Two Problems Caused by the Innovation Diffusion Curve

The economist Rudi Dornbusch succinctly describes the way that ideas spread:

Things take longer to happen than you think they will and then they happen faster than you thought they could.

It’s the innovation S-Curve in words, this is what that looks like graphically:

And the problem is that the value for X is larger than we expect it to be – that’s the essence of Dornbusch’s quote.

I ran across the quote in a post by Andrew Hargadon discussing how sustainability in business is taking longer than expected to arrive. Hargadon explains why X is big:

Forget all the names and dates you learned in elementary school, great social and technical revolutions begin with a whisper, not a bang. They take decades to develop and then, when they do, they change everything overnight.

Take the industrial revolution. It started with a whisper: three different technologies slowly emerging in the 1700s. Coal slowly replaced wood as the dominant source of fuel; the steam engine slowly replaced animal and wind power (to pump water from coal mines); and large ironworks slowly replaced local craftsmen and blacksmiths. For decades, these technologies and the businesses and lifstyles that surrounded them grew and evolved. Then, all of the sudden, the last few decades of that century and the first few of the next saw an explosion of innovation across all industries—from textiles to shipping to railroads to iron and metalworks.

The impact didn’t come from any one of these technologies, it came from the interaction between them.

This slow diffusion causes two problems for firms. The first is that if you are a powerful incumbent, you see the slow diffusion and you think that it will continue to expand along path C – slow and steady. The consequence of this is that when the change does happen, even though there have been warning signs for ages, it still takes you by surprise.

There is a quote from the CEO of a major book store in Game-Changing Strategiesby Constantinos Markides:

We were late in implementing [the web] but not in evaluating it. And our evaluation was that this thing did not make sense. yet every time I tried to explain our reasons why we wouldn’t do it to Wall Street, my share price went down! Even in 1997 when online distribution of books went from zero to 6 percent, superstores increased their share from 10 percent to 22 percent – yet our stock price dropped by 40 percent. So in the end, we decided we had to do something.

This is exactly what path C thinking sounds like. And the problem it leads to is this (via Boing Boing):

But there are also problems for innovators in the S-Curve. The long delay in diffusion causes a lot of firms to go out of business trying to catch the new wave.

You can see this in the Kodak case. Here’s the world’s first digital camera:

It was invented by Kodak in 1975. The problem was, the rest of the economy wasn’t ready for digital cameras yet. Digital memory was still so expensive that you couldn’t actually take usable photos then. Does anyone else remember how crappy the first digital photos were in the late 90s? They were just awful. The supporting technology didn’t catch up with the camera technology for about 25 years.

That is exactly what Hargadon is talking about – it takes multiple innovations to disrupt an industry.

Kodak took this to mean that digital cameras would evolve along path C. So they kept the technology on the shelf and waited. If an independent entrepreneur had invented the digital camera, he or she would have gone bankrupt waiting for the supporting technologies. Or, if they were lucky, they might have sold the rights to a big company like Kodak.

The point is, when you’re early in the S-Curve, it usually takes a lot longer to get to the tipping point than you’d like it to.

The first step in addressing these problems is being aware of them. However, there are also some positive steps that you can take as well. I talk more about these here.

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

Please note: I reserve the right to delete comments that are offensive or off-topic.

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8 thoughts on “Two Problems Caused by the Innovation Diffusion Curve

  1. I am the inventor of HotSmart Plates, a type of ceramic plates that remain still hot after 30 minutes by preheating them for only one minute. HotSmart plates keep food from getting cold on the plate obviously and I am convinced my invention will follow the “S” shape since most people hate it when food gets cold.
    HotSmart might follow path B due to cash flow problems (I am a stroke and brain tumor survivor with no credit). I have been approached by an investors group but it is obvious to me that all they want is my invention and put me to work for them for $24k/year (I am an experienced Industrial Engineer).
    Any advise for me?

  2. In my opinion, even if a small startup is following path “C” that path can still bend upwards to form a larger “S” shaped path (The bending could be delayed for lack of promotion or cash flow problems). There are 100 million homes in the USA with MW ovens and my goal is at least 2 HotSmart plates per home. Why should people allow food to get cold on the plate? Why should you let your coffee to get cold before you finish it?
    I knew about the Kodak case and now they failed for lack of vision and perseverance.

  3. Liked this and other posts. I’ll come back and read more another time. Wanted to say thanks for prompting me to draw a graph freehand but it didn’t look as good as yours.
    Cheers Pip

    • Hi Pip – thanks for stopping by. I find it hard to believe that anyone could draw something that looks worse than my drawings. But I still think it’s worth the effort to do stuff ourselves.