RSM InnovationDiffusion

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Sunday, May 1, 2011 Prof R S Mathur 1

Innovation Diffusion

Prof. R.S.Mathur




Invention-Innovation-Diffusion Triology

• 1. Invention:the technological change process including theconception of new ideas.2. Innovation:the innovation process that involves the developmentof new ideas into marketable products andprocesses. "The doing of new things or the doing of things that are already being done in a new way."3. Diffusion

the diffusion stage in which the new products andprocesses spread across the potential market.




Diffusion of Innovation (DoI)

• Some inventions 'take the world by storm'

(archetype: the Sony Walkman).

• Others seem to fail, lie dormant for decades,but when 'their time has come', their use grows

quickly, even explosively (archetype: the fax

machine).

• Most achieve slow penetration at first, then

their adoption grows more quickly, but later

slows down again.




Diffusion of Innovation

Images created and permission granted by Ted Jalbert




• Learning…….. the nature’s way

In 1953, a young female Macaque monkey in the south of Japanwashed a muddy sweet potato in a stream before eating it. Thisobvious improvement in food preparation was imitated quickly byother monkeys and in less than 10 years it became the norm in herimmediate group; by 1983, the method had diffused completely.

• In 1956, the same monkey innovated again, inventing a techniquein which handfuls of mixed sand and wheat grains were cast uponthe sea, so that the floating cereal could be skimmed from thesurface. Again, by 1983, this method of gleaning wheat had diffused

almost completely throughout the local populations of Macaques.• Besides the obvious fact that humankind does not have a monopoly

on innovation, these examples illustrate a couple of things about thediffusion of innovations: first, when they are clearly better thanwhat went before, new ideas of how to do things will usually spread

via a “learning by observing” process, and second, the process cantake some time; in these cases it took thirty years, and the life cycleof the Macaque monkey is somewhat shorter than ours (Kawai,Watanabe, and Mori 1992).




Peter F. Drucker




Innovation

• “Because its purpose is to create a

customer, the business enterprise has two –

and only these two– basic functions:marketing and innovation.”

• Peter Drucker, People & Performance,

• Harper & Row, 1977




• Gabriel Tarde (1903)

– S-shaped curve for diffusion processes

• Ryan and Gross (1943): adopter categories

– Innovators

– Early adopters

– Early/Late Majorities – Laggards

Original Theorists




Original Theorists

• Katz (1957) :

– media opinion leaders opinion followers

• Everett M. Rogers

Diffusion of Innovations (1962-95)

– the process by which an innovation is communicated

through certain channels over time among the

members of a social system




Everett M. Rogers




Rogers’ Diffusion of InnovationStages of adoption:

1. Awareness - the individual is exposed to the

innovation but lacks complete information

about it

2. Interest - the individual becomes interested

in the new idea and seeks additional

information about it.

3. Evaluation - individual mentally applies the

innovation to his present and anticipated

future situation, and then decides whetheror not to try it

4. Trial - the individual makes full use of the

innovation.

5. Adoption - the individual decides tocontinue the full use of the innovation




Diffusion of Innovation Model

Knowledge

Persuasion

Decision Confirmation

Communication Channels

Adoption Rejection

Adopters• Personality A• Social characteristics• Perceived need for innovation

Social System• Social system norms

• Tolerance of deviancy• Communication

integration

Characteristics of

Innovations

• Relative advantage• Compatibility• Complexity• Triability• Observability

• Later Adoption• Continued Rejection

• Continued Adoption• Discontinuance

Time





Knowledge

Persuasion



Adoption Rejection

Adopters• Personality characteristics• Social characteristics• Perceived need for innovation



integration

Characteristics of

Innovations




Time




Valente (1996)Social network thresholds

• Personal network thresholds: number of members within personal network that must

have adopted before one will adopt - Accounts for some variation in overall

adoption time

-“Opinion leaders” have lower thresholdsand influence individuals with higherthresholds




Factors affecting diffusion

1. Innovation characteristics

2. Individual characteristics

3. Social network characteristics

4. Others…




Innovation characteristics• Observability

– The degree to which the results of an innovation are visible to potentialadopters

• Relative Advantage

– The degree to which the innovation is perceived to be superior to currentpractice

• Compatibility – The degree to which the innovation is perceived to be consistent with socio-

cultural values, previous ideas, and/or perceived needs

• Trialability

– The degree to which the innovation can be experienced on a limited basis

• Complexity – The degree to which an innovation is difficult to use or understand.




