M&S 4631 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 4632 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 4633 A. How did the market develop? A timeline Apply for patent in Sept, 1967, receive June –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, 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 4634 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 4635 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 4636 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 4637 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 4638 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 4639 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 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 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 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