Platt Perspective on Business and Technology

Considering a cost and benefits analysis of innovation 1: supply side and demand side innovation adaptation curves 1

Posted in macroeconomics by Timothy Platt on March 13, 2014

I recently concluded a 14 part series: Quantifying Business Intelligence Valuation in Terms of Systems-Indeterminacy (see Macroeconomics and Business, postings 137 and following.) And I finished that by stating that I would follow it with a series “on the cost and benefits analysis of innovation, with a goal at this point of more systematically pursuing this discussion through a design and development, production, distribution and sales and feedback cycle.”

I begin that discussion here, with some foundation material that I will use for presenting a currently significant case study example: the development and diffusion into use of new, next generation battery power sources. But before I get to that, I want to set the stage by connecting what I will write here, into my ongoing discussion of innovation per se, and particularly my discussion of the diffusion of the new and innovative into the active marketplace and into active and widespread use.

Most of the time when people think about the diffusion and acceptance of new and emerging innovation, they begin with a new product or service that has already been developed and brought to market and simply describe the process that follows as more and more of its potential users buy in. So a given innovation can be and usually is thought of as following, or under special circumstances not following, some relatively standard innovation adaptation curve, beginning with acceptance and use by pioneer and early adaptors, and with successive waves of acceptance and market expansion following. Finally the lagging adaptors pick up on this, and by then it is no longer really a current innovation at all and in many cases later developed options are already out there making their way through their own adaptation curves. I have primarily written in this blog about that more focused view of innovation diffusion and adaptation, and in that regard cite postings and series that I have added here such as:

• Some Thoughts on Identifying Potential Marketplaces and Customers in the Face of Novelty and Innovation (see Business Strategy and Operations – 2, postings 233 and following for its Parts 1-3), and
• My series: Innovators, Innovation Teams and the Innovation Process (see that same directory page, postings 366 and following for its Parts 1-13 and Business Strategy and Operations – 3, postings 402 and loosely following for its Parts 14-19.)

• My goal here for this series is to take a much wider and more detailed look at innovation
• And its development and production, marketing and sales, and end user marketplace acceptance
• With its diffusion towards more mainstream acceptance,
• And at marketplace diffusion and acceptance patterns in general as they arise and develop through a complete new product development, production and usage curve. Here, it is critically important to remember that end users do not comprise the only marketplace of importance in this cycle.

In this, I will discuss the roles and nature of innovation diffusion through the design, production, marketing and sales cycle as this sequence of processes feeds back on itself going into a next innovation step and its development and use. And to jump ahead of myself here, I divide this cyclical, recurring process into a series of alternating opportunities for supply side and demand side innovation diffusion and acceptance curves, which I will explain in coming postings.

And this brings me to my case study example: the development and at least attempted diffusion of newer more compact and efficient battery technologies and the challenges that this potential technology transformation has faced, and even as the need for new sources of battery power has expanded.

I am going to actually develop this case study in detail in my next series installment, but to set the stage for that, I am going to make note here of two palpably important facts:

• Battery technology as generally used today is essentially the same as if was decades ago, even as technologies that require battery power have proliferated, and as end-user markets have demanded more powerful, compact and long-lasting sources of portable electrical charge. This demand encompasses everything from emerging hybrid technology and all-electric cars and trucks, to our increasingly ubiquitous handheld and wearable computational and communications devices, where we increasingly want them on and working all of the time.
• But new and more compact and powerful batteries that might meet these needs also hold potential for catastrophic failure and to cite an example of how that can happen that is still relatively current as of this writing, I cite the problems that Boing’s new 787 Dreamliner has faced from catastrophic failure of its new lithium ion batteries, leading to electrical system fires and the grounding of the entire 787 fleet.

Taken together, the pressures and demands of these two bullet points balance need and demand that would promote development and marketplace acceptance of new technology offerings, against risk assessment concerns that would push back on the supply side and against developing and offering products that use the new technologies in question. And I add here that lithium ion batteries per se have been around for a long time now; this is just a new design for an already established basic technology. Uncertainties and risk concerns can and do push back a lot harder for more fully new and novel such technologies.

I will follow through on this discussion in my next series installment where I will look at the design and development, production, distribution and sales and feedback cycle as this plays out at an industry and overall market space level, as following a series of innovation diffusion steps. Meanwhile, you can find this and related postings at Macroeconomics and Business.

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