Management of Technology (OM476) Design Dominance and Timing of Entry February 8, 2006 S. Fisher.
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Transcript of Management of Technology (OM476) Design Dominance and Timing of Entry February 8, 2006 S. Fisher.
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Management of Technology (OM476)
Design Dominance and Timing of Entry
February 8, 2006
S. Fisher
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Agenda How does existence of a dominant design
affect innovation? Who benefits from dominant designs? What is the optimal timing of entry into a
market? The role of first movers
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Review: Technology Cycles Selection of a dominant design results in a period
of incremental change, until the next technological discontinuity.
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Group Exercise Think of a technology for which there is a
dominant design Something other than Microsoft, please
What is the impact of this dominant design for: The dominant provider Providers of complementary goods Consumers The industry as a whole
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Battle for Dominant Design: VHS vs. Beta 1974 – Sony meets with JVC and Matsushita to
discuss plans and design standards for home video 1975 – Sony releases Betamax 1976 – JVC rejects Sony’s ideas, releases VHS
(using some of Sony’s technology) Division into 2 camps
Betamax: Sony Toshiba, Sanyo Electric, NEC, Aiwa, and Pioneer
VHS: Matsushita, Hitachi, Mitsubishi Electric, Sharp, and Akai Electric
VHS ultimately became the dominant standard – simpler, longer recording times, better marketing
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Key question… How does this innovation add value? What is
the utility to the buyer? Dimensions include: Productivity Simplicity Convenience Risk Fun and Image Environmental friendliness
Remember Performance Indicator!
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Network Externalities
Also known as positive consumption externalities
The benefit (or value) of using a technology increases as the number of people using it (installed base) increases
Examples? Are there instances when the opposite effect
occurs?
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RFID (radio frequency identification) Technology used to track materials and
products through the supply chain Essentially, more sophisticated version of the
bar code Active vs. passive tags
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RFID, continued
Wal-Mart, US Department of Defense are requiring suppliers to use RFID
Pros and cons of dominant design in this situation? Tags Readers Software
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Compatibility and RFID Alien’s ALR-9800 reader, designed primarily
for EPC Class I Gen 2 compatibility, has cleared a major obstacle -- its compliance with Microsoft’s RFID technology. August 20, 2005 from
http://www.rfidgazette.org/2005/08/microsoft_and_a.html
“Our latest solution suite combines modular flexibility and user-specified capabilities with ease of integration with IBM, SAP WM and other technologies,” May 4, 2005 from
http://www.catalystinternational.com/content/About_Us/pressreleases/latest/CatalystComplete%209.2%20Release.pdf
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Components of Value
Technological utility Installed base Complements availability
Greater value --- higher probability of adoption and design dominance
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Timing of Entry
Categories similar to Rogers’ categories for diffusion First movers Early followers Late entrants
First mover advantages? Disadvantages?
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Early follower advantages
Learn from what the first movers have done Adopt new and more efficient processes Often have higher ROI in the long term, even
without a significant sales advantage
Source: Boulding and Christen (2001 October). First-mover disadvantage. Harvard Business Review.
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Factors Driving Optimal Timing of Entry Certainty of customer preferences Degree of innovation (level of improvement) Enabling technologies and complementary
goods Threat of competitive entry Ability to withstand early losses Reputational value Switching costs
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When to enter first Likely advantage depends on rates of
technological change and market growth
Calm Waters -Both slow
Technology Leads-Market slow-Tech rapid
Market Leads-Market rapid-Tech slow
Rough Waters-Both rapid
Short-Lived Durable
Unlikely Very likely
Very likely
Very Unlikely
Likely
Likely
Unlikely
Very unlikely
Source: Suarez, F. and Lanzolla, G. (April 2005). The half-truth of first-mover advantage. Harvard Business Review.
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Next class
Monday – no class (Feb. break) Wednesday, Feb 15 – Prepare Apple
Computer case (2002 and 2005) Team 3 presenting Team 7 asking questions (and exec summary) All other teams preparing exec. summary