Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. Hey there,
Speaker 1: and welcome to tech Stuff. I'm your host Jonathan Strickland.
Speaker 1: I'm an executive producer with iHeart Podcasts and how the
Speaker 1: tech are you? So today I wanted to talk about
Speaker 1: a particular theory relating to technology. Now, I've done episodes
Speaker 1: on various quote unquote laws regarding tech. These laws are,
Speaker 1: you know, like stuff like Moore's law, which today we
Speaker 1: often interpret as this concept that every two years or so,
Speaker 1: computing power doubles. The original observation, which was made by
Speaker 1: Gordon Moore back in nineteen sixty five, was that semiconductor
Speaker 1: chip manufacturers were doubling the number of transistors that could
Speaker 1: fit on an inch square wafer of silicon at regular intervals,
Speaker 1: although the length between those intervals has changed over time,
Speaker 1: like whether it's twelve months or eighteen months or twenty
Speaker 1: four months. Moore's argument was that economic factors drove the
Speaker 1: push to make processors more complex, to cram more components
Speaker 1: on processors, not that there was some fundamental force that
Speaker 1: allowed this to happen. And in order to keep Moore's
Speaker 1: law relevant, we have fudged his observation several times. So
Speaker 1: rather than talking about physically doubling the number of transistors
Speaker 1: on a chip, we talk about computational output, you know,
Speaker 1: like processing speed, that kind of thing, because you can
Speaker 1: make the argument that the more important thing here isn't
Speaker 1: how many transistors are on the chep, it's how powerful
Speaker 1: is that chep? Because doubling the transistors, at least in
Speaker 1: the early days, was kind of shorthand for saying this
Speaker 1: processor is twice as powerful as one that came out
Speaker 1: last year. Right anyway, stuffing Moore's law or even stuff
Speaker 1: like Worth's law, that kind of thing. That's all stuff
Speaker 1: that I've I've covered on this show in the past.
Speaker 1: Today we're going to look at a different theory that
Speaker 1: relates to technology, and it's all about early adopters. Really, really,
Speaker 1: it's more than that. It's about the diffusion of innovation.
Speaker 1: That's what the theory is called. The idea comes from
Speaker 1: a guy named Everett M. Rogers, who is a sociologist
Speaker 1: and a professor who in nineteen sixty two published his
Speaker 1: observation on how societies ultimately accept new ideas, including new
Speaker 1: innovations like technologies. Now. He described his observation as sort
Speaker 1: of a bell curve. So imagine a bell curve. Right,
Speaker 1: it's low at the front end, then it peaks up
Speaker 1: into a hill, and then it slopes off and becomes
Speaker 1: low at the back end. Right, So the front end
Speaker 1: would be a group of people that he called the innovators.
Speaker 1: This would consist of just two and a half percent
Speaker 1: of the overall population that ultimately adopts this idea. So
Speaker 1: not two point five percent of the entire population of
Speaker 1: the world, just two point five percent of all the
Speaker 1: people who ultimately adopt whatever it is we're talking about.
Speaker 1: So these are the innovators. Behind them are the early adopters,
Speaker 1: and this represents another thirteen point five percent of that population.
Speaker 1: And then after that you get the majority of adopters
Speaker 1: and rogers. Divided them into two halves, he had the
Speaker 1: early majority and the late majority. Each of these consist
Speaker 1: of around thirty four percent of the population that adopts
Speaker 1: this idea. Then, bringing up the rear are the laggards
Speaker 1: sixteen percent of the population. These are the people who
Speaker 1: are slow to accept this new idea or product, but
Speaker 1: ultimately they do come around to it. But even with
Speaker 1: all these there will still be people who just never
Speaker 1: come around to accepting an idea or technology. So this
Speaker 1: is really just a way to describe the folks who
Speaker 1: do now. On top of that, to be considered an adopter,
Speaker 1: each person first must be aware of how this thing
Speaker 1: addresses some need or want. It's not enough for it
Speaker 1: to just be a new whatever it is, a new
Speaker 1: idea or a new product. That thing has to be
Speaker 1: able to do something that people perceive as being useful.
