Page 1

Process of Technology Change:

Ch. 4

Diffusion

Page 2

WHAT IS DIFFUSION?• The original word diffusion can be traced to Latin

“diffundere,” which meant “to put out.”• In ordinary English language, to diffuse means to spread in

all directions.• Diffusion is the process by which an innovation is

propagated through certain channels over time among the units of a system.

Page 3

THERE ARE 3 MAJOR ELEMENT1. Innovation. From the point of view of a customer, a technical solution is

considered to be an innovation when it is new or perceived as new by the individual or the unit of adoption.

2. Propagation. Refer to the spread of an innovation beyond its inventor.3. Time. The time dimension is involved in diffusion, because it takes time

for individuals or firms to decide to adopt an innovation.4. System. Is a set of interlinked units that participate in the diffusion

process.

Page 4

THE ADOPTION SPEED• Indeed, many innovations fail because they do not get

adopted altogether.• When successful, an innovation gets adopted over a period

of time: – Different types of users adopt the innovation at different times. – The late adopters sometimes look to the earlier ones for information

when trying to decide whether the innovation will be useful to them.

Page 5

TECHNOLOGY

MARKET

Diffusion

TECHNOLOGY-MARKET (T-M) MATRIX

Page 6

DIFFUSION DYNAMIC

Page 7

3 MAJOR CHARACTERSTIC OF THE DYNAMICS OF DIFFUSION

(1) S-curve of diffusion, (2) reinvention during diffusion, (3) mechanism of diffusion.

Page 8

Frequency of adoption

Cumulative number of adoption

Number of Customers

Time

S-CURVE OF DIFFUSION

Page 9

Increasing diffusion speed

Number of Customers

Time

PERBEDAAN DAN KECEPATAN DIFUSI

Page 10

REINVENSION• Reinvention refer to the dynamic by which an

innovation is changed or modified by the users as they adopt and use it.

Page 11

4 WAYS IN WHICH REINVENTION OCCURS DURING DIFFUSION

1. The increasing use of an innovation often hinges upon improvement in its functional aspects.

2. As an innovation diffuses through a consumer population, a standard model of innovation may emerge and speed the adoption process. Example: TQM diffused through US firm, it become standardized.

3. The widespread diffusion of innovations often requires development of complementary products.

4. In order instances changes in an innovation make possible new applications, thereby facilitating its adoption beyond the originally conceived scope of its application.

Page 12

Mechansim of

Diffusion

Page 13

MECHANISMS OF DIFFUSION

Two mechanisms by which an innovation propagates through an adopter population1. Technology Substitution

2. Bandwagon Effect

Page 14

1. TECHNOLOGY SUBSTITUTION• The key that unlocks the doors of an adopter population for

the propagation of an innovation is TECHNOLOGY SUBSTITUTION.

• Technology substitution refers to the actual substitution of a new technique for the old. Many times, a new technology or an innovation displaces an already existing technique or technology during the process of being adopted.

Page 15

2. BANDWAGON EFFECT• Bandwagon effect focuses on the dynamic by which later

adopters, in their decision to adopt an innovation, imitate the behavior of earlier adopters.

• The experience with the use of an innovation increase as each successive member in the potential adopter population adopts it.

Page 16

Model of InnovationAdoption

Page 17

5 STEPS THE DECISION PROCESS

The decision process that leads either an individual or a firm to adopt an innovation involve five step:1. Awareness 2. Attitude formation3. Decision 4. Implementation 5. Confirmation.

Page 18

1. Knowledge2. AttitudeFormation

3. Decision4. Implemen-

tation5. Confirma-

tion

1. PROBLEM RECOGNITION

4. IMPLEMENTATION

3. SOLUTION DEVELOPMENT

2. TECHNOLOGY SELECTIONCharacteristicsOf the Decision-Making Unit1. Socioeconomic Factor2. Personality Variables3. Communication Behavior

Relative AdvantageCompatibilityComplexityTrialabilityObservability

Adoption

Rejection

STAGES IN DECISION TO ADOPT

5. CONFIRMATION

Page 19

SHIFTING CHARACTERISTICS OF ADOPTERS OVER TIME

• Innovator• Early adopters• Early majority• Late majority• Laggard

Page 20

Factor InnovatorEarlyAdopter

EralyMajority

Latemajority Laggard

1. Socioeconomic Status

High Low

2. Personality Variable

High on:EmpathyRationalityAbstraction

Low on:EmpathyRationalityAbstraction

3. Communication Behavior

High on:Commupnication Behavior

High onOpinionLeadership

Low on:Commupnication Behavior

DEFFERENCES AMONG ADOPTER CATEGORIES

Page 21

RELATIVE IMPORTANCE OF DECISION STAGE

There are two major reasons for the problem of implementation in an organization rather than an individual:• In an organization, a number of individuals are usually involved in the

innovation-decision process, and the implementers are often a different set of people from the decision makers.

