#2017mitsloanbrandingA innovationdiffusion

[aeburns-blog]

Innovation Diffusion: Predicting who will win and lose in new markets.

In the “Note on Innovation Diffusion: Rogers’ Five Factors” product-driven forces related to new product introduction are compared to people-driven forces. People-driven forces describe how different groups of people influence the rate at which new products reach mass appeal, identifying categories of adopters from “innovators” and “early adopters” to “early majority” and “late majority” and finally to “laggards.” Additional theory suggests a simplified version of this, in which new product adoption is aided by only two groups of people, namely “innovators” and “imitators.”

By comparison, product-driven forces rely less on the groups of people who influence product adoption, and rather on the attributes of the product itself that can either aid or impede diffusion. In particular, Rogers names five forces that influence new product diffusion: 1. Relative advantage, 2. Compatibility, 3. Complexity, 4. Trialability and 5. Observability. While no one force can absolutely predict new product adoption, considered together, these five factors can help us evaluate the likelihood of new product diffusion, and determine whether diffusion to new markets will be relatively fast, or slow.

I will apply Rogers’ five factors to evaluate the relative speed of market adoption for four different new product introductions, as described in the case, “Four Products: Predicting Diffusion.” While I believe all five forces are influential in new product diffusion, I assert that there is a hierarchical element to the importance of each force, per the ranking noted below:

#1. Relative Advantage: At its most basic level, new products must present some advantage relative to existing options. If there is no advantage over the alternative(s) (related to features, price, social status etc.), the product will fail.

#2. Compatibility: Unless the relative advantage is extraordinarily high, it is very difficult to change user behaviors, values or expectations. Products that aim to reorient consumers should focus on one area of innovation rather than multiple (i.e. a product may change user behaviors but meet user values/expectations, i.e. Apple Watch). Importantly, the new product should be perceived as relatively non-threatening and accessible, as though the user can master the product rather than the product master the user.

#3. Trialability: Try before you buy. This is particularly important for very new tech/products (i.e. VR/AR), as people need to try, experience, and engage with new tech/products on their own terms.

#4. Complexity: Typically complexity has an inverse relationship with product diffusion (i.e. greater complexity, slower/less likely diffusion); however, if the relative advantage is quite high, users are more likely to be receptive to education and willing to accept complexity given the relative benefit of the product.

#5. Observability: Observing others use or engage with new products can be risky, and therefore, observability is not always a positive influence on new product diffusion. For example, if perception not good (i.e. people perceived “Google Glass” as looking dumb/unnatural) early adopters could be punished via social rejection and therefore fail to become promoters/ambassadors for brand.

Individually Wrapped Peanut Butter Squares

Relative Advantage (Low): The problem the product aims to solve is the effort of spreading peanut-butter on bread for a sandwich. The alternative to the new product is simply spreading jarred peanut-butter with a knife. The inventor claims the product is “easy for kids” and makes life “less stressful;” however, the relative effort of the alternative is low and therefore the product appears to be gimmicky rather than solve a pressing market need. Prices of peanut-butter can vary, particularly given organic versions; however, peanut-butter can generally be acquired for $2-5 (as confirmed via quick google search), therefore it seems there would be limited cost advantages of individually packaged peanut butter slices.

Compatibility (Low/Med): Given the ubiquity of individually wrapped slices of cheese, consumers are generally familiar with using “slices” of ingredients when assembling sandwiches. That said, peanut butter is predominantly used in peanut butter and jelly sandwiches, and jelly is typically spread on the sandwich rather than applied via pre-packaged slices. Thus, current user behavior is to spread complementary products.

Complexity (Low): The product is very simple, which is a positive for new product diffusion; however, given that the relative advantage of the product is low, the lack of complexity will do little to aid adoption.

Trialability (Med): Presumably it is relatively easy to offer samples of the product in grocery stores etc. While this may promote initial awareness and curiosity about the product, given that the product offers relatively low advantage vs. existing options, any initial interest due to product demonstrations or samples will be likely to fade.

