RSM InnovationDiffusion

Innovation Diffusion
Prof. R.S.Mathur
Sunday, May 1, 2011 Prof R S Mathur 1

Invention-Innovation-Diffusion Triology
• 1. Invention:
the technological change process including the
conception of new ideas.
2. Innovation:
the innovation process that involves the development
of new ideas into marketable products and
processes. "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 and
processes 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 Japan
washed a muddy sweet potato in a stream before eating it. This
obvious improvement in food preparation was imitated quickly by
other monkeys and in less than 10 years it became the norm in her
immediate group; by 1983, the method had diffused completely.
• In 1956, the same monkey innovated again, inventing a technique
in which handfuls of mixed sand and wheat grains were cast upon
the sea, so that the floating cereal could be skimmed from the
surface. 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 the
diffusion of innovations: first, when they are clearly better than
what went before, new ideas of how to do things will usually spread
via a “learning by observing” process, and second, the process can
take some time; in these cases it took thirty years, and the life cycle
of 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

Original Theorists
• Gabriel Tarde (1903)

– S-shaped curve for diffusion processes
• Ryan and Gross (1943): adopter categories

– Innovators
– Early adopters
– Early/Late Majorities
– Laggards

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 Innovation
Stages 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 whether
or not to try it
4. Trial - the individual makes full use of the
innovation.
5.Sunday,
Adoption
May 1, 2011 - the individual
Prof Rdecides
S Mathur to 11
continue the full use of the innovation
Diffusion of Innovation Model
Adopters
• Personality A
• Social characteristics
• Perceived need for innovation
Communication Channels
Knowledg Persuasio Decision Confirmatio

e n n
Social System Characteristics of

• Social system norms Innovations
• Tolerance of • Relative advantage Adoption Rejection
deviancy • Compatibility
• Communication • Complexity
integration • Triability • Continued Adoption • Later Adoption
• Observability • Discontinuance • Continued Rejection
Sunday, May 1, 2011 ProfTime

R S Mathur 12
Adopters
• Personality characteristics

e n n

• Tolerance of deviancy • Relative advantage
• Communication • Compatibility
Adoption Rejection
integration • Complexity
• Triability
• Observability
• Continued Adoption • Later Adoption
• Discontinuance • Continued Rejection
Sunday, May 1, 2011 ProfTime

R S Mathur 13
Adopters
• Personality characteristics

e n n

• Tolerance of deviancy • Relative advantage
• Communication • Compatibility
Adoption Rejection
integration • Complexity
• Triability
• Observability
• Continued Adoption • Later Adoption
• Discontinuance • Continued Rejection
Sunday, May 1, 2011 Prof R S Mathur

Time 14
Abrahamson & Rosenkopf (1990):
Bandwagons & Thresholds
Rational efficiency vs. Fad theories
• Rational Efficiency: The more organizations adopt an
innovation, the more knowledge about the innovation’s true
efficiency is disseminated
• Fad theories: The sheer number of adopters creates

“bandwagon pressures”
– Institutional pressures: Adoption innovation can
become a social norm
– Competitive pressures: Fear that not adopting will lead
to loss of competitive advantage
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 thresholds
and influence individuals with higher
thresholds
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 potential
adopters
• Relative Advantage
– The degree to which the innovation is perceived to be superior to current
practice
• 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
Purchas
e
Evaluation Decisio
Post purchase
of n Behavior
Alternatives
Informatio
n
Search
Need
Recognitio
n
Buyer Decision Process
for New Products
Stages in the Adoption Process
Awareness
Interest
Evaluation
Trial
Adoption
Model of Consumer Behavior
Marketing and Buyer’s Buyer

other stimuli Black Box Responses
(mind)
Product choice
Marketing Other Buyer
characteristics Brand Choice
Product Economic
Price Technological Dealer choice
Buyer Decision Purchase timing
Place Political
Process
Promotion Cultural Purchase amount

Types of Buying-Decision
Behavior
Four Types of buying behavior
High Low
involvement involvement
Significant Complex Variety-seeking

Differences buying behavior
between buying behavior
brands
Few
Dissonance-
reducing buying Habitual buying
Differences
between behavior behavior
brands
The Buyer Decision Process
Process • Needs can be triggered by:

Stages – Internal stimuli
• Need recognition
• Normal needs become
• Information search
strong enough to drive
• Evaluation of alternatives behavior
• Purchase decision – External stimuli

• Advertisements
• Post purchase behavior
• Friends of friends

Technology Acceptance Model
Perceived
Perceived
Ease of use
Ease of
use
Decision Actual
Behavior
Actual
Decision Behavior
Perceived
Usefulness

