New technology presents risk for many customers. They react differently toward this risk based on their innate characteristics, the wants and needs of their companies, and the behavior of other buyers. The Technology Adoption Life Cycle (TALC) models how different groups of customers adopt to discontinuous innovation at different times. This model helps high-tech marketers build the best strategy for each phase of a product's life. The graphic below shows the markets that develop along the TALC and the types of customers that dominate them.
The Early Market
The Early Market is the phase in which a discontinuous innovation can grow from merely a technology with promise to a novel new product idea. The customers at this point recognize that the technology is new and unproven but it has the potential for a breakthrough. The Early Market consists of two kinds of customers:
- Technology enthusiasts (techies) can be found in most every organization. They are always looking for state-of-the-art technology, but they typically don't have the money to fund further development. Techies provide a good test ground for a new technology. They are also gatekeepers to the rest of the TALC. Impress the technology enthusiasts, and you can get the attention of visionaries. If the techies are unimpressed, visionaries will look to another way of gaining competitive advantage.
- Visionaries are industry revolutionaries looking for a breakthrough application that will give them a competitive business advantage. They see discontinuous innovations for the potential advantage offered, especially if the technology can give them a clear edge over the competition. The challenge is that they may want you to modify the innovation to address their specific issue, without regard to what the market wants or needs. Their importance lies in their ability to fund development as well as publicize it within an industry.
The Chasm represents a gap between the Early Market and the next phase: the Bowling Alley. It develops when there are few if any remaining visionaries to sell to but pragmatists are not yet ready to adopt. Pragmatists do not see a complete solution to their problem, plus there is no group of references that have formed that they trust. In addition, they want to see the solution working live at customer sites. Revenue growth ceases or even recedes in the Chasm. The length of this market lull is uncertain.
The Bowling Alley
Market momentum picks back up in the Bowling Alley phase, as early pragmatists in certain customer segments overcome their reluctance toward discontinuity and adopt the new technology to solve niche-specific problems. By their nature, pragmatists are reluctant to adopt new technology and prefer to follow the herd. Early pragmatists are forced out of their comfort zone to find solutions for broken, mission-critical business processes.
The Bowling Alley phase takes its name from the market strategy that is appropriate. The key to success is to provide a complete solution for one segment while identifying closely aligned segments that could benefit from a similar solution. When the momentum from successfully capturing market share in the first segment (the lead bowling pin) is felt, this momentum is leveraged into adjacent segments. By dominating several segments, your company may start to emerge as a sector leader.
As the Bowling Alley phase further develops, a mass market sometimes emerges where the product is swept into a Tornado of demand. Up to this point, late pragmatists have delayed their adoption, waiting for the technology to gain a strong record of accomplishment and enough references from people they trust. In the Tornado, these pragmatists finally shift en masse to the new infrastructure, and they tend to go with the market leader.
Only one company will emerge as the market leader around which the standard will be constructed. An influx of new customers creates a huge sales opportunity, and demand outpaces supply. One key to success in the Tornado is to expand the sales channel as fast as possible in order to capture market share at the expense of the competition.
Once the new product and infrastructure are in place throughout the market, the Tornado gives way to the Main Street phase. The mass market stabilizes, and the standard product begins to experience a price decline. In this market, some conservative end users look for value-added extensions (+1 offers) that deliver additional benefit.
Conservatives don't see value in technology just for technology's sake. They tend to stay out of the market as long as they can, finally making the leap because they fear being left behind. Conservatives are sensitive to price and demanding of value. The key to Main Street success is to offer the add-on products that can command a price premium from conservative customers.
Total Assimilation marks the end of the TALC. In many cases additional services will extend the life of aging legacy systems. In this phase, even skeptics will unconsciously or begrudgingly accept the technology, possibly obtained as a service or designed into an end product in which skeptics never see the technology. Skeptics are defenders of the status quo and want solutions that have no risk.
Even though the TALC is coming to a close, Total Assimilation is not the end of the product life cycle. Just as automobiles were in the Tornado in the 1930s and were on Main Street following World War II, they are by no means at the end of their market. They have simply moved beyond first-time adoption.