When it comes to adopting new innovations, the past can serve as a guide to the future.
Technological innovations have become part of our modern lifestyle, changing it gradually, subtly and inexorably. A few years ago, we would not have imagined using the phone as a form of communication beyond just verbal exchanges, nor would we have thought that household devices were capable of following simple commands. We could not fathom that new types of currencies untethered from government control would emerge, and that these currencies could be used to purchase products and services.
Companies are more concerned about disruptive technology and changes in business models than they had been in the past. The threat to existing businesses may come not from their own traditionally defined industries, but from startups or companies in other industries that enter new areas as part of their strategic expansion. Few people would think of Google or Apple as potential car manufacturers, and yet they are committing vast resources into research and development of driverless vehicles.
Amidst such changes, how do we make sense of technological innovation? Business history may be instructive. In many ways, future trend lines may even resemble the past.
Technology Adoption Takes Time
According to research and consulting group Gartner, the adoption of technology follows a certain pathway known as the Hype Cycle. A new technology tends to be overhyped at the beginning (“inflated expectations”) which then leads to “disillusionment” when it is not able to fulfil its promise. After a period of continual improvements, the technology becomes more widely adopted and achieves productivity gains.
Take Bitcoin for example. It was first coined in 2009 and for many years, its value increased slowly, remaining at less than USD1,000 even up till 2017. As the potential of cryptocurrencies grew, Bitcoin started to shoot up in value around 2017, reaching its peak at almost USD20,000 in end 2017 before backsliding and then stabilizing within a trading range.
The Gartner Hype Cycle. Photo credit: CC BY-SA 3.0
While the jury is still out on cryptocurrencies, companies have started to incorporate blockchain technology, which is the backbone of cryptocurrencies into their operations. Business and even government adoption is driving a new wave of applications built around blockchain.
The Network Effect
Amazon was started in 1995 and went public in 1999. It built up its e-commerce operations by adding more and more product categories, and invested into new warehouse and logistics infrastructure for delivery to customers.
The market valuation of Amazon stayed relatively stable for a decade and started increasing from 2010. It has gone up exponentially as e-commerce became a way of life for consumers. Amazon has since leveraged its e-commerce presence by launching retail stores and logistics services, creating an integrated offering for its customers.
E-Commerce, like many Internet-driven business models, relies on the network effect. The more people use it, the more efficient and cost-effective the technology becomes, driving a virtuous cycle of higher usage and growth. E-commerce technology has now evolved to encompass making product recommendations based on what customers have purchased, and what others are buying, making online shopping even more convenient than ever before.
Big Ideas Before Their Time
Apple and its founder Steve Jobs are known for having created the smartphone market and industry with the launch of the iPhone.
Fewer people know that Apple came up with the Apple Newton in 1993, a handheld personal computing device with a touchscreen, which was created as a “personal digital assistant device”. It was later discontinued in 1998 due to poor sales. Many have pointed out the similarities between the Apple Newton and the first iPhone. The Newton “personal digital assistant device” was an idea before its time which only became a hit a decade later.
Whilst technology is developing and evolving rapidly, business principles still apply. Even as we adopt technological innovation, we have to remain cognizant of the uncertainties that lie ahead. We need to be able to sift through the realities from the promises. Sometimes, the period that we choose to enter the market with the launch of a new innovation, or when we decide to invest in a new technology, makes a difference, proving that timing also plays a part.
Comparisons have been made between the Apple Newton and the first iPhone. Photo credit: CC BY-SA 3.0
About The Writer
Goh Puay Guan is an Associate Professor at NUS SCALE and NUS Business School where he teaches supply chain management, operations and technology innovation. Prior to that he had 20 years of corporate experience throughout Asia in general management, strategic planning, and commercial investments. He is the author of Supply Chain Management: A Concise Guide published by Pearson (1st Ed. 2005, 2nd Ed. 2015). He led Batamindo Shipping and Warehousing Pte Ltd to attain the ASEAN Business Award for Growth (SME) by the ASEAN Business Advisory Council in 2013. He was also a Top Outstanding Young Persons (TOYP) 2012 Merit Winner in the Business and Entrepreneurship category, awarded by Junior Chamber International (JCI).
This article was first printed in MillionaireAsia Issue 49 - Sep 2018