Topic 3: Diffusion Examples

1. Topic 3: Diffusion Examples • A few canonical cases of product diffusion. • Moore and more than Moore. • A: After the “break-through” invention • Inventing the calculator • B: Acquiring capabilities over long term • I.e., alignment of business strategy w/lengthy diffusion • The emergence of the home video recorder market • C: Decision making at critical juncture • Market segmentation strategy for an early leader • Sony Navigation system leads early, but will it last? M&S 463

2. A. New product market & the big leap: The calculator • TI tries to put IC expertise into hand-held calculator • Likeliest early target market: Engineers & slide rules • How did early conceptual model “blind” developers? • What demands were anticipated? Was mass market foreseen? • Technical/organizational barriers to development • Complexity of the IC (both design & manufacturing) • Printing/displaying results • Input technology, design and technologies, batteries • What else? • Organizational support? M&S 463

3. A. How did the market develop? A timeline • Apply for patent in Sept, 1967, receive June 1974. • Two years of more development after 67 • Others (!) make similar advances & also receive patents • Early market excitement & then explosion • TI manufacturing out-sourced: Why? • First model in Fall, 1970 . . . Price: $300+ • Fall, 1971, 4 function LED model, $240 • Mature market by mid 1970s as “features” expand • Models at $100 by end 1972 & under $20 by 1976 • High end systems (HP especially) proliferate M&S 463

4. A. Observations about the diffusion of calculators • Bottlenecks to producing breakthroughs • Interdependence of design/manufacturing, how & why? • Engineers selling to engineers is the first market • Dependence on “lead” users for feedback • Did later demand resemble early? Why? Why not? • Mass market develops in predictable pattern • What happened to features, prices, reliability? • How TI profits from own/others’ actions • Others profit too, but use different strategies • Does Moore framework help? Where & where not? M&S 463

5. B. Learning by trying/using: the home video recorder market • Early technical bottlenecks are severe • Breakthrough in 1956  only TV broadcasters can buy • Did early success at Ampex lead to wrong vision? Why? • Requirements of home use differ – how? • Simpler recording head, recording color • Amount of tape, cassettes • Weight, solid-state electronics & ease of use features • What else? • Accumulation of improvements over many years • The difficulty of making a “big leap” quickly at RCA/Ampex M&S 463

6. B. How did commercialization develop? • Multiple attempts at developing consumer mkt • In what sense is there failure? To whom? • Over how many generations of products? • Who learns lessons from early failure? Why? • Why are Sony executives skeptical of “market research”? • How do firms use market experience as source of lesson? • Viewing a new design as a “probe.” Probe of what? • Define “strategic consistency,” “learning by trying.” • Why is it important in a market w/lengthy development? • What parts of R&D can be done quickly? What parts not? M&S 463

7. B. Observations about the VCR diffusion • Mass market develops as concept demonstrated • What happened to features, prices, reliability? • The importance of “standardization” in two senses • As a technical specification: focal for storage • As distribution matures: necessary for reliable mass market • Did early events “blind” management to later events? • What was unanticipated? Home use recording, video rental • What are the downsides of excessive short-term focus? • How do organizations position themselves for long term? • Does Moore framework help? Where and where not? M&S 463

8. C. Sony’s navigator in Japan: Key elements in summer 1996 • Sony is early leader in Japan • Imitators and competitors? • Size of potential market? • Decision for installation. How/who makes decisions? • What is state of diffusion as of 1996? • Why? Price, features, type of adopter. • What was anticipated in Japan? • From competitors, from users • Strategic decisions for Sony in 1996? • What do they need to decide now? Why? M&S 463

9. C. The setting elsewhere: State of diffusion in US/Europe in 1996 • Is Sony early leader in US/Europe? Why/why not? • Imitators and competitors? • Size of potential market? • Decision for installation. How/who makes decisions? • What is state of diffusion as of 1996? • Why? Price, features, type of adopter. • What was anticipated? • Open decisions & strategy in each of these markets? • What do they need to decide now and why? • Is leadership in Japan a (dis?)advantage for developing leadership elsewhere? M&S 463

10. C. Observation about diffusion w/distinct geographic segments • Each geographic region has own diffusion pattern • How does the diffusion in one setting make management potentially blind to the issues in another setting? • More than diffusion complicates the environment • Distinctly different supply of complementary components • Distinctly different user need profiles (w/ or w/o diffusion) • Open strategy question: serve all or only one market? • If all, different stages of diffusion complicate formulating unified strategy. M&S 463

11. C. The relationship between the strategies in distinct markets • Is it possible to work independently across markets? • In technology & operations • In product design/manufacturing/cost • Japan unique in any respect? Why/why not? • History/installed base/experience a help/hindrance? • Trading off one market w/another • Choice of “format” in one market vs. another • How does diffusion forecast shape expected costs of being “wrong” or being “right”? • Does Moore framework help? Where & where not? M&S 463

12. Learning Points • Diffusion studies • Moore & more than Moore • Understanding how diffusion influences strategic thinking in a variety of settings • After the break-through invention • Long term accumulation of capabilities • Decision making at critical junctures M&S 463