Speaker 1: If it doesn't solve a problem, then the company or
Speaker 1: person whomever is putting forth this innovation they need to
Speaker 1: come up with a way to invent a problem that
Speaker 1: this thing does solve. Steve Jobs is pretty darn good
Speaker 1: at this. He was good at convincing a general public
Speaker 1: that new technologies from Apple solve problems they didn't even
Speaker 1: know that they had had. The adopter also obviously has
Speaker 1: to make the decision to take the plunge and actually
Speaker 1: adopt this new idea, and then they have to use
Speaker 1: it and continue to use it. So the theory also
Speaker 1: identifies five factors that affect the adoption of a new idea.
Speaker 1: They are relative advantage. So how and to what extent
Speaker 1: does this new idea solve a problem or improve upon
Speaker 1: an earlier innovation. There's compatibility. You know, is the new
Speaker 1: idea or product or whatever aligned with the values and
Speaker 1: needs of potential customers. If they're in conflict, people are
Speaker 1: not going to adopt it. There's complexity. Is the new
Speaker 1: idea or whatever is it easy to understand and use?
Speaker 1: That's pretty self explanatory. There's triability, as in, can someone
Speaker 1: actually give this thing a whirl? Can they give it
Speaker 1: a test before they commit to adopting it, and if so,
Speaker 1: that definitely improves adoption. And then there's observability. Is it
Speaker 1: possible to see or perhaps even measure the outcome of
Speaker 1: adopting the innovation to say, I know that it has
Speaker 1: been an improvement because here are the ways I can measure,
Speaker 1: So can you tell that the thing is working? Generally speaking,
Speaker 1: this theory, this diffusion of innovation is a pretty decent observation.
Speaker 1: It's pretty rare for a new technology or idea in
Speaker 1: general to just take the world by storm instantaneously. Usually
Speaker 1: this is a process. We should also mention there are
Speaker 1: additional factors when you take into account technology. This isn't
Speaker 1: just a case of some people being more adventurous or
Speaker 1: more open to new ideas. Other stuff makes a really
Speaker 1: big difference, particularly when we're talking about tech, and one
Speaker 1: big thing about that is cost, because often when a
Speaker 1: new technology debuts, it's expensive. Really new technologies take a
Speaker 1: lot of money to develop and to produce. The companies
Speaker 1: that are making these things then pass those costs along
Speaker 1: to us, the consumers, at least most of the time,
Speaker 1: and that does make sense. You can't go making something
Speaker 1: that costs you, you know, hundreds of dollars to produce
Speaker 1: and then you turn it around and you sell it
Speaker 1: for twenty bucks, because you would be out of business
Speaker 1: in no time. But this does mean that the folks
Speaker 1: who will buy your do hiky have to be both
Speaker 1: willing to adopt something that is new and they have
Speaker 1: to be able to afford it, and that reduces the
Speaker 1: potential pool of customers a bit. So let's take the
Speaker 1: HUM CD player as an example. The first commercially available
Speaker 1: CD player came out in Japan back in nineteen eighty two.
Speaker 1: In October of nineteen eighty two. This was the Sony
Speaker 1: CDP one oh one, and Sony had worked in partnership
Speaker 1: with other companies like Phillips to develop the CD player
Speaker 1: technology for the market. So they had been working on
Speaker 1: this throughout the nineteen seventies, and it sunk a lot
Speaker 1: of money into making this thing happen, and there were
Speaker 1: a lot of battles as well to actually ultimately arrive
Speaker 1: at the CD form factor. The pitch of CDs to
Speaker 1: the consumer was that they were going to offer far
Speaker 1: more clarity than other forms of media that were available
Speaker 1: in the market, like vinyl albums and cassette tapes. But
Speaker 1: if you wanted one of these first players, you first
Speaker 1: had to cough up one hundred and sixty eight thousand yen. Now,
Speaker 1: back in October nineteen eighty two, in the CDP one
Speaker 1: oh one first debut, the exchange rate of yen to
Speaker 1: dollars was two hundred and sixty eight point five to
Speaker 1: five yen to one US dollars. So this would mean
Speaker 1: that the first CD player costs around six hundred and
Speaker 1: twenty six dollars in nineteen eighty two dollars. Now, if
Speaker 1: we adjust that for inflation, that would mean that buying
Speaker 1: a CD player when it first came out would cost
Speaker 1: you around two thousand and seventy five bucks or so
Speaker 1: two grand for a CD player. And here's the thing,
Speaker 1: other early CD players were even more expensive than the
Speaker 1: CDP one oh one. And remember this is a brand
Speaker 1: new technology. There's a limited library of CDs that are
Speaker 1: even available to purchase to play on the ding dang
Speaker 1: dern thing. So early adopters of CD tech had to
Speaker 1: have a lot of income at their disposal as well
Speaker 1: as a desire to experience something new in the world
Speaker 1: of audio. That's a pretty small slice of the overall market.
