1. Copyright © 2004 Sherif Kamel Theory of Diffusion of Innovation Sherif Kamel The American University in Cairo

2. Copyright © 2004 Sherif Kamel Theme of the theory  How ideas and technologies can spread and become accepted in a community?  Technology cycle includes: o Adoption o Diffusion o Adaptation

3. Copyright © 2004 Sherif Kamel Innovation  An idea, object(s) practice(s), or product perceived to be new by the relevant individual or group adopting it  Uncertainty exists about both the innovation’s purpose and value as well as the evaluation and consequences of use

4. Copyright © 2004 Sherif Kamel Diffusion theory Everett Rogers (1983)  The process by which an innovation is communicated through certain channels over time among members of a social system

5. Copyright © 2004 Sherif Kamel 4 elements of diffusion  Innovation o An idea, object(s), practice(s) that is perceived as new by an individual or other unit of adoption  Communication channels (knowledge) o Means by which messages get from one individual to another  Time (decision process) o innovation-decision process o Relative time with which an innovation is adopted by an individual or group o Innovation rate of adoption  Social System (structure) o A set of interrelated units engaged in joint problem solving to accomplish a common goal (opinion leaders are capable of influencing others)

6. Copyright © 2004 Sherif Kamel Types of innovations  Innovations differ in their degree of newness and this helps to determine how quickly products will be adopted by a target market  The more novel the innovation, the slower the diffusion process  Innovation continuum is based on the amount of disruption or change

7. Copyright © 2004 Sherif Kamel Original theorists  Gabriel Tarde (1903) o S-shaped curve for diffusion processes  Ryan and Gross (1943) – adopter categories o Innovators o Early adopters o Early/Late Majorities o Laggards  Katz (1957) o media  opinion leaders  opinion followers

8. Copyright © 2004 Sherif Kamel Rogers’ (1995) Diffusion of innovation – theory stages  Adoption Process o Awareness - individual is exposed to innovation but lacks complete information o Interest - individual becomes interested in the new idea and seeks additional information o Evaluation - individual mentally applies innovation to his present and anticipated future situation, and then decides whether or not to try it o Trial - individual makes full use of innovation o Adoption - individual decides to continue the full use of innovation

9. Copyright © 2004 Sherif Kamel Factors affecting diffusion  Innovation characteristics  Individual characteristics  Social network characteristics  Others…

10. Copyright © 2004 Sherif Kamel Innovation characteristics  Observability o The degree to which the results of an innovation are visible to potential adopters  Relative Advantage o The degree to which the innovation is perceived to be superior to current practice  Compatibility o The degree to which the innovation is perceived to be consistent with socio-cultural values, previous ideas, and/or perceived needs  Trialability o The degree to which the innovation can be experienced on a limited basis  Complexity o The degree to which an innovation is difficult to use or understand.

11. Copyright © 2004 Sherif Kamel Societal conditions conducive to diffusion  Modernity  Physical distance  Opinion leadership

12. Copyright © 2004 Sherif Kamel Diffusion process Time Percent of adoptions 0% 100% Early Adopters Late Adopters

13. Copyright © 2004 Sherif Kamel S-shaped diffusion curve rate of adoption 0 0.2 0.4 0.6 0.8 1 Percent diffusion 0510152025 Time 100% adoption or saturation point

14. Copyright © 2004 Sherif Kamel Critical issues in understanding high-tech customers Factors that determine how desirable customers are Factors that affect purchase decision Factors that affect timing of purchase decision High Tech Customer Perceived ease of use (TAM) Perceived Usefulness (TAM) Trust

15. Copyright © 2004 Sherif Kamel Constituencies of diffusion of innovation  Innovators (2.5%) o Technology enthusiasts  Require a shorter adoption period than any other group  Venturesome, risk takers  Financial resources to absorb unprofitable innovations  Understand and apply complex technical knowledge to cope with a high degree of uncertainty  Appreciate technology for its own sake  Motivated by idea of being a change agent  Gatekeeper to the next group of adopters