Rogers Model
COMMUNICATION CHANNELS
PRIOR
CONDITIONS
1. Previous Knowledge
Knowledge
Persuasion
Persuasion
Decision
Decision
Implementation
Implementation Confirmation
Confirmation
practice
2. Felt needs/
problems 1.Adoption Continued

3.Innovativnes Adoption
Later Adoption
s
4. Norms of Discontinuance
the social 2. Continued
system Rejection Rejection
Characteristics Perceived
of the Decision- Characteristics of
Making Unit the Innovation
1 Socio-
economic 1. Relative
advantage
Characteristics 2. Compatibility
2. Personality 3. Complexity
variables
Sunday, May 1, 2011 4. Trialability
Prof R S Mathur 29
3. 5. Observability
for New Products
Product Characteristics
Relative
Relative
Observability
Observability Advantage
Advantage
Can
Canresults
resultsbebeeasily IsIsthe
observed or
easily
described theinnovation
innovation
observed or described superior
superiortoto
to
toothers?
others? existing
existing
products?
products?
Trialability
Trialability Compatibility
Compatibility
Can
Canthetheinnovation
innovation Does
Doesthe theinnovation
innovation
be
be usedon
used onaa fit
fit the valuesand
the values and
trial
trialbasis?
basis? experience of the
experience of the
target
targetmarket?
market?
Complexity
Complexity
IsIsthe
theinnovation
innovation
difficult
difficult to
to
understand
understand oruse?
or use?
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 its
5th edition.

Innovation Adoption Decision
1. Innovation decisions may be optional (where
the person or organisation has a real
opportunity to adopt or reject the idea),
2. Collective (where a decision is reached by
consensus among the members of a system),
or
3. Authority-based (where a decision is imposed
by another person or organisation which
possesses requisite power, status or technical
expertise).
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).

Adoption Levels of
Technology
Innovators / Leading edge:
• Experiment frequently with emerging
innovations
• Leaders

1. INNOVATORS
•
The first 2.5% of adopters are called "Innovators".
• Innovators are:
1. venturesome and educated,
2. have multiple sources of information and show greater
propensity to take risks.
3. They appreciate technology for its own sake and are
motivated by the idea of being a change agent in their
reference group.
4. They are willing to tolerate initial problems that may
accompany new products or services and are willing to make
shift solutions to such problems.

Adoption Levels of
Technology
Early
adopters:
• Uses advanced
features in
generally
adopted
innovations

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 are
looking to adopt and use new technology to achieve a
revolutionary 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 envision
great gains in competitive advantage from adopting a
new technology.
• They typically demand personalized solutions and
quick-response, highly qualified sales and support.

Adoption Levels of
Technology
Early Majority /
Mainstream:
• Uses generally
adopted innovations
proficiently on a
regular 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 productivity
enhancements 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 why
adoption increases so rapidly in the diffusion process and causes a landslide in
demand.
2. - “When we pick a vendor to lead us to the new paradigm, let us all pick the
same 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 Levels of
Technology
Late Majority /
Reluctant:
• Skeptics
• Try to use generally

adopted innovations
but have problems
using basic features
• Will use innovations

or products only when
the majority are using
it

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 completely
preassembled, bulletproof solutions.
• They are motivated to buy technology just to stay
even with the competition and often rely on a single,
trusted adviser to help them make sense of
technology.

Adoption Levels of
Technology
Laggards /Avoiders:
• Love to hang onto the old ways
• Critical of new ideas
• Use technology as little as

possible
• Will accept innovation only if it

has become mainstream over a
period of time

5. LAGGARDS
•
The last 16% of the adopters consists of
"Laggards".
• Laggards are technology skeptics who want
only to maintain the status quo.
• They tend not to believe that technology can
enhance 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 and
change 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 most
significant application is the Bass Diffusion
Model where the process of how new
innovations are adopted through the
interaction of current and potential users is
described mathematically
Three Sets of Personalities
• Another way to look at any society facing
change is by looking at three distinct
personalities.
1. There are drivers (early adapters), who drive
new innovations and thinking.
2. There are the riders (middle adapters) who
will eventually ride along with new trends.
3. And there are always the draggers (late
adapters) who are still grousing about using
wordprocessing and the fax machine.

