Varian 1999
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Adoption Dynamics
Number of Users
Saturation
Critical
mass
Takeoff
Launch
Laggards (16%)
Late majority (34%)
Early majority (34%)
Early adopters (13,5%)
Innovators (2,5%)
Time
Source: Rogers, 1995
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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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Fax
Source: Varian
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Mobile communications
Source: Srivastava, Lara, “from the mobile internet to the ubiquitous internet”, ITU, July 24, 2006
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