Meanwhile, the company introducing the innovative product has a different point of view. Having invested time, money, and energy in developing the product, its managers see its innovative features not as something to weigh but as something to be desired.
This, Professor Gourville notes, has two important implications: “First, it means that consumers will often reject innovations that, objectively, would make them better off. Second, developers will be at a loss to anticipate this rejection. The result will be an increased probability of market failure.”
He points to the example of TiVo and DVD players. Both hit the U.S. market in the late 1990s. By early 2005, 80 million DVD players had been sold compared with only 3 million TiVo units, although TiVo spent well over $500 million on marketing. Both products are highly innovative. But whereas the DVD is a direct replacement for the VCR, TiVo requires a huge change in behavior because it completely alters people’s television viewing habits.
The author says that the success of an innovation can often be predicted by determining which of four categories it belongs in:
Tinkering: limited technological advance and little change in consumer behavior. For instance, toothbrushes with angled heads. Adoption is likely, but the benefits to both the company and the consumer are limited.
Death: small technological improvement but a major change in consumer behavior. The Dvorak keyboard increases typing speed over the QWERTY keyboard but requires massive retraining. Adoption is very unlikely.
Long haul: significant technological development that requires a significant change in consumer behavior. Think TiVo and satellite radio. Adoption is likely to be gradual. The benefits are potentially large for businesses and consumers, but resistance is also great.
Home run: great technological change that barely alters consumer behavior. When Google debuted on the Web, for example, it was hard to envision the need for a new search engine. Yet by changing the underlying algorithm without altering the user interface, Google attracted people through its superior results. Adoption is a sure thing.
Beware the Glass Cliff
Michelle Ryan (M.Ryan@exeter.ac.uk) and Alexander Haslam, “The Glass Cliff: Evidence That Women Are Over-represented in Precarious Leadership Positions,” British Journal of Management, vol. 16, no. 2. Click here.
In boardrooms around the world, women remain conspicuously underrepresented. In mid-2005, for example, there were just nine women CEOs at Fortune 500 companies — that’s less than 2 percent. The failure of women to reach the top has led to concerns about a “glass ceiling”: an invisible barrier that prevents women from rising beyond a certain level in many organizations. But, according to new research, there may be another even more insidious obstacle facing executive women.
Michelle Ryan and Alexander Haslam, from the School of Psychology at the University of Exeter in the U.K., argue that when women achieve high-profile corporate positions, frequently the company is in a precarious state. The prestigious jobs that women get, unlike those awarded to men, often fail to live up to their billing.
To test their theory and determine whether the appointment of women to top corporate positions improves or hurts company performance, the authors examined the share prices of FTSE 100 companies in 2003 immediately before and after the naming of a male or female director. In total, 19 women board appointments were made that year. To make adequate gender comparisons, the researchers found 19 companies in the FTSE 100 that had appointed a male director in the same period and, if possible, in the same business sector.
One interesting finding was that the appointment of women to the board tended to smooth out stock prices. Where firms were operating in depressed stock markets, “company performance increased significantly” immediately following such an appointment; appointments made in less unsettled, more sanguine times were followed by stock price stability. When men were named to boards, the results were less pronounced.