TECHNOLOGY MANAGEMENT CENTER

UNIVERSITY OF THE PHILIPPINES - DILIMAN

Introduction to the
Deployment and
Diffusion of
Innovations
Presented by: Isabela Mendez
Agenda
I. Introduction to Deployment of Innovations
Overview
Elements in the deployment of innovations: timing of market entry,
licensing and compatibility, pricing, distribution, and marketing.

II. Introduction to the Diffusion of Innovations

Definitions and Nature of Diffusions
Elements of Diffusion
Dynamics of Diffusion
Factors That Drive The Process of Diffusion

III. The Innovation Adoption Process

5 Stages or Steps of Innovation Adoption Process
Technology Adoption Life Cycle
Categories of Technology Adopters
Moore’s Chasm Theory of Technology Adoption
Crossing the Chasm
Overview of Deployment
Strategy
A large part of the value of technological innovation is
determined by the degree to which people understand
and use it.

An effective deployment strategy is a key element in a

technological innovation strategy.

Some of the key elements in the deployment of

innovation include the (1) timing of market entry,
(2) licensing and compatibility, (3) pricing, (4)
distribution, and (5) marketing.
Source: Melissa Schilling (2005)
 Timing of Entry
THE TIMING OF A MARKET LAUNCH CAN BE
AN IMPORTANT DEPLOYMENT STRATEGY

Strategic Timing of Optimizing Cash Flow versus Can you give an example of a company
Entry Embracing Cannibalization that uses cannibalization as their
strategy and an advantage?
Technology leadership vs. Firms managed product life-
followership cycles to optimize cash flow and
return on investment.
Firms can use timing of
entry to take advantage of Investing in continuous
business cycle or seasonal innovation and cannibalize its
effects own products to make it difficult
for competitors.
 Licensing and
Compatibility
PROTECTING A TECHNOLOGY TOO LITTLE OR
TOO MUCH MAY AFFECT THE FIRM DEPLOYMENT
STRATEGY

Firms must carefully decide:

How compatible to be with products of others Whether to make product backward

compatible - leveraging on an installed base
1. If a firm is dominant, it generally prefers and complements of previous generation.
incompatibility with others’ platforms but may
use controlled licensing for complements.
2. If a firm is at an installed base disadvantage,
they generally prefer some compatibility with
others and are aggressive in licensing for
complements.
 Pricing
Crucial element in the firm's deployment strategy

Pricing Objectives Pricing Strategy

Maximum Current Maximum Market Maximum Market Manipulate customers'
01 Survival 02 03
Share
04 05
Profit Skimming perception of price

pricing objective choosing a price employing market companies set very initial product is
is affected by that produces penetration pricing high price in the free but pay for
intense maximum current to attract and introduction stage to monthly service
competition. profit, cash flow, grow market share. reap much profit "freemium"

and rate of
making profit = return on
goal of surival investment.
 Distribution
SELLING DIRECT VS. USING
INTERMEDIARIES

SELLING DIRECT INTERMEDIARIES

Firms can capture more Manufacturers'
information about representatives
customers and Wholesalers
customize their products Retailers
but may be expensive or OEMs
impractical In some industries,
disintermediation
are enabled
 Marketing

1 2 3

Publicity and
Advertising Promotion
Public Relations

Introduction to the
Diffusion of Innovations
“Diffusion is the process by which an innovation is
communicated through certain channels over time
among the members of a social system.”

- Everett M. Rogers
DEFINITION AND NATURE OF DIFFUSION
INNOVATION IS NEWNESS IMPLIES THAT
COMMUNICATED AMONG DIFFUSION ENTAILS
MEMBERS OF A SOCIAL SOME DEGREE OF
SYSTEM CONCERNED UNCERTAINTY
WITH NEW IDEAS

SOCIAL CHANGE
ESSENCE OF DIFFUSION
A PROCESS WHEREIN
PROCESS =
ALTERATION OCCURS
INFORMATION
IN THE STRUCTURE
EXCHANGE
FOUR MAJOR ELEMENTS OF DIFFUSION
INNOVATION
An idea, practice, or object is
perceived as new by an individual
or other unit of adoption.
TIME
parameter that measures the
innovation's rate of propagation
and adoption
Communication
messages get from one individual
to another, including mass media
channels and interpersonal
channels
Social System
individuals, groups, organization, and
subsystems that are engaged in joint problem
solving to accomplish a common goal
THE DYNAMICS
OF DIFFUSION
INNOVATIONS PROPAGATE THROUGH A
POPULATION OF CONSUMERS IN THE MARKET
(PROSPECTIVE ADOPTERS) OVER TIME.

The Reinvention of an The Mechanisms of

The S-Curve of Diffusion
Innovation During Diffusion
Diffusion
S-Curves of Diffusion
Eras in the Diffusion History of an
S-Curves and Rates of Adoption
Innovation
 MECHANISM OF
REINVENTION
DIFFUSION
Technology
many innovations are changed Substitution
or modified. substitution of old
dynamic by which an Anyone with a device can use our
mobile payments app
to new technology
innovation is modified by the
adopters as they use it.

