Chapter 6 - Assessing Future Markets for New Technologies

In chapter 6, George Day, delves into how to assess markets for emerging technologies and the challenges companies face in doing these market assessments. The question companies must address is, how do we determine the size and demands of a market that does not yet exist for a product that nobody knows about? Traditional market assessment methods and tools are designed to assess developed markets, to receive and interpret consumer feedback for products that are developed and have established purposes. This process becomes much more difficult when there is no market, the technology is not fully developed and its applications are not absolutely clear. There are 3 usefull assessment approaches for future markets and emgerging technologies:

1. Diffusion and Adoption
2. Exploration and Learning
3. Triangulation for Insights

Diffusion and Adoption

The author here explains how prducts diffuse themselves throught the market and rate of adoption by the different customer sets. How quickly and successfully products diffuse themselves through the market can be largely explained by the following characteristics:

• Perceived Advantages - the advantages of the new product compared to best available alternative
• Risk - risk buyers perceive because of their uncertainty about the new product (performance, changing standards or possible economic loss
• Barriers to Adoption - barriers that hinder the consumers from adopting sooner, such as investments in current or prior generation products, regulatory restrictions, etc.
• Opportunities to Learn and Try - the product must be readily available for trial, purchase and servicing, the consumers must also be informed about the benefits of the product

While all of these characteristics are important to the diffusion of new technologies into the market, perceived advantages are the main driver, because without a substantial advantage over current technologies most consumers will be hesitant to invest in new technology just to have new technology. There must be a significant enough advantage to justify the investment, both monetary investment as well as any learning investment that may be needed. In order to stimulate the diffusion of technologies into the market, firms must make investments in innovation, which stimulates market growth, which encourages competitive activity, which causes further innovation to increase relative advantages, which starts the entire process over again and causes further diffusion of the new technology and market growth.

This diffusion occurs in stages across different customer groups, all of which have different rates of adoption tolerences for new technologies. Some of these consumers are quick to adopt, others will not adopt the new technology until there is no choice but to make the change (similar to the digital conversion of television going on today). These different consumer group are labeled by a popular adoption bell shaped curve with the innovators and early adopters on the left tail of the curve where the early stages of diffusion would be, then the early majority and late majority are where the largest percentage of diffusion occurs, then the laggards adopt when there is no other alternative. The first few groups provide valuable insights into the market for firms as they progress their product through the market. The Innovators adopt new technology as quickly as possible, they take the time needed to master the technology. They help to prove the new product and provide endorsements to the follow-on groups. Early adopters, visionaries, see potnential to change the rules in their own competitive market with the use of the new technology. This group really helps to bring the capabilities and potential out in the new technology because of their extensive requirements. Once proven by the early adopters, the pragmatic early majority will start to adopt once the benefits are well proven. This part of the chapter was discussed by John Hanousek in our last class and more in depth in the book he recommended, "Crossing the Chasm".

Exploration and Learning

This is the process of creating a technology out of market inquiries, successive approximations and accumulating learning. Questions to ask at the beginning of this process would be:

• What are we trying to learn about?
• What decisions have to be made and what alternatives should be considered?

These questions must be asked and answered mutiple times and mutiple way sprior to the establishment of the dominant design of the new product. A great example here is the early PDA market, where many companies tried to rush to the market with solutions they thought consumers would want. However, Palm waited back, assesed market needs, released early versions of their product to innovators, took feedback from those early releases and eventually launched a product that became the industry standard. This information gathering and beta testing stage is crucial to this approach; good customer feedback will be used to develop a product that meets broader market needs. The information gathered will then be interpreted by organizations. These organizations must be careful to look past their initial assumptions of the market as well as specific customer feedback. Instead they need to interpret this feedback and draw from it information about latent needs, persistant problems and/or trends in requirements.

Triangulation for Insights

As previously stated because there is a lack of information about the future market and little to no knowledge about the emerging technology, using any single current market assessment method will not produce accurate information. However, by using different methods and gathering information in different ways one can make market assessments that are directionally similar. That is we cannot gain the exact information that we could in existing markets from a focus group, for instance, we can predict a general direction or general needs that a product should take or solve.

Taken together these 3 approaches can help solve the difficult issue that companies producing emering technologies face. They find ways to collect useful market information that critical decisions about new products can be made. As an extension to this chapter, Geoffrey Moore's book, "crossing the Chasm" provides more in depth analysis about the Adoption Curve and the groups that make that curve up. The book details the importance of maintaining momentum to cross the "chasm" where many technologies and companies die.

Moore, Geoffrey A., "Crossing the Chasm". New York: Collins Business Essentials, 2002.