IT Innovation
Evaluating an Innovation
GP Dhillon, PhD
Associate Professor of IS
School of Business, VCU
Functionality and Cost
Innovation and Diffusion S Curve
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Examples:

First Technology:
incremental
improvements to the
original ferritehead/oxide disk
technology enabled
manufacturers to grind
the heads to smaller,
more precise
dimensions.
Second Technology:
thin-film
photolithography
displaced ferrite-heads
in most disk drives
between 1979 and
1990.
Third Technology:
magneto-resistive
heads.

Time

Emerging Technologies and Markets
Technological discontinuities: Jumping
the S- Curve
Impact of sustaining and disruptive
technologies
Performance as in application “A”
Disruptive technology S-Curve
Application (Market) “A”
Application (Market) “B”
Technology 2
Technology 2
Technology 1
Time or Engineering Effort
Internet Commerce is a disruptive
technology
 Certain Internet based solutions are disruptive technologies within a given
market (e.g. e-commerce solutions relating to selling books are disruptive
technologies within the market of selling books).
Managing disruptive technology
principles
 Companies that utilize disruptive technologies or have a product or a
service that is disruptive, should remember that their success depends
on both the customers and investors for resources.
 Since small markets don't solve the growth needs of large companies,
the launch and sustainability of a disruptive product or service needs to
be positioned accordingly.
 Since disruptive technology products and services are novel, it is hard
to analyze their respective markets, which do not exist.
 Ability to create a business model, product or a service does not
necessarily mean that there is a demand for such a product or service,
i.e. technology supply may not equal market demand.
Companies depend on customers and
investors for resources
 If a company has invested more than necessary into a disruptive
technology and the customers seem to like it, but it has a negative cash
flow and has a bad debt load, there is a strong likelihood that the
investors (or venture capitalists) would not be as enthusiastic as they
would have been.
 In the B2B arena nearly $800 million was invested into 77 eexchanges in early 2000 and another $500 million in mid 2000 but the
customers have not been too responsive.
 E.g. Industrialvortex.com attempted to aggregate products from
numerous suppliers, they faced stiff resistance since the suppliers felt
that such an e-marketplace would give buyers an easy access to cheap
suppliers
Small markets don't solve the growth
needs of large companies.
 Companies that successfully leverage the disruptive technologies to their
advantage, gain significant first mover advantages. However once these
companies get entrenched in their specific market, then find it difficult to
enter newer small markets, which could potentially be very profitable.
 Amazon vs Barnesandnoble.com and Barnes & Noble
Markets that don't exist can't be analyzed
 Since research about future success can only be carried out
for technological impacts that have already taken place, it is
difficult, if not impossible, to analyze a market for disruptive
technology. Such analysis can only be carried out for
sustaining technologies.
 It has been rather difficult for Amazon to adequately forecast
demand for newer products. And on $676 million in sales for
the fourth quarter (1999), Amazon had to write down $38
million on inventories, particularly for electronics and toys.
Technology supply may not equal market
demand
 Since the pace of technological improvement usually far exceeds the
performance improvement rate than mainstream customers can absorb, the
companies whose technological features match customer demands today may
overshoot mainstream market needs tomorrow.
 Consider developing conventional photographic films. The first mover
advantage clearly went to AOL and Kodak. The service was carefully
positioned to address the needs of those who wanted to have the ability to
share digital photographs with friends and family. Hence the emphasis was on
functionality.
 Then came Ememories (sluggish) and Ofoto (low reliability) who started
offering free processing along with the ability to share digital photographs.
Such advancement was clearly surpassing what the current market could
absorb. The customer expectation hovered around functionality and reliability
aspects.
Conclusion
 In the end success will be defined by the ability of the
respective firms to differentiate between sustaining and
disruptive technologies and their ability to manage the
resource allocation problem, competence in matching the
market to the technology and systematically identify and
position their capabilities.