Individual characteristics

• Innovativeness

– Originally defined by Rogers: the degree to

which an individual is relatively earlier in adopting an

innovation than other members of his social system

– Modified & extended by Hirschman (1980):

• Inherent / actualized novelty seeking

• Creative consumer

• Adoptive / vicarious innovativeness




Other individual characteristics

• Reliance on others as source of

information

• Adopter threshold

• Need-for-change / Need-for-cognition




Network characteristics

• Opinion leadership: number of

nominations as source of information

• Number of contacts within each adopter

category

• Complex structure




Other possible factors:

-Social environment of diffusion of

innovation

– Marketing strategies employed

– Institutional structures (e.g., government)




The Buyer Decision Process

Post purchaseBehavior

Purchase

Decision

Informatio

nSearch

NeedRecognitio

n

Evaluationof

Alternatives




Stages in the Adoption ProcessStages in the Adoption Process

AwarenessInterest

Evaluation

Trial

Adoption

Buyer Decision Process

for New Products




Model of Consumer Behavior

Marketing and

other stimuli

Marketing

Product

Price

Place

Promotion

Other

Economic

Technological

Political

Cultural

Buyer’s

Black Box(mind)

Buyer

characteristics

Buyer DecisionProcess

Buyer

Responses

Product choice

Brand Choice

Dealer choice

Purchase timing

Purchase amount




SignificantDifferences

betweenbrands

Complex

buying behavior

Lowinvolvement

FewDifferences

betweenbrands

Dissonance-

reducing buying

behavior

Habitual buying

behavior

Variety-seeking

buying behavior

Highinvolvement

Types of Buying-Decision

Behavior

Four Types of buying behavior




The Buyer Decision Process

• Need recognition

• Information search

• Evaluation of alternatives

• Purchase decision

• Post purchase behavior

• Needs can be triggered by:

– Internal stimuli• Normal needs become

strong enough to drive

behavior

– External stimuli

• Advertisements

• Friends of friends

ProcessProcessStagesStages




Technology Acceptance ModelPerceived

Ease of use

Decision Actual

Behavior

Perceived

Usefulness

Perceived

Ease of

use

DecisionActual

Behavior

R M d l




Rogers ModelCOMMUNICATION CHANNELS

Knowledge Persuasion Decision Implementation Confirmation

1.Adoption

2.Rejection

Continued

AdoptionLater Adoption

Discontinuance

ContinuedRejection

PRIORCONDITIONS1. Previous

practice2. Felt needs/

problems

3.Innovativness4. Norms of

the socialsystem

Characteristics

of the Decision-Making Unit1 Socio-economic Characteristics2. Personality

variables3.

Perceived

Characteristics of the Innovation

1. Relativeadvantage2. Compatibility3. Complexity

4. Trialability5. Observability

Knowledge Persuasion Decision Implementation Confirmation




Product CharacteristicsProduct Characteristics

TrialabilityCan the innovationbe used on a

trial basis?

TrialabilityCan the innovation

be used on atrial basis?

ComplexityIs the innovation

difficult tounderstand or use?

ComplexityIs the innovation

difficult to

understand or use?

ObservabilityCan results be easily

observed or describedto others?

Observability

Can results be easilyobserved or described

to others?

CompatibilityDoes the innovationfit the values andexperience of the

target market?

CompatibilityDoes the innovation

fit the values andexperience of the

target market?

Relative

AdvantageIs the innovationsuperior toexistingproducts?

RelativeAdvantage

Is the innovationsuperior toexistingproducts?

Buyer Decision Process

for New Products




Diffusion

• Innovation is of little value unless it diffuses

• Curiously, diffusion theory’s dominant

paradigm emanated in rural sociology

• Everett M. Rogers’ Diffusion of Innovations

was published in 1962 and is one of the most

cited books in the social sciences. Now in its5th edition.




Innovation Adoption Decision

1. Innovation decisions may be optional (wherethe person or organisation has a realopportunity to adopt or reject the idea),

2. Collective (where a decision is reached byconsensus among the members of a system),or

3. Authority-based (where a decision is imposedby another person or organisation whichpossesses requisite power, status or technicalexpertise).