Innovation Diffusion Curve
• Together, these three main groups create a bell
curve of innovation diffusion.
• The amount of time it takes for an innovation
to diffuse across society can vary based on
many factors.
• Widespread use of the telephone took 25 years,
fifteen years for personal computers, seven
years for widespread use of the fax machine,
and five years for widespread use of the World
Wide Web.
The S- Curve of Innovation Diffusion

Product Life Cycle &
Diffusion of Innovations
20%
Innova- Early Early Late Laggards

tors Adopters Majority Majority
Source: Rogers & Shoemaker,
Sunday, May of
Communication 1,Innovations
2011 Prof R S Mathur 49
Innovation Diffusion S- Curve
Cumulative Number of Adaptors
Heart of Diffusion Process

(Opinion leaders adopt
innovation)
Critical Mass Achieved

(Adoption becomes
self-sustaining)
Technology Technical
Development Assistance
and Demos
Time
Innovation Diffusion

for New Products
Adopter Categories
Percentage of Adopters
Early Majority Late Majority

Innovators
Early
34% 34% Laggards
Adopters
13.5% 16%
2.5%
Early Late
Time of Adoption of Innovations

Four Stages of Internalization of
Innovation- Internet
• Dealing with diversity of cultural and technical backgrounds
can make Internet acceptance more challenging.
• Consider these four identifiable stages specifically regarding
internalizing the potential of Internet use and collaboration:
* Awareness/Uncertainty
* Insight/Adoption
* Internalization/Adaptation
* Enlightened Expectations

1. Awareness/Uncertainty
• At this first stage people often experience acute self-doubt and
self-deprecation as to whether they will be able to master the
basic computer, Internet, typing, and written skills.
• A very shallow understanding of the potential benefits is common
at this stage, though there is the general impression that there are
advantages.
• For the individual at the "uncertainty" stage, it is important to
keep the instructional tasks very simple with short step-by-step,
mastery learning format such that there is no failure, only
success.
• Easily obtainable objectives are necessary to build confidence, as
well as encouraging messages whenever possible.
• Technofear, and related ego-protecting excuses, are strongest at
this stage. Upon proving to themselves they CAN communicate
online, there is often a surge of optimism and confidence.
2. Insight/Adoption
• At the "insight" phase people accept that
telecommunications skills are not beyond reach
and begin to see an increasing number of ways to
benefit.
• They "adopt" use of the Internet and begin to
gain a broader of idea of what it has to offer
them.
• Self-confidence begins to build through hands-on
experience.

3. Internalization/Adaptation
• The "internalization" stage is achieved through
regular use when people begin to view the online
skills as merely an extension of one's self.
• Use of Internet begins to be adapted to meet
personal needs in an increasing number of ways.
• At this point "being online" is no more threatening
than making a voice telephone call.
• Usage falls into a pattern of purposeful use and
becomes "transparent."

4. Enlightened Expectations
• The fourth stage, "enlightened expectations," begins after
people internalize the online experience and become regular,
even casual users. There is a growing acceptance that the
Internet has even greater potential benefits.
• At this stage excitement begins to generate as the real potential
of Internet use begins to percolate deep down in the person's
consciousness and serious questions as to what else might be
possible begin to arise.
• At this stage people begin to make an internal commitment to
pursue their full potential for new uses of the Internet. This may
be a year or more after initially going online. Willingness to
serve as an online resource person, to tutor others online, or
even to teach others online, are indications one has arrived at
this "enlightened" stage. Imagining new original uses begins to
occur.
Youth today are the key change
agents and technology leaders
• Computers and Internet appear to be significantly more
motivating to youth than for adults. While most adults will tend to
resist learning new things about computers and Internet, the
opposite appears to be true with youth. While adults are often
intimidated and feel stupid when frustrated with computers,
youth tend to love to have the control to explore and learn new
things. Adults need to relearn how "playing to learn" is as
important as it is fun.
• With most leadership positions held by adults, many of whom
actively resist learning to use computers and Internet, early
adapters, both young and old, are faced in considerable challenges
when they attempt to "lend their wings to others." This type of
tension will be part of any community network initiative.

Youth today are the key change agents
and technology leaders
“be innovative”
“be creative and imaginative”
“be able to think independently
and creatively”

Twin Strategies for Profitability
• Relentless Innovation
• Rapid Penetration

Relentless Innovation
• Competitive Rationale:
• “I think Sony’s mission is to make our own
products obsolete. Otherwise, somebody else
will do it.”
Kunitake Ando, President of Sony, Financial
Times, February 10, 2003
• Consumer Rationale:
• > Benefit escalation, e.g., PDAs
• > Benefit evolution, e.g., digital cameras

• Market Driving
The challenge is to anticipate customer needs
• Market Sensing
• Marketing research too often assumes that
customer needs are established
• New directions must generally be inferred
• – iPod
• – Rolls Royce jet engines
• Market Driving
• “My success in scoring goals is to
anticipate where the ball is going – not to
chase it.”
Pelé

Rolls Royce Aero Engines
• Market Vision
• “Power by the hour”
• Real-time ground to air monitoring
• Rolls Royce assumes the responsibility.
• Airlines don’t really want to own and maintain
engines.