16. Copyright © 2004 Sherif Kamel Constituencies of diffusion of innovation  Early adopters (13.5%) o Visionaries  Greatest degree of opinion leadership  Role model within social system, respected by peers, successful  Want to revolutionize competitive rules in their industry (want to be first)  Attracted by high-risk/high-reward projects (adventurous)  Not necessarily very price sensitive (think-spend big)

17. Copyright © 2004 Sherif Kamel Constituencies of diffusion of innovation  Early majority (34%) o Pragmatists  Interacts frequently with peers, deliberate  Holds positions of opinion leadership  Comfortable with only evolutionary changes in business practices, in order to gain productivity enhancements  Want proven applications, reliable service  Buy only with a reference from trusted colleague in same industry  Want to pick the same technology solution (avoid risk)  Prudent; stay within budget  Make slow, steady progress

18. Copyright © 2004 Sherif Kamel Constituencies of diffusion of innovation  Late majority (34%) o Conservatives  Responds to pressure from peers  Economic necessity, skeptical, cautious  Technology shy  Very price sensitive  Require bullet-proof solutions  Motivated only by need to keep up with competitors in their industry  Rely on single, trusted advisor

19. Copyright © 2004 Sherif Kamel Constituencies of diffusion of innovation  Laggards (16%) o Skeptics  No opinion leadership, isolated  Point of reference is in the past  Suspicious of innovations, innovation-decision process is lengthy, resource limited, traditional  Want to maintain status quo  Technology is a hindrance to operations  Buy only if all other alternatives worse

20. Copyright © 2004 Sherif Kamel Diffusion of innovation implications  High-tech firms must provide upgrades that allow firms to take advantage of new technology o without scrapping investments in the prior generation  A “migration path” is a series of upgrades to help transition the customer to new generations o customer readiness is a must (awareness and training are integral elements)

21. Copyright © 2004 Sherif Kamel Measuring IT in the organization Item  Corporate productivity  Technology deployment  Remuneration  Functional productivity  Infrastructure costs  Application costs  Purchasing performance  Development efficiency  Maintenances cost.  User involvement Measures as  Revenue per employee  IT cost per employee  Salary cost per employee  Output units per employee  Desktop/server/network cost per head  Application development/maintenance cost per head  Hardware/software cost per PC  Cost per delivered function point  Maintenance cost per PC  % user time in application requirements Level 1 2 3 4 5

22. Copyright © 2004 Sherif Kamel Innovation scorecard  Knowledge creation  Human resources  Financial resources  Knowledge diffusion  Collaboration  Market outcomes

23. Copyright © 2004 Sherif Kamel Role of change agents  People who try to influence the innovation decisions in the direction desired by change agency  Change agents usually have technical training  Gradual transformation is a key element for successful information technology diffusion and implementation

24. Copyright © 2004 Sherif Kamel How to minimize the knowledge gap  Be aware of differences in knowledge level of change agent and target  Provide foundation of knowledge on which to build  Needs assessments (to increase involvement)  Use highly accessible channels for effective diffusion

25. Copyright © 2004 Sherif Kamel Remarks  Should we look at innovations as technological objects or at the innovation process? o Should focus on the innovation process with its economic and social implications  Which dimensions of innovation should we explore o Technical products/processes? o Organizational/market change?  Focus on technological innovation, its importance in competitive strategies, its impacts on changes in its product mix

26. Copyright © 2004 Sherif Kamel Remarks  How can you classify newness and degree of innovation o New to the firm? First in the market? First in the world? o Incremental or radical innovations?  Focus on all modes of novelty, because of the extreme importance of incremental innovation and intra-firm diffusion in innovation effects  What kind of measurement concept/units should you choose? o Focus on financial flows because of the commercial importance of innovation and the financial commitments made by the firm