Observability (Med): The target consumer is likely children, who cannot or are not allowed to use a knife and who benefit from easy sandwich assembly. School lunch-time provides a good opportunity for the new product to be shared among students, and thus, the product could benefit from social pressure if it is used by children who are “high profile” i.e. popular/perceived to be trendsetters in a school setting. That said, there is a risk that the product will appear “gross” when it is observed given its incompatibility with norms regarding peanut butter, and thus observability may have a negative effect given initial product perceptions.

Verdict: Fast to enter, fast to fail. Given simplicity of product, assumed relatively low cost, ability to trial and observe, the product will be quick to the market but also quick to fail. The product does not solve a critical market need, and while may initially generate interest given its “novelty” will not generate sustainable demand given that it does not create meaningful value relative to alternatives and that it is not compatible with user expectations regarding how to use peanut butter/assemble a PB&J sandwich.

Silver-Coated Adhesive Bandage

Relative Advantage (High): The silver-coated adhesive bandage, with the “power to kill more than 150 different kinds of bacteria” appears to offer a number of healing benefits that exceed the capabilities of existing products in the market. While scientists and healthcare professionals have recognized the healing benefits of silver for many years, the bandage as a vehicle for delivering silver to the wound/affected area is a novel application of the metallic element. Given the already low cost of adhesive bandages, it appears the product could offer little to no cost advantage relative to existing options.

Compatibility (Low): Adhesive bandages are widely used and represent a large and growing market. That said, while consumers are willing to experiment with new bandage design (i.e. “Tattoos” for children) it remains uncertain as to whether or not users are willing to experiment with new materials. While professionals recognize the healing properties of silver, consumers are likely not to have the same knowledge. Therefore, significant education would be needed to compel consumers to alter their expectations of silver as not only a decorative metal, but one that has significant healing properties. Given the healthcare application, it is expected that consumers will be very conservative regarding new technology introduction, regardless of the communicated healthcare benefits. Because the concept of silver as a healing mechanism is so at odds with consumer expectation regarding the utility of silver, product adoption will be quite slow, if it occurs at all.

Complexity (Med): While bandages are easy to use, educating consumers about the healthcare benefits of silver may be more complex. A more effective means of new product introduction may be to begin by offering healthcare professionals with the product, so professionals can demonstrate and communicate the utility of the silver bandages to otherwise skeptical consumers.

Trialability (Low/Med): Though it may be relatively easy to provide consumers with samples, either in-store (i.e. at CVS or Target), or via healthcare professionals, consumers’ skepticism could supersede the benefits of trialability. That is to say, although the product may be made readily available to consumers, consumers may still be resistant to try the product due to low compatibility/fear of the unknown.

Observability (Low/Med): Wounds or cuts are generally (if not subconsciously) perceived as sensitive or a source of weakness, hence various “skin-toned” adhesive bandages. While it may be fruitful for consumers to observe healthcare professionals/providers such as nurses or doctors using the bandage, the product may be difficult to observe in the general public, as bandages are typically under clothing, concealed or not “shown off.”

Verdict: Slow to enter, better off B2B. While the product has the potential to offer a high relative advantage vs. existing adhesive bandages, lack of compatibility with consumer expectations regarding materials used in bandages, as well as the uses of silver, are too great and will thus impede rapid diffusion. Such low compatibility may mean that the product will be unable to enter the mass market, and instead may be a better solution for professional/institutional environments. Rather than aim for mass appeal, makers of this product may decide to abandon a B2C approach and instead take on B2B by working with healthcare professionals to introduce the product to new consumers.

Satellite Radio (XM and Sirius)

Relative Advantage (Med): Satellite radio creates value by eliminating (mostly) ads from listening time, and offering more specialized programming for various listeners. These are two features that are highly valued by consumers, and therefore the product offers a compelling new solution for listeners and benefits from an advantage relative to traditional radio. That said, satellite radio is not without a cost, and therefore, while it offers an advantage relative to radio based on new feature innovation, it does not offer a cost advantage, and this will limit its diffusion in new markets, as users dually value quality programming and free access.