• The organization structure that gives stability and continuity to an organization often resists the implementation of an innovation.

Page 22

FACTORS THAT DRIVE THE PROCESS OF DIFFUSION

1. Attribute of an innovation 2. Community effects and network externalities 3. Characteristics of the population through which

diffusion occurs

Page 23

1. ATTRIBUTE OF INNOVATION1. Relative advantage is the degree to which an innovation

is perceived as being better than the idea it supercedes.

2. Compatibility is the degree to which an innovation is perceived as being consistent with existing values or past experiences an needs of potential adopters.

3. Complexity is the degree to which an innovation is perceived as being difficult to understand an use

4. Trialability is the degree to which an innovation may be experimented with on a limited basis

5. Observability is the degree to which the results of an innovation are available to other.

Page 24

COMPONENT OF AN INNOVATION1. Hardware2. Software3. Evaluation Information

Page 25

Hardware

Software

EvaluationInformation

Realtive Advantage

Complexity

Compatibility

Trialability

Observability

COMPONENTS OF AN INNOVATION MAPPED TO ATTRIBUTES

Components Attributes

Page 26

2. COMMUNITY EFFECTFour major factors drives community effect:1. Prior technology drag 2. Irreversibility of investments3. Sponsorship4. Expectations

Page 27

2. COMMUNITY EFFECTFour major factors drives community effect:1. Prior technology drag : When a prior technology exists that has already developed a mature

adoption network, the disparity in short-term benefits between the old and new technologies is likely to be large, even though the new technology may hold more promise in the long term.

2. Irreversibility of investments: When adoption of an innovation requires irreversible investments in areas such as product training and accumulative project experience, it enhances the risk of adoption.

3. Sponsorship: This refers to the existence of a single entity (person, organization, consortium) to define the technology, set standards, subsidize early adopters, and otherwise promote adoption of the new technology.

4. ExpectationsIf enough firms hold positive expectations about a technology’s chances for dominance, then the technology is likely to enjoy a long honeymoon period, and the adoption is facilitated.

Page 28

3. CHARACTERISTIC OF THE POPULATION

1. Communication: Information reduces uncertainty for the adopter.

2. Opinion leaders: Are individual who influence others’ opinions about innovations. Most ideas enter and diffuse through a population because of its opinion leaders.

3. Cultural norms: They define a range of tolerable behavior, serve as a guide for the individuals, and are typified by opinion leaders. Norms may impede or speed the diffusion of innovations.

Page 29

INFLUENCE OF ENVIRONMENTAL TRENDS ON DIFFUSION

• As a result of globalization, the potential adopters during the diffusion of any innovation are located all over the world.

• Time compression in diffusion requires rapid responses by firms in three areas: 1. redesign of the evaluation information component of the innovation, 2. adjustment of their marketing strategies, and 3. adoption of relevant innovations faster than their competitor

• The potential for technology integration in both process and product arenas is inducing firms to look outside their own organization for appropriate innovations as complements to their in-house development activity

Page 30

MANAGERIAL IMPLICATION

1. Significant attention should be devoted to obtaining market feedback over the course of diffusion in the case of new product or process introductions.

2. Implementation is a challenging task and should be manaed carefully.

3. Product design and marketing strategy should reinforce each other as a firm rolls out a new product or process.

4. Manager should line up sponsors and create expectation of a technology success to take advantage of community effects in diffusion.

Page 31

PROCESS OF TECHNOLOGY CHANGE: DIFFUSION

In 1965, Dr. Richard Carlson analyzed the spread of modern math among school administrators in Pennsylvania and West Virginia. He studied the opinion leadership pattern related to modern math among school superintendents, characteristics of the innovation, and its rate of adoption.

Carlson’s study produced impressive insights about the diffusion networks through which modern math spread from school to school in Allegheny County, Pennsylvania (this county is the metropolitan area for Pittsburgh). Carlson conducted personal interviews with each of the 38 superintendents who headed these school systems, asking each (1) in what year they had adopted modern math, (2) which other superintendents were their best friends, and (3) for certain other data.

Modern math entered the local educational scene of Allegheny County by means of one school superintendent, who adopted in 1958. This innovator traveled widely outside the Pittsburgh area, but he was an isolate in the local network; none of the 37 other school administrators talked to him. The S-shaped diffusion curve din not take off until 1959—after a clique of six superintendents adopted; these six included three main opinion leaders in the system. The rate of adoption then began to climb rapidly. There was only one adopter in 1958 (the innovator), five by the end of 1959, 15 by 1960, 27 by 1961, 35 by 1962, and all 38 superintendents had adopted by the end of 1963. Thus, modern math spread to 100-percent adoption in about five years.

The cosmopolite innovator was too innovative to serve as an appropriate role model for the other superintendents. They waited to adopt until the opinion leaders in the six-member clique favored the innovation.