Speaker 1: Other technologies would follow the very same path. When the
Speaker 1: first HDTV sets debuted in America, they had a pretty
Speaker 1: hefty price tag as well. There was a Samsung rear
Speaker 1: projection HDTV that went on sale in nineteen ninety eight
Speaker 1: and it sold for eight thousand dollars. That's a lot
Speaker 1: of money. Eight grand to get an early HDTV. Some
Speaker 1: things were not quite as expensive when they first debuted.
Speaker 1: I mean, they would still set you back a good
Speaker 1: chunk of change, and they were really limited in their
Speaker 1: initial variations. For example, the first MP three player could
Speaker 1: only hold half an hour of audio and it sold
Speaker 1: for two hundred and fifty bucks back in nineteen ninety eight.
Speaker 1: Two hundred fifty dollars. I mean, that's a good chunk
Speaker 1: of change. It's not the craziest number we've talked about
Speaker 1: on this show, but for only half an hour of audio,
Speaker 1: that's asking a lot. All Right, When we come back,
Speaker 1: I'm going to talk more about early adopters and how
Speaker 1: important they are and also how risky it is to
Speaker 1: be one. But first let's take a quick break to
Speaker 1: thank our sponsors. So one role that early adopters play,
Speaker 1: typically at least in the tech ecosystem, is akin to
Speaker 1: a beta tester. Right. When you're an early adopter of
Speaker 1: a new technology, you're also a source of feedback to
Speaker 1: the company, right, Like you can tell the company, hey,
Speaker 1: this one feature is totally useless, or I really wish
Speaker 1: this technology had X, Y and Z features, or this
Speaker 1: is something that is really frustrating when I try and
Speaker 1: use this tech. So early adopters are often important to
Speaker 1: a company because they provide information about how to further
Speaker 1: refine a product so that it will have mass market appeal.
Speaker 1: You're not going to have a successful business if the
Speaker 1: only customers you ever get are early adopters and no
Speaker 1: one else ever follows suit. So listening to the early
Speaker 1: adopters is really important, and companies might end up in
Speaker 1: the process, shedding features in order to bring costs down
Speaker 1: so that the mass market is more likely to accept it,
Speaker 1: or maybe they're just features that no one found really
Speaker 1: particularly compelling, or maybe adding in some stuff to create
Speaker 1: it more convenience. So early adopters play a really vital
Speaker 1: role for companies, not just in getting the ball rolling
Speaker 1: for folks to adopt a new technology, but also the
Speaker 1: refining process. To be able to get there, companies have
Speaker 1: to do a lot of stuff like make sure that
Speaker 1: the manufacturing process is refined to make it as efficient
Speaker 1: and cost effective as possible. Otherwise you're never going to
Speaker 1: get into a mass manufacturing situation. Like if you're doing
Speaker 1: everything bespoke and by hand, it's always going to be
Speaker 1: a niche product. Doesn't mean you can't make a business
Speaker 1: out of that. You can just look at Bentley for example,
Speaker 1: but it does mean you're not going to take the
Speaker 1: pathway toward mass manufacturing and mass appeal. But if you
Speaker 1: are able to do that, if you are able to
Speaker 1: take those steps, that's when you can start to see
Speaker 1: the price tag come down and become more affordable to
Speaker 1: the general public. Tapping into early adopters requires a particular
Speaker 1: approach to marketing because early adopters are kind of like visionaries.
