L07 L: Diffusion of digital innovation Flashcards
DIFFUSION
Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system.
THE DIFFUSION PROCESS
Innovation –> Idea, practice or object that is perceived as new
Communication channels –> Means by which messages get from one adoption unit to another
Time –> Adoption period, relative time of adoption by unit, rate
of adoption of innovation
Social system –> A set of units that aim to achieve a common goal
THE ADOPTION PROCESS
Knowledge –> Person becomes aware of an innovation and has some idea of how it functions
Persuasion –> Person forms a favorable or unfavorable attitude toward the innovation
Decision –> Person engages in activities that lead to a choice to adopt or reject the innovation
Implementation –> Person puts an innovation into use
Confirmation –> Person evaluates the results of an innovation-decision already made
“Build it and They Will Come” Is this true? It is probably a little bit more complex than that. Explain why and how organizations can overcome this.
Sometimes new innovations clash with the existing social system and they will face substantial resistance. organizations can wrap their new innovation into the existing system, eventually replacing it with the new innovation.
Technical features and/or utility offer an incomplete answer to diffusion and adoption of innovations. Its role in the system and the status the innovation brings also need to be considered.
ADOPTION AT THE INDIVIDUAL LEVEL
- Value is subjective
- Point of reference
- Improvements are gains, shortcomings are losses
- Losses have a far bigger impact than gains
Status quo bias
People value what they are used to and are less willing to swap (adopt) for new innovation
Endowment effect
People ask more for giving up what they have than for obtaining these same items
Implications endowment effect innovation
§ People gain something by adopting an innovation, but they will also need to give up/ loose something
§ What they give up has a bigger weight then what they gain
§ Innovations need to deliver high gains in order to be adopted
name two ways how to deal with resistance
§ Accept resistance
- Patience
- 10x better
- Eliminate the old (e.g., light bulbs)\
§ Minimize resistance
- Ensure compatibility
- Target group without reference point
- Target group with a beneficial balance between perceived benefits and behavior change
The adoption life cycle has two sets of characteristics, what are those characteristics?
rate of adoption: innovation characteristics
Adoption period: Individual characteristics
Innovation characteristics:
(+) Relative advantage: The degree to which the innovation is perceived to be superior to current practice
(-) Complexity: The degree to which the innovation is difficult to use or understand
(+) Triability: The degree to which the innovation can be experienced on a limited basis
(+) Observability: The degree to which the results of an innovation are visible to potential adopters
(+) Compatibility: Perceived consistency with socio-cultural values, previous ideas, and/or perceived needs
(-) Perceived risk: The degree to which the innovation is expected to perform inadequately or involves e.g., physical risk
The diffusion effect
The cumulative effect of increasing influence on any individual to
adopt (or reject) an innovation in a social system. This (social) effect increases alongside the cumulative # of adopters grows.
What do we refer to as “crossing the chasm”?
This is when an innovation has to move from the early adopter stage to the early majority stage.
What characteristics are essential for “opening up the market”?
Innovation is central
§ Best product
§ Most elegant architecture
§ Unique functionality
Essential for opening up
the market
What characteristics are essential for crossing the “chasm”?
Market central
§ Largest group of customers
§ Current standard
§ Low cost of ownership
§ Quality of customer support
Essential for crossing the ‘chasm’
Ensuring a large installed base
HOW ARE ADOPTION AND DIFFUSION DIFFERENT FOR DIGITAL INNOVATIONS? EXPLAIN THIS FOR THE HOMOGENIZATION AND DECOUPLING CHARACTERISTIC
As a result of homogenization and decoupling there is no direct relationship between form and function. This results in:
§ Complexity: Lack of knowledge
about how digital innovations work
§ Perceived Risk: Can I trust the application, e.g., autonomous cars
§ Trialability: High, essentially available at your fingertip
§ Observability: Digital services and software may be less
observable and therefore might have slower rates of adoption,
relative to physical products
HOW ARE ADOPTION AND DIFFUSION DIFFERENT FOR DIGITAL INNOVATIONS? EXPLAIN THIS FOR THE REPROGRAMMABILITY AND SMART CHARACTERISTIC
As a result of reprogrammability and smart there are fluid product boundaries; product architectures are never truly stable. This results in:
§ Relative Advantage: Not just current but also future developments?
§ Observability: May be diluted because outcomes change
HOW ARE ADOPTION AND DIFFUSION DIFFERENT FOR DIGITAL INNOVATIONS? EXPLAIN THIS FOR THE NETWORK EFFECTS CHARACTERISTIC
Direct and Indirect Network Effects; Winner takes all perception in digital innovation
§ Relative Advantage: More advantages due to network effects
What are the implications for firms now that DIFFUSION is DIFFERENT FOR DIGITAL INNOVATIONS?
IMPLICATIONS FOR FIRMS
§ Digital technology affords new ways of shaping diffusion and adoption
§ In the past, firms would go deaf after product launch
§ Digital technology allows firms to stay in touch with their products and, therefore, also with their users
§ This also requires new organizational practices to leverage these abilities
Scaling
§ Scaling is a useful concept to analyze these dynamics in the digital age
§ Scaling is defined as significant increase in the user base between two points in time
§ Any idea why scaling might be relevant?
§ Scaling is fundamentally concerned with adoption and diffusion
§ Scaling takes the perspective of the firm and assumes that they can shape this process, rather than being passive bystanders to adoption and diffusion.
DATA DRIVEN OPERATION
§ The identification of new innovation opportunities from analyzing significant volumes of data
§ Builds on user interactions with a digital innovation (logs), other available data sources, sophisticated analysis frameworks
§ These can be used to continuously monitor user behavior to analyze their preferences
§ A source to learn about new opportunities and inform features that foster adoption
INSTANT RELEASE
§ Firms can act very quickly due to the modularity of digital innovations
§ Driven by new architectural approaches to designing digital
innovations
§ Microservice architectures, docker, and continuous deployment
§ Minimizes the time-lag between development and release of new functions
§ Allows firms to react to a slowing adoption speed
ENVELOPMENT
§ A process through which platform owners enter a new market by coupling their own functionality with the target’s
§ Leverages overlap in users and capitalizes on network effects
§ Incumbents thereby can no longer access users, as their first point of contact will be with the platform owner
§ A new path for entering a new market that differs from schumpetarian innovation (based on recombination and creative descruction)
Summary new ways to shape the adoption process:
Firms have new ways to shape the adoption process, afforded by digital technology
§ They no longer ‘go deaf’ after market launch
§ Data-driven operation, instant release, swift transformation, and
envelopment represent (a non-exhaustive overview of) means by which firms can influence adoption
§ These means require us to rethink how organizations navigate product launch
