A model for picking technology winners?

Citation

Davidson, A. (2009), "A model for picking technology winners?", Strategy & Leadership, Vol. 37 No. 2. https://doi.org/10.1108/sl.2009.26137bae.001

A model for picking technology winners?

Article Type: The strategist’s bookshelf From: Strategy & Leadership, Volume 37, Issue 2

Mastering the Hype Cycle: How to Choose the Right Innovation at the Right Time

Jackie Fenn and Mark RaskinoHarvard Business Press, 2008.

The Hype Cycle model got its start in 1995 when Jackie Fenn, a Gartner Group analyst, observed that promising new technologies seem to go through a predictable evolution – hype, initial disappointment, initial success, a learning phase, and then finally becoming accepted by customers. At first, innovative technologies quickly are over hyped and, as a consequence, they then frequently disappoint early adopters who buy based on over-enthusiastic publicity and industry gossip. Only subsequently, as the customer gains experience with the new technology, does the potential for real successes become apparent. During this stage, the technology often becomes more robust, knowledge is developed around how best to deploy it and customers learn where and how the business benefits can be obtained.

The new book by Fenn and Mark Raskino, Mastering the Hype Cycle, augments the basic framework that Gartner has been using for more than a decade to communicate to clients the position and evolution of IT technologies. It claims to offer top managers a proven way to anticipate the future of innovation in their industry. The Hype Cycle model has had the most success analyzing when information technologies will translate into truly useful new projects. The authors suggest, however, that the Hype Cycle is also a helpful framework for assessing, talking about and deploying most other types of innovation. And through examples, they show how a variety of new ideas, technologies and business models go through a similar set of stages of inflated expectations, disappointment and eventual success.

The value of the Hype Cycle

The Hype Cycle addresses a genuine problem in information technology – the need to time its selection and deployment. Too early and the technology does not work. Too late and you lose opportunities for competitive advantage. Information technology, like good wine, should not be served before its time. Instead, if you pick the right moment in the introduction cycle, pricing may have dropped, supporting and deployment skills have been developed, complementary technologies have emerged and risks are reduced. Understanding the Hype Cycle enables companies to time their deployment of IT technologies to minimize failures. For example, guided by the Hype Cycle concept, managers can reduce their project risk by introducing a series of iterative prototypes timed to arrive at advantageous stages of the cycle. In this way, both IT companies and their customers can avoid making an overlarge commitment to a new technology by phasing in implementation. As both providers and customers learn from each iteration, they can expand the scope of the project without increasing the risk.

An example is the Hype Cycle for radio frequency identification (RFID) or wireless readable tags that can track inventory and assets. RFID was initially touted as a technology that would dramatically improve the ability of companies to track inventory and assets with the promise of lowering inventory costs, shrinkage and recording costs. The hype in the technical and business press reached a crescendo when Wal-Mart, the world’s largest retailer, demanded that all its suppliers use RFID. However, implementation problems dramatically slowed down the speed of adoption.

As with most technologies, RFID has progressed through Gartner’s five stages of the hype cycle. In the initial phase, “Technology Trigger,” the potential of the technology gave rise to initial interest, numerous media articles (a metric that can be tracked) leading to early adoption, typically in specialized situations or with customers who have optimistically bought into the promises (often unfulfilled) of the technology or innovation. The second phase of the Gartner Hype Cycle is amusingly called the “Peak of Inflated Expectations.” The inevitable result of inflated expectations triggers the “Trough of Disillusionment.” From failure comes learning and perhaps just as importantly, the slow maturation of the technology and the social and technical systems that evolve with it. This occurs in the fourth phase, “Slope of Enlightenment.” In the fifth phase, “Plateau of Productivity,” success leads to actual productivity and positive economic returns. The Hype Cycle offers decision makers a simple way to consider the critical risks of any unproven technology. Research, piloting, phasing and iterating prototypes can help reduce the risk of being deceived by the hype and also establish a better understanding of how marketing campaigns need to evolve as expectations about a new technology emerge. As the authors’ Figure 1-7 (Exhibit 1) shows, e-business has followed a fairly typical hype cycle. Clever marketing by IBM allowed the company to reframe their traditional business as supporting e-business at a crucial stage of its evolution.

Exhibit 1

The Segway example

A well-publicized non-IT product such as the two-wheeled Segway electric personal vehicle (see Exhibit 2) has clearly gone through a Hype Cycle and today seems to be lingering in the “Trough of Disillusionment”. Initially marketed as a major new form of transportation that could be used by everybody, it has ended up being a more specialized product. The Segway scooter has had some success as a conveyance for warehouse personnel, police, security guards, repair staff and groups of guided tourists, markets where it is useful because it travels much faster than walking and doesn’t produce the noise or fumes of a combustion engine. It has not lived up to its hype as a mass market product, however, because it can not be safely used on most road systems and many communities have forbidden Segways on sidewalks.

Exhibit 2

Four Hype Cycle mistakes

Another case in the book describes the introduction of optically scanned loyalty cards in the UK market by two supermarket retailers, Safeway and Tesco. The authors suggest four common traps caused by mistiming various stages in the implementation of such a technology.

1. 1.

   Adopting too early.

2. 2.

   Giving up too soon.

3. 3.

   Adopting too late.

4. 4.

   Hanging on too long.

Safeway was an early adopter of loyalty programs but did not mine the individual consumer information sufficiently to drive changes in their business. They exited their loyalty programs and pursued a more price-driven strategy. Safeway UK ended up being acquired by a smaller competitor. In contrast, Tesco, initially a smaller competitor, did not give up on its loyalty programs. It used the individual consumer purchasing information from the loyalty cards to alter its relationship to customers and change its pricing and inventory strategies. This enabled it to grow its business, becoming the third largest retailer in the world.

Prescriptions

The prescriptive part of the book revolves around Gartner’s STREET process – Scope, Track, Rank, Evaluate, Evangelize, and Transfer (see Exhibit 3). “Scope” means “decide what’s valuable to you and how much risk you’ll take to get it.” “Track” means “seek out relevant innovations … and track their progress along the hype cycle.” “Evaluate” means innovations should be subjected to a more detailed examination of whether the top ranked innovation candidates can be brought forward, analogous to the Stage Gate model of new product development used by many companies. “Evangelize” includes inspiring, educating and involving the stakeholders who can influence the success of a project. The “Transfer” stage involves completely handing off the innovation to those who must deploy it – groups that should have been involved earlier in the STREET process.

Exhibit 3 The Gartner STREET process for innovation adoption

Perhaps the most significant takeaway from the book is that a single dimension of performance improvement offered by an innovation often grabs too much of the attention of an early adopter. When this one attribute is sold too hard by the developer, the hype often leads to customer disappointment. Instead, carefully considering the broader consequences of use and adoption – knowledge about performance, integration with other processes and technologies, staff and skills availability, usage issues, and uncertainties about payback – will help managers to time both pilot technologies and full scale deployment of a potential product.

Alistair DavidsonCEO of Eclicktick Consulting (alistair@eclicktick.com), provides marketing and strategy consulting to technology firms. He is a Strategy & Leadership contributing editor and has published a number of articles on technology and marketing in S&L.