Bandwagon dynamic by which

Effect later adopters
decides to adopt
Anyone with a device can use our
mobile payments app
an invention, and
imitate behavior of
earlier adopters
 Factors that drive the process of Diffusion

Perceived Characteristics of
Community effects
the social system
Characteristics and network
through which the
of innovation externalities
innovation diffuses
Perceived Characteristics of Innovation

Relative Advantage - the degree to which an innovation is

perceived as better than the one it is superseding

Compatibility - the degree to which an innovation is

perceived as being consistent with the existing values, past
experiences, and needs of potential adopters

Complexity - the degree to which an innovation is perceived

as difficult to understand and use

Trialability - the degree to which an innovation may be

experimented with on a limited basis

Observability - the degree to which the results of an

innovation are visible to others
 Community Effects and Network Externalities
LEARNING POSITIVE TECHNOLOGICAL
EFFECTS EXTERNALITIES INTERRELATEDNESS
innovation's performance ratio the immediate benefits of refers to a large base of
improves rapidly as a use are a direct function of compatible products needed
community of adopters the number of current to make the innovation
accumulates experience in adopters. worthwhile as a whole.
developing and applying
innovation.

Social System in Diffusion

Communication Channels EFFECTS OF THE
SYSTEM'S SOCIAL
MASS MEDIA INTERPERSONAL STRUCTURE
CHANNELS CHANNELS social relationships

most rapid and efficient means to inform more effective in persuading an EFFECTS OF SYSTEM
an audience of potential adopters about
the existence of an innovation
individual to accept a new idea NORMS ON
DIFFUSION
behavior patterns
The Innovation
Adoption
Process
The process through which an
individual passes knowledge of an
innovation to forming an attitude
toward the innovation, and making a
decision to adopt, reject, implement,
and use of the new idea.
 5 Steps in Innovation Adoption Process

KNOWLEDGE PERSUASION DECISION

IMPLEMENTATION CONFIRMATION
 Stages in the Innovation
Adoption Process

AWARENESS INTEREST EVALUATION TRIAL ADOPTION CONFIRMATION

1 2 3 4 5 6
Technology Adoption TECHNOLOGY
ENTHUSIASTS
Pursues new technologies
Life Cycle aggressively and buy early

No. of Adopters of the Innovation

VISIONARIES
Appreciate benefits of
technology and are key to
penetration
PRAGMATISTS
Interested in technology but
PRAGMATISTS CONSERVATIVE practical. They want well-
established references before
buying

VISIONARIES CONSERVATIVE
Not comfortable with
technology and they buy when
SKEPTICS technology is established
TECHIES
<---------TIME ---------> SKEPTICS
Don't want anything to do with
new technology
Moore's Chasm
Theory of Technology
Adoption
?! So… Why Have These
Innovations Not Yet
Succeeded? Or Taken
so long to Succeed?
 Technology
Adoption Life Cycle

This model becomes the foundation for a high-tech marketing model which says the
way to develop a market is to work the curve from the left to right, progressively
winning each group of users, using each "captured" group as reference for the next.
Moore's Chasm Theory of Technology
Adoption There is a big difference
between PEOPLE WHO
ARE WILLING TO TRY
NEW TECHNOLOGIES
ap and the REST OF THE
e g
rg he
a
a
l nt POPULATION who are
at e e y
th etw an conservative.
ued s b of S
rg is t R S A S
e x
a ” e TE M
o r
o asm O P th e Technologies initi
M “ch AD and ally get
commercially laun
or RLY ogy ched by
A
E hn ol . enthusiasts, but la
T ter fail
tec RKE to get wider adop
tion.
MA
Entrepreneurs ne
ed to
come up with stra
tegies
that will help them
BUILD
A BRIDGE ACRO
SS THAT
GAP.
 Gaps in the Technology Adoption Life Cycle

The curve has three cracks and one very large chasm

The Technology Adoption Life

Cycle is not continuous,
since the different segments
buy for different reasons

CRACK 1 CRACK 2 CRACK 3

 BACK TO
GAME BOARD

CRACK 1

Early Adopters talks to the Lead Users/Innovators.

To pass Crack 1, there should be a strong need to enable a strategic
leap forward.
 BACK TO
GAME BOARD

Perceived characteristics of the

Visionaries (Early Adopters)
THE CHASM that alienate the Pragmatists
(Early Majority):

1. Pragmatists don't feel respected by

Visionaries
2. Visionaries love technology but are bored
with mundane details, the everyday work
for the pragmatists.
3. Visionaries build systems from the ground
up and do not appreciate the networks
and procedures already in place.
4. Visionaries do all the fun things. They
take all the funds/attention for their
projects. If they fail, pragmatists are there
to clean up the mess. If they succeed,
Early Majority does not talk to the Early Adopters,
disruptive change is too much to handle
hence the big Chasm.
CRACK 2

Late Majority talks to the Early Majority.

To pass Crack 2, there should be a strong need to ensure user-
friendliness, and ease to adopt.
CRACK 3

Laggards listen to the Late Majority for economic reasons big enough
to make them change. Laggards are the last to take on new technology.

To pass Crack 3, there must be really no other choice and a clear

economic advantage to compensate for a "very cumbersome technology
shift"
Crossing The
Chasm
Crossing the Chasm requires a shift
in Delivered Values

From Product- To Market-

Centric Values Centric Values
obtain market essential to cross
penetration the chasm

fastest/smallest/lightest product quality of support

most elegant "architecture" most third-party supporters
unique functionality de facto standard
 Crossing the Chasm
requires a shift from Core
Product to Augmented
Augmented Product
Product
more than physical product and sets
Actual Product
it apart from competitors

tangible product
features
Core Product

basic benefit customers want

"Chasm crossing is not the
end, but rather the
beginning, of mainstream
market development."

-Geoffrey A. Moore