Speaker 1: They like big, bold ideas and they like to take
Speaker 1: big leaps from where they currently stand, so you have
Speaker 1: to kind of appeal to that sense. It's almost like
Speaker 1: a sense of adventure. They get really swept up in
Speaker 1: the excitement of possibility. By contrast, when you look at
Speaker 1: the majority of consumers, the mass of people who, if
Speaker 1: you're lucky, will follow those early adopters, they're once and
Speaker 1: perspectives are different. You can't use the same marketing approach
Speaker 1: or you will scare them off. So they want dependability,
Speaker 1: they want practicality. They want to feel like there is
Speaker 1: little to no risk when it comes to adopting the technology,
Speaker 1: and they often will take a wait and see approach
Speaker 1: to make sure that this new tech isn't just going
Speaker 1: to disappear in a puff of smoke overnight. They're not
Speaker 1: foolish to do this. Sometimes jumping on a new tech
Speaker 1: bandwagon does not pay off. Let's consider one notable example
Speaker 1: and take the sad tale of the HDDVD format and
Speaker 1: its fate in the Great Format War. Now we've talked
Speaker 1: about this particular format war before on the show. Many times.
Speaker 1: In fact, the birth of tech stuff happened the same
Speaker 1: year that the death of HDDVD happened, So I talked
Speaker 1: about it a lot in the very early days with
Speaker 1: my co host Chris Pollette. But the two main adversaries
Speaker 1: in this format war were Toshiba, which was the company
Speaker 1: behind the HDDVD format, and Sony, which of course is
Speaker 1: the company behind the Blu ray technology. The goal was
Speaker 1: to bring high definition video to home theater enthusiasts, so
Speaker 1: that's what both of these technologies were meant to do,
Speaker 1: and there were technical differences between the two, but for
Speaker 1: a lot of people there wasn't enough of a difference
Speaker 1: to make it easy to decide one versus the other.
Speaker 1: So these two companies each individually announced plans to bring
Speaker 1: the next generation of home video to the market way
Speaker 1: back in two thousand and two. That's when they made
Speaker 1: the announcement. It would actually take four years to do it. However,
Speaker 1: it did not take long for the two companies to
Speaker 1: consider trying to work out a truce between them. Because
Speaker 1: format wars are expensive and they're risky. There is no
Speaker 1: guarantee that the format you have created is going to win,
Speaker 1: and if you engage in a format war. At that point,
Speaker 1: you've already spent millions of dollars on research and development,
Speaker 1: on production, on marketing, and that money is not gonna
Speaker 1: return to you. You're not going to get that back,
Speaker 1: especially if you lose the format war, and consumers obviously
Speaker 1: are not crazy about format wars either. Competing formats hurts adoption.
Speaker 1: A lot of that majority in the diffusion of innovation
Speaker 1: theory will hold back when there are competing formats at play,
Speaker 1: because no one wants to be the person who's holding
Speaker 1: the bag who sunk potentially thousands of dollars in a
Speaker 1: technology that ultimately goes nowhere. Trying to come to some
Speaker 1: sort of compromise, Tashiba and Sony could find no common
Speaker 1: pathway forward. The blu ray format could hold more data
Speaker 1: on a disc, like significantly more, ten gigabytes more in fact,
Speaker 1: but the HDDVD format was easier to incorporate into computer
Speaker 1: systems and so would be less expensive to be able
Speaker 1: to do that sort of thing, and it would require
Speaker 1: less investment on the manufacturing side, because you could upgrade
Speaker 1: a current DVD production facility to HD DVD for far
Speaker 1: less money than it would cost to do Blu Ray,
Speaker 1: and so Tashiba and Sony both got to work on
Speaker 1: their respective technologies, which finally launched in two thousand and six.
Speaker 1: Teshiba tried to undercut Sony. The first HD DVD player
Speaker 1: retail for five hundred ninety nine bucks, which if we
Speaker 1: adjust for inflation today, would be nine hundred forty three dollars.
Speaker 1: That's still really expensive. But Sony's first Blu Ray player
Speaker 1: retailed for a whopping one thousand dollars. If we adjust
Speaker 1: that for inflation, that's one thousand, five hundred Sony five bucks.