Adopter Categories

• Different categories are identified as:

1. Innovators (venturesome);

2. Early adopters (respectable);

3. Early majority (deliberate);

4. Late majority (sceptical);

5. Laggards (traditional).

Ad ti L l f




Innovators / Leading edge:

• Experiment frequently with emerginginnovations

• Leaders

Adoption Levels of Technology



Ad ti L l f




Earlyadopters:

• Uses advancedfeatures ingenerallyadoptedinnovations





2. EARLY ADOPTERS

The next 13.5% of adopters are "Early Adopters".

• They are the social leaders, popular and educated.

• They are the visionaries in their market and arelooking to adopt and use new technology to achieve arevolutionary breakthrough that will achieve dramatic

competitive advantage in their industries.• They are attracted by high-risk, high-reward projects

and are not very price sensitive because they envisiongreat gains in competitive advantage from adopting a

new technology.• They typically demand personalized solutions and

quick-response, highly qualified sales and support.

Ad ti L l f




Early Majority /Mainstream:

• Uses generallyadopted innovationsproficiently on aregular basis

• Not prone to

experimentation





3. EARLY MAJORITY

The next 34% of adopters are formed by the "Early Majority".• They are deliberate and have many informal social contacts.

• Rather than looking for revolutionary changes to gain productivityenhancements in their firms, they are motivated by evolutionary changes.

• They have three principles in the adoption of new technology:

1. - “When it is time to move, let’s move all together”. This principle defines whyadoption increases so rapidly in the diffusion process and causes a landslide indemand.

2. - “When we pick a vendor to lead us to the new paradigm, let us all pick thesame one”. This principle explains which firm will become the market leader.

3. - “Once the transition starts, the sooner we get it over with, the better”. This

principle shows why the transition stage occurs rapidly.

Adoption Le els of




Late Majority /Reluctant:

• Skeptics

• Try to use generallyadopted innovationsbut have problemsusing basic features

• Will use innovations

or products only whenthe majority are usingit





4. LATE MAJORITY•

The next 34% of adopters are the "Late Majority".

• They are skeptical, traditional and of lower socio-economic status.

• They are very price sensitive and require completelypreassembled, bulletproof solutions.

• They are motivated to buy technology just to stayeven with the competition and often rely on a single,

trusted adviser to help them make sense of technology.

Adoption Levels of




Laggards /Avoiders:

• Love to hang onto the old ways

• Critical of new ideas

• Use technology as little aspossible

• Will accept innovation only if ithas become mainstream over aperiod of time





5. LAGGARDS

•

The last 16% of the adopters consists of "Laggards".

• Laggards are technology skeptics who wantonly to maintain the status quo.

• They tend not to believe that technology canenhance productivity and are likely to block new technology purchases.




Tom Sawyerism

• The most effective means of motivating

other-directed personalities (middle to

late adapters) to accept new thinking andchange is by "Tom Sawyerism,“

• Demonstrating satisfaction from

tangible benefits without direct advocacy.• Painting a fence…




• Roger’s model has found wide appeal and

application in such disciplines as marketing

and management science. The model’s mostsignificant application is the Bass Diffusion

Model where the process of how new

innovations are adopted through theinteraction of current and potential users is

described mathematically




Three Sets of Personalities

• Another way to look at any society facingchange is by looking at three distinctpersonalities.

1. There are drivers (early adapters), who drivenew innovations and thinking.

2. There are the riders (middle adapters) whowill eventually ride along with new trends.

3. And there are always the draggers (lateadapters) who are still grousing about usingwordprocessing and the fax machine.




Innovation Diffusion Curve

• Together, these three main groups create a bellcurve of innovation diffusion.

• The amount of time it takes for an innovationto diffuse across society can vary based onmany factors.

• Widespread use of the telephone took 25 years,fifteen years for personal computers, sevenyears for widespread use of the fax machine,and five years for widespread use of the WorldWide Web.




The S- Curve of Innovation Diffusion

P d t Lif C l &P d t Lif C l &



Sunday May 1 2011 Prof R S Mathur 49

Innova-

torsEarly

Adopters

Early

Majority

Late

MajorityLaggards

Product Life Cycle &

Diffusion of Innovations

Product Life Cycle &

Diffusion of Innovations

20%

Source: Rogers & Shoemaker,

Communication of Innovations

RSM InnovationDiffusion

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