Compatibility (Med): Both satellite radio options require consumers to “retool” their equipment and purchase new products that enable them to access the satellite programing. This process of “retooling” is a hassle and can be costly. The new product does benefit from compatibility with complementary products, such as automobiles; however, the longer lead-time of new automobile development may counteract the benefits of complementarities and thus delay market adoption.

Complexity (Low/Med): Satellite radio benefits from a relatively simple value proposition – users are not required to undergo education or change behaviors to utilize satellite radio. That said, the purchasing process does suffer from some complexity, as consumers will have to purchase specific equipment/technology to access satellite radio, and then work with providers to manage a subscription.

Trialability (Med): Given integration with automobiles, satellite radio could benefit greatly from trialability. As is currently the case (hindsight is always 20-20!), new cars could come equip with a free trial of satellite radio so listeners can understand first-hand the value of reduced commercials and more specialized programming. Technology to access satellite radio is specialized, and therefore the cars that come equip with this technology could be limited (at least at the time of the case). Therefore, access to a free trial would be dependent upon users’ access to cars that are equip with the proper satellite radio, which may limit the benefits of trialability.

Observability (Low): Though listening to the radio can be a social activity, typically listening to the radio is done via commute or during the workday. Thus, listening to the radio is more commonly a solo activity, and one that is passive (i.e. does not involve a “performance” or activity that can be observed by others). It is not obvious to others what radio station/products different users engage with, and thus, the positive effects of observability in aiding diffusion are minimal.

Verdict: Slow to enter, highly specialized. Satellite radio solves for the consumer need for quality programming with limited interruption. It does not solve for the need for free-access to programming, and instead introduces a cost to access more specialized content. Additionally, satellite radio depends upon specific technology for its distribution. Thus, diffusion will depend upon the access of complementary technologies. Given its cost, the new product will appeal to a specific segment of the market that can access/afford complementary technologies and that values specialized program and is willing-to-pay for it.

Odor-Generating Computer Plug-In (iSmell)

Relative Advantage (Low): The odor-generating computer plug-in addresses no observable need in the market. While smell is highly linked to emotional response, taste and overall human experience, consumers do not demand that smell is associated with their engagement with technology. This product represents a novelty or fad, rather than a tangible market need.

Compatibility (Low): Technology users do not expect their technology to generate a specific smell. Humans have sufficed for centuries by experiencing images through sight and no smell. To supplement images shown on the computer with a complementary smell could create cognitive dissonance: users recognize the image as non-reality, and yet experience the instant sensation of smell as if the object shown in the image were actually present. The dissonance that results could create confusion/repulsion, similar to users’ reaction to virtual reality (i.e. the eye sees movement/activity, but the body does not feel similarly).

Complexity (Low): The product seems relatively easy to engage with (though would require installation with existing technology). The benefit of simplicity is outweighed by the low relative advantage of the product.

Trialability (Low): To experience the product, it appears as though users would need to purchase the apparatus that disseminates the smell. It would be difficult to trial this privately without actually purchasing the product (though the makers could conceive of a free trial in which the user could return the add-on at no cost if it did not prove satisfactory). It would be very difficult to trial the product in a public space, such as a store, as the product could create conflicting smells which, when comingled, create an unpleasant/confusing smell to users.

Observability (Low): Personal computing equipment is typically just that – personal. Therefore, it would be difficult to know whether or not others have this add-on installed in their personal desktop. Perhaps the makers of the product could leverage bloggers to review the product and provide their expert endorsement; however, this would not permit potential users to actually experience the product for themselves. There is very little social benefit from the product, given the divergence and diversity of people’s preferences for smell.

Verdict: Non-enterer. The product doesn’t solve a real market need, and is not compatible with people’s expectations of their personal technology products. Further, given that it is incompatible with expectations and a very “new” technology, it would be important for users to trial the product before purchase; however, this would be challenging. Given these factors combined, this product appears to be a non-starter and is expected to see little to no mass-market adoption.