The introduction phase of technology why are companies usually unable to anticipate the market impact of technologies

Sometimes, it takes a very long time for a new technology to emerge. Just consider the case of Speech Recognition software, whose goal is to replace keyboards, pushbuttons, and knobs with speech input. The prospective potential has attracted both big and small firms—IBM and ScanSoft, as well as Voice Signal Technologies and Sensory, Inc. However, even after 50 years of basic research, this is still a market in the making.

Even in the case when the technical feasibility of an innovation has been confirmed, it seems that very frequently people are unable to anticipate the future business impact of auspicious innovations. For instance, the inventor of the radio, Marconi, believed it would mainly be used by steamship companies, newspapers, and navies needing to transmit private messages over long distances where communication by wire was impossible. No one originally conceived of communicating to a large and dispersed audience of listeners, rather than to a single point. The first public broadcast imagined was the transmission of Sunday sermons—the sole event where one individual would address a mass public [12].

Similarly, at the end of the 1940s, the computer was considered useful only for carrying out rapid calculation in limited scientific and data-processing contexts. The dominant judgment, shared even by Thomas Watson, Sr., then the president of IBM, was that world demand could be met by a very limited number of computers.

Likewise consider the case of the laser, another major innovation of the twentieth century, whose range of uses has expanded in so many directions since its invention. Lasers are used for precision cutting in the textile, metallurgy, and composite materials industries as well as in various surgical procedures. They produce high-quality sound in compact disc players and high-quality text and drawings through laser printers.

Furthermore, combined with fiber optics the laser has revolutionized telecommunications. In the 1960s, the best transatlantic phone cable could carry only 140 conversations concurrently. In 1988, the first fiber-optic cable could convey 40,000 conversations concurrently, and in 1997, CNET, the research and development laboratory of France Telecom, the French telecommunication carrier, failed to saturate the transmission capacity of the last generation of fiber-optic cable, meaning that the transmission capacity is almost limitless (Figure 2.4). Despite this achievement, the patent lawyers at Bell did not apply for a patent to the laser, believing it could not attract interest in the telephone industry. All of these examples, among many others, of failure to foresee the future business impact of technological innovations tell of our inability to overcome the uncertainties associated with new technology. This failure can be explained by four factors.

First, very often, new technologies come into the world in a rudimentary condition, and it is not always easy to predict the trajectory of future progress in performance, size, price, and economic consequence. The first electronic digital computer, the ENIAC, was unreliable and consisted of more than 18,000 vacuum tubes that filled a huge room. It was difficult to imagine in the 1940s that one day a computer more powerful than the ENIAC would be the size of a laptop (or even smaller). Similarly, when the transistor was invented, few people would have believed that one day the integrated circuit, a component in itself, would eventually become a computer with the creation of the microprocessor in 1970.


Figure 2.4 Increase in the bit rate-distance product for five generations of fiber-optic communication systems. (After: [13].)


Figure 2.4 Increase in the bit rate-distance product for five generations of fiber-optic communication systems. (After: [13].)

Second, identifying uses for new technologies is difficult and takes time, especially when they emerge from pure scientific research. Faraday discovered the principles of electromagnetic induction in 1831, but it took many decades to find applications for electricity.

At the same time in 1947, when the transistor was invented, it was first proposed that this new device might be used to develop better hearing aids for the deaf. None envisaged the future connection with computers.

The third reason why it is difficult to beat the uncertainties associated with new technology is that, frequently, the impact of an innovation relies on complementary inventions, which contribute to a full system solution that will add to its performance and, consequently, its demand. For instance, Edison's system of incandescent lighting required the simultaneous development of lamps, generators, sockets, and wiring.

Similarly, the telephone has existed for more than 100 years, but only recently has its performance been improved by facsimile transmission, voice mail, conference calls, data transfer, and on-line services, for example. In the telecommunications industry, the laser was useless on its own. Associated with fiber optics, however, lasers are revolutionizing telephone transmissions.

Though optical fiber was available in a primitive form in the 1960s when the first lasers were developed, it took many years to discover that fiberoptic technology allow a tremendous augmentation in bandwidth, because the light spectrum is a thousand times wider than the radio spectrum. In addition, fiber-optic technology provides a better quality of transmission because of its lack of electromagnetic interference.

The recent explosion of demand for PCs has been fueled by network system add-ons, such as modems, LANs, and connections to the Internet, as well as by the integration of various software applications in one package, chief among them being Office by Microsoft and SmartSuite by IBM.

The development time for these complementary innovations can fluctuate very significantly. For example, after the dynamo was invented in the early 1880s, electrolytic techniques were created contiguously, giving birth to a prosperous electrochemical industry, but it took more than 50 years to see the arrival of the electric motor.

Similarly, the transistor and, later, the integrated circuit were introduced into computers years behind their invention to transform the computer industry. Ultimately, the integrated circuit itself became a computer with the advent of the microprocessor in 1970.

One must note that the development of such interconnected innovations integrated into a system solution creates barriers to aspiring competitors because of the complexity of the offer to build. As we will see later, the existence of complementary inventions intensifies the need for technological standards and alliances.

The fourth reason that makes predicting the uses of a new technology difficult is that many inventions proceed to solve a specific problem, but often turn out to have unexpected uses in unexpected conditions.

Consider the role of the computer in the car industry. Computers are used:

► For the aerodynamic research and design of cars and components;

► For manufacturing through robots and automatic assembly lines;

► For controlling the car's systems (such as the braking system, fuel consumption monitoring, and maybe someday the automatic pilot);

► For determining optimal driving paths;

► For ticketing and controlling access to highways;

► For monitoring traffic lights (and minimizing traffic jams) in major cities.

While many companies are left behind at the introduction phase of a radical innovation, the ones that go through have yet to impose their technology on the market in order to stay in the game during the growth phase of technology.

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