Speaker 1: Sony's format cost significantly more than the Tashiba alternative. Sony
Speaker 1: had one distinct advantage. They had exclusive content. You know,
Speaker 1: Sony had the benefit of being both an electronics company
Speaker 1: and also a movie studio, So when you're pushing a
Speaker 1: home theater technology, it really helps that you're also the
Speaker 1: source for some exclusive content. By withholding Sony Pictures films
Speaker 1: exclusively for the Blu Ray format, Sony could apply leverage
Speaker 1: on Toshiba. Other studios were less eager to throw all
Speaker 1: in on either. Camp Warner Brothers in Paramount, for example,
Speaker 1: both chose to release home theater films on each format,
Speaker 1: and for about a year, Sony and Tashiba were in
Speaker 1: pretty stiff competition among early adopters. So collectively they sold
Speaker 1: fewer than a million units of HDDVD players and Blu
Speaker 1: Ray players, I mean all put together, it was fewer
Speaker 1: than a million units. Tashiba did have an edge over
Speaker 1: Sony in the early days. But then Sony pulled another
Speaker 1: ace out of its corporate sleeve, and that ace was
Speaker 1: the PlayStation three, and he incorporated a Blu Ray player
Speaker 1: into the PS three. And while Sony had decided against
Speaker 1: selling early Blu Ray players below cost of manufacturing, they
Speaker 1: did not do that same thing for the PS three,
Speaker 1: and so Sony sold the consoles at a loss. And
Speaker 1: in fact PS three consoles, a lot of them, were
Speaker 1: priced lower than the other video players that were on
Speaker 1: the market. So this got Blu Ray players into a
Speaker 1: lot more homes. This was a move that really helped
Speaker 1: tip the scales. But what really got things moving was
Speaker 1: when other studios began to make the choice of Blu
Speaker 1: Ray over HDDVD. Now that decision made sense for these
Speaker 1: studios because they saw the installed base for the Blu
Speaker 1: Ray format was growing very quickly, much faster than HDDVD,
Speaker 1: largely due to the PS three. That would mean that
Speaker 1: they could pick that format and hit more homes and
Speaker 1: not produce DVDs or discs in both Blu Ray and
Speaker 1: HDDVD format. They could choose just one and that would
Speaker 1: cut way back on expenses. So if you're going to
Speaker 1: make a choice of picking just one format, it makes
Speaker 1: sense to go with the one that has the larger
Speaker 1: install base among customers. So that's what they did. Various
Speaker 1: studios made the decision to go all in with Blu
Speaker 1: Ray and with Sony, and the very last big one
Speaker 1: to do this was Warner Brothers, which signaled the beginning
Speaker 1: of the end for HDDVD. There are even rumors that
Speaker 1: Sony had made the decision a little easier for Warner
Speaker 1: Brothers by greasing the wheels with a half billion dollar payoff,
Speaker 1: but that allegation was never confirmed. As far as I
Speaker 1: can tell, the death of HDDVD happened pretty quickly near
Speaker 1: the beginning of two thousand and eight. I remember attending
Speaker 1: cees that year and seeing the buzz about Tashiba canceling
Speaker 1: the HDDVD presentation just two days before it was supposed
Speaker 1: to happen, and that was all because of the Warner
Speaker 1: Brothers announcement. Later in two thousand and eight, Tishiba announced
Speaker 1: it would stop production on HDDVD systems, and the format
Speaker 1: war had ended and Blu Ray was the clear winner.
Speaker 1: So for some early adopters, the conclusion was a really
Speaker 1: tough blow because some of those adopters sung a not
Speaker 1: inconsiderable amount of money into HDDVD systems and libraries. That's
Speaker 1: precisely the kind of thing that keeps the majority of
Speaker 1: consumers cautious. It's why they are inclined to hold back
Speaker 1: upon the introduction of a new technology, particularly if they
Speaker 1: are competing formats. So that's why early adopters are really important.
Speaker 1: They're kind of the guinea pigs for new ideas and technologies.
Speaker 1: It's why the majority is also more cautious. They don't
Speaker 1: necessarily have the access to discretionary income where they can
Speaker 1: just spend it on a new technology that may or
Speaker 1: may not work out. It's why some technologies just fizzle
Speaker 1: out after a brief period of hype. I think of
Speaker 1: things like Google Glass. Potentially the Apple Vision pro will
Speaker 1: follow that same model. We'll have to see. But yeah,
Speaker 1: I wanted to spend some time to talk about the
Speaker 1: diffusion of innovation. It is a cool idea and I
Speaker 1: think it's a pretty valid observation. You know, it's not
Speaker 1: going to apply universally, but I think it's a good
Speaker 1: general rule to look at, and it's something that a
Speaker 1: lot of businesses pay attention to when it comes to
Speaker 1: how they position their technologies, their new technologies with introducing
Speaker 1: them to the market. Hope you enjoyed this quick episode
Speaker 1: of tech Stuff, and I'll talk to you again really soon.
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