The Innovation Continuum
Discontinuous
Continuous
Innovation
Innovation
Inventions
Enhancements Migration –
-new patterns
•Functionality, New generation
of
•Value added in of
Usage and
•product/service Technology
consumption

800 Boeing’s Current Portfolio of
700 Enhancements & Migrations
600
500
Sales
400
300
200
100 In design
737 747 757 767 777 787
Time

Rapid Market Penetration
• Capture Brand Loyalty and Reputation
Effects
• Set the Dominant Standard
• Achieve Scale and Experience Effects
• Capture Sales and Profits Before
Competitors

Rapid Market Penetration
Market Penetration
Scenarios
Desired
Pattern
Sales
Typical Undesirable
Pattern Pattern
Introduction Growth Maturity
Time
Bass Diffusion Model

The Chasm

So what is an innovation chasm?
•
The 'innovation chasm' is the point at which a company,
organisation or product can no longer compete in its
marketplace. This is generally due to its inability
to innovate; to create new products, to develop new
markets, to design new more efficient processes, or to
compete against new business processes and services.
Every firm will encounter these chasms from time to
time. It is a natural result of growth within any
organisation.
The challenge is to recognise the next imminent chasm
the company may face as well as the practical ways in
which to build bridges for each chasm you encounter.

The Adoption “Chasm”

Innovation Chasm

The Adoption
“Chasm”
2.5% 13.5% 34% 34% 16%

Innova- Early Early Late Laggards
tors Adopter Majority Majority
s
The Diffusion of Innovation cycle is not continuous; it is discontin-
uous since the different segments buy for different reasons
Source: Geoffrey Moore,
Crossing the Chasm

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Innovation Diffusion

Sunday, May 1, 2011 Prof R S Mathur 1

Sunday, May 1, 2011 Prof R S Mathur 2

Sunday, May 1, 2011 Prof R S Mathur 4

Sunday, May 1, 2011 Prof R S Mathur 5

Sunday, May 1, 2011 Prof R S Mathur 6

• “Because its purpose is to create a

Sunday, May 1, 2011 Prof R S Mathur 7

• Gabriel Tarde (1903)

• Ryan and Gross (1943): adopter categories

Sunday, May 1, 2011 Prof R S Mathur 8

Sunday, May 1, 2011 Prof R S Mathur 9

Sunday, May 1, 2011 Prof R S Mathur 10

1. Awareness - the individual is exposed to the

Knowledg Persuasio Decision Confirmatio

Social System Characteristics of

Sunday, May 1, 2011 ProfTime

Knowledg Persuasio Decision Confirmatio

Social System Characteristics of

Sunday, May 1, 2011 ProfTime

Knowledg Persuasio Decision Confirmatio

Social System Characteristics of

Sunday, May 1, 2011 Prof R S Mathur

• Fad theories: The sheer number of adopters creates

• Personal network thresholds: number of

3. Social network characteristics

Sunday, May 1, 2011 Prof R S Mathur 18

– Modified & extended by Hirschman (1980):

Sunday, May 1, 2011 Prof R S Mathur 19

Sunday, May 1, 2011 Prof R S Mathur 20

• Number of contacts within each adopter

Sunday, May 1, 2011 Prof R S Mathur 21

-Social environment of diffusion of

– Marketing strategies employed

– Institutional structures (e.g., government)

Sunday, May 1, 2011 Prof R S Mathur 22

Marketing and Buyer’s Buyer

Sunday, May 1, 2011 Prof R S Mathur 25

Significant Complex Variety-seeking

Process • Needs can be triggered by:

• Purchase decision – External stimuli

Sunday, May 1, 2011 Prof R S Mathur 27

Sunday, May 1, 2011 Prof R S Mathur 28

problems 1.Adoption Continued

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• Try to use generally

• Will use innovations

Sunday, May 1, 2011 Prof R S Mathur 40

Sunday, May 1, 2011 Prof R S Mathur 41

• Critical of new ideas

• Use technology as little as

• Will accept innovation only if it

Sunday, May 1, 2011 Prof R S Mathur 42

Sunday, May 1, 2011 Prof R S Mathur 43

Sunday, May 1, 2011 Prof R S Mathur 44

Sunday, May 1, 2011 Prof R S Mathur 46