Business Article Review: “The ‘Right Tech, Wrong Time’ Syndrome.”

(BY RON ADNER AND RAHUL KAPOOR, HARVARD BUSINESS REVIEW, NOVEMBER 2016)

We have become quite savvy in determining whether a new technological innovation poses a threat to the existing technology offered by our businesses, industries and public sector institutions, but we have very poor tools for determining when we should actually make the transition to a new technology.

TEXT BY JOSEFINA DELIMA

The number-one fear is to miss the opportunity, (e.g. the case of Blockbuster, where DVD film rentals became obsolete due to “video streaming”). The number-two fear is to make the transition too soon, and exhaust our finances and our research and development resources before we can launch our new technology on the market (e.g. cloud-based storage was incumbent on broadband availability and on-line security software, and this resulted in delays thereby tying up capital and months of research). There is a fine line between being too early or too late, and to understand why, we must look at two different scenarios. Firstly, we must look, not just at the technology itself, but also at the broader conditions and variables that form the necessary background that supports the new technology. Secondly, we must also look at the variables between the existing networks and background settings supporting the old technology, alongside those supporting the new technology. That is to say, old technologies can often be upgraded, so should we consider anything new in the first place?

When we are assessing a new technology’s potential for success, we drill down on its ability to satisfy customers and generate a good return on investment for its producers. Crucially, this result will hold only if the new technology’s background settings support it in all aspects. For example, when a new type of light bulb is introduced to the market, it will have a quick and successful implementation as light bulb sockets are standardized worldwide. However, when considering the example of HDTV first being introduced to the market in the 1980s, where new HD cameras, new broadcasting standards and different postproduction processes were also needed, the HDTVs were ready to be marketed long ago but the supporting factors surrounding its use were not ready. This was a great idea at the wrong time. Old technologies enjoy an established background with existing pre-established settings. But a new technology needs to consider not only its required platform, but also whether the old technology could be upgraded thus delaying the ROI on the new technology.

Research results show a success rate of 48% when the introduction of a new technology only takes into consideration the new product’s market, price, performance, rivals, existing tenure. But when consideration is also given to pre-established settings, environment, networks, rival upgrades, and strengths, the percentage for possible success rises to 82%. The overall environment must be taken into account from the early planning stages. Take for example electric cars. This great new idea was slow to kick-start as there were scarcely any re-charging stations. So until electric re-charging stations are as plentiful as gas stations, hybrid cars (electric and/or gas) will prevail.

To consider the interplay between these forces, four possible scenarios exist: Creative Destruction: When the emergence and establishment of a new technology is not very challenging and quite easy to install without much need for changes in the existing technological environment. At the same time, the possibility for the extension and continued use of the old technology is time consuming and difficult to upgrade. Then the new technology will gain market dominance in a short period of time.

Robust Resilience: When the new technology’s required infrastructure is very complicated, costly and time consuming, causing it to have a deferred time span for success. In addition, the future possibilities for the old technology’s continued use are readily available and can easily and quickly be improved and extended, then this new technology will gain market dominance slowly and gradually.
Robust Coexistence: When the new technology’s conditions and market readiness challenges are minimal and the old technology’s lifespan can be readily extended, then both can exist simultaneously. Consumers benefit the most from this scenario.
Illusion of Resilience: When the new technology’s background needs are complicated, costly and time consuming, and the old technology’s background needs can simply and easily be extended, the time needed for implementation gives the illusion that the old technology is resilient.

THE COST OF “WHEN”
As automation and digitization transform the world, established players are losing out to smart upstarts, for example: department stores and shopping malls are loosing business to e-commerce and online purchases; taxicabs to Uber; and HBO and TNT to Netflix and streaming. Yet CEOs find it hard to walk away from an established well-working business with established processes and happy customers. The main point is that the pace of substitution is determined by how quickly the new technology’s challenges can be resolved, and whether the old technology’s continued usage can easily be extended. It all comes down to the question of WHEN investors should introduce new technology. It’s simply a question of timing.