Technological factors

Disruptive technologies

New technologies that prompt businesses to reappraise their strategic approaches.

Electronic communications are disruptive technologies that have, as we saw in Chapter 2, already caused major changes in industry structure, marketplace structure and business models. Consider a B2B organisation. Traditionally it has sold its products through a network of distributors. With the advent of e-commerce it now has the opportunity to bypass distributors and trade directly with customers via a web site; it also has the opportunity to reach customers through new B2B marketplaces. Knowledge of the opportunities and threats presented by these changes is essential to those involved in defining marketing strategy.

One of the great challenges for Internet marketers is to be able to successfully assess which new technological innovations can be applied to give competitive advantage. For example, personalisation technology (Chapter 6) is intended to enhance the customer's online experience and increase their loyalty. However, a technique such as personalisation may require a large investment in proprietary software and hardware technology to be able to implement it effectively. How does the manager decide whether to proceed and which solution to adopt? In addition to technologies deployed on the web site, the suitability of new approaches for attracting visitors to the site must be evaluated - for example, should registration at a paid-for search engine, or new forms of banner adverts

Companies or departments that invest in new technologies and techniques.

or e-mail marketing be used? Deciding on the best mix of traffic building techniques is discussed further in Chapter 8.

The manager may have read articles in the trade and general press or spoken to colleagues which has highlighted the potential of a new technology-enabled marketing technique. They then face a difficult decision as to whether to:

• ignore the use of the technique completely, perhaps because it is felt to be too expensive or untried, or because they simply don't believe the benefits will outweigh the costs;

• ignore the technique for now, but keep an eye on the results of other companies that are starting to use it;

• evaluate the technique in a structured manner and then take a decision whether to adopt it according to the evaluation;

• enthusiastically adopt the technique without a detailed evaluation since the hype alone convinces the manager that the technique should be adopted.

Depending on the attitude of the manager, this behaviour can be summarised as:

1 cautious, 'wait and see' approach;

2 intermediate approach, sometimes referred to as 'fast-follower'. Let others take the majority of the risk, but if they are proving successful, then rapidly adopt the technique, i.e. copy them;

3 risk-taking, early-adopter approach.

Different behaviours by different adopters will result in different numbers of adopters through time. This diffusion-adoption process (represented by the bell curve in Figure 3.4) was identified by Rogers (1983) who classified those trialling new products from innovators, early adopters, early majority, late majority, through to the laggards.

Figure 3.4 Diffusion-adoption curve

Figure 3.4 can be used in two main ways as an analytical tool to help managers. First, it can be used to understand the stage at which customers are in adoption of a technology, or any product. For example, the Internet is now a well-established tool and in many developed countries we are into the late majority phase of adoption with large numbers of users of services. This suggests it is essential to use this medium for marketing purposes. But if we look at WAP technology (see below) it can be seen that we are in the innovator phase, so investment now may be wasted since it is not clear how many will adopt the product. Secondly, managers can look at adoption of a new technique by

Figure 3.4 Diffusion-adoption curve

Time

Time other businesses - from an organisational perspective. For example, an online supermarket could look at how many other e-tailers have adopted personalisation to evaluate whether it is worthwhile adopting the technique.

Trott (1998) looks at this organisational perspective to technology adoption. He identifies different requirements that are necessary within an organisation to be able to respond effectively to technological change or innovation. These are:

• growth orientation - a long- rather than short-term vision;

• vigilance - the capability of environment scanning;

• commitment to technology - willingness to invest in technology;

• acceptance of risk - willingness to take managed risks;

• cross-functional cooperation - capability for collaboration across functional areas;

• receptivity - the ability to respond to externally developed technology;

• slack - allowing time to investigate new technological opportunities;

• adaptability - a readiness to accept change;

• diverse range of skills - technical and business skills and experience.

A commercial application of the diffusion of innovation curve was developed by technology analyst Gartner and has been applied to different technologies since 1995. They describe a hype cycle as a graphic representation of the maturity, adoption and business application of specific technologies.

Gartner (2005) recognises the following stages within a hype cycle, an example of which is given for current trends in 2005 (Figure 3.5):

1 Technology Trigger - The first phase of a Hype Cycle is the 'technology trigger' or breakthrough, product launch or other event that generates significant press and interest.

2 Peak of Inflated Expectations - In the next phase, a frenzy of publicity typically generates over-enthusiasm and unrealistic expectations. There may be some successful applications of a technology, but there are typically more failures.

3 Trough of Disillusionment - Technologies enter the 'trough of disillusionment' because they fail to meet expectations and quickly become unfashionable. Consequently, the press usually abandons the topic and the technology.

4 Slope of Enlightenment - Although the press may have stopped covering the technology, some businesses continue through the 'slope of enlightenment' and experiment to understand the benefits and practical application of the technology.

5 Plateau of Productivity - A technology reaches the 'plateau of productivity' as the benefits of it become widely demonstrated and accepted. The technology becomes increasingly stable and evolves in second and third generations. The final height of the plateau varies according to whether the technology is broadly applicable or benefits only a niche market.

The problem with being an early adopter (as an organisation) is that being at the leading edge of using new technologies is often also referred to as the 'bleeding edge' due to the risk of failure. New technologies will have bugs, may integrate poorly with the existing systems or the marketing benefits may simply not live up to their promise. Of course, the reason for risk taking is that the rewards are high - if you are using a technique that your competitors are not, then you will gain an edge on your rivals. For example, RS Components (www.rswww.com) was one of the first UK suppliers of industrial components to adopt personalisation as part of their e-commerce system. They have learnt the strengths and weaknesses of the product and now know how to position it to appeal to customers. It offers facilities such as customised pages, access to previous order history and the facility to place repeat orders or modified re-buys. This has enabled them to build up a base of customers who are familiar with using the RS Components online services and are then less likely to swap to rival services in the future.

Hype cycle

A graphic representation of the maturity, adoption and business application of specific technologies.

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