Platt Perspective on Business and Technology

Technology as the tide that raises all boats 11 – but often unevenly 8

Posted in outsourcing and globalization, reexamining the fundamentals, strategy and planning by Timothy Platt on October 7, 2017

This is my 11th installment to a discussion that I initially began as a single stand-alone posting in April, 2012, but that needs reconsidering. I focused in that posting, on a key issue that enters into a determination of how and when change rises to a level of significance so as to qualify as true innovation (see Outsourcing and Globalization, postings 25 and loosely following for Parts 1-10, and Part 1 of that in particular as the foundational urtext for this narrative.)

The at-times conflicting dynamics of innovation’s entry into, and acceptance in the marketplace are crucially important to the narrative that I have been developing here in this series. So I explicitly addressed two of the more overtly significant aspects of that in Part 9 and Part 10:

• Availability and accessibility of New in the marketplace (at all, and at an affordable cost there),
• And consumers’ levels of comfort with, and willingness to adapt New and how soon after it first appears as a marketplace possibility.

My goal for this installment is to address something of the underlying mechanisms of these dynamics, and certainly in an increasingly ubiquitously connected context, with a focus here on friction in these systems. And in the course of discussing and analyzing that, I will explicitly consider how both cultural and socioeconomic forces impact upon and help to shape innovative change and the opportunity for it as it advances forward all around us.

I begin addressing all of that by posting a basic and even fundamental question, that I have in fact answered at least in part, a number of times in the course of developing and writing postings and series to this blog:

• What is friction in this context?
• I start with a well established approach to answering that: with friction as that term is used in economic theory and as a general organizing principle there. Economic friction is resistance to systems efficiency as that arises from a lack of essential information, clearly stated and available when and as needed. Friction is the consequence of having to make economic and financial decisions absent even crucially necessary information at the time of decision making, that would be required in order to knowingly make a best decision then. Think of this as sand thrown in the gear box of Adam Smith’s invisible hand, where marketplace and economic system participants cannot make what would be the best decisions for themselves or for others (who for example, they might hold fiduciary responsibility toward), as they lack the information and insight that would be required for that. Economic friction is a measure of the consequence of faulty and limited information and its communication and it shapes the overall systems that it arises in, and the outcomes and consequences of decisions made in them.
• I adapt that basic term and its definition to the organizational level of the individual business with a matching term: business systems friction. And I apply that term at the level of the overall business or organization as a whole, and at the level of functional and other supposedly tightly connected functional subsystems that arise within the complete organization (e.g. as separate and distinct lines on a table of organization under single lines of leadership there, or as separate and distinct offices or facilities that formally belong within the business but that also function at least somewhat autonomously within it.) Looking outward and in the other direction for organizational scale, I also apply this term in the context of supply chain and related value chain systems, with the functionally interconnected and interacting businesses that enter into them, all collectively brought under direct consideration here.
• And here and in this context, I continue expanding the range of organizational levels that I would apply the basic term “friction” to, to consider individuals and social network and marketplace connected groups of them. Yes, the basic issues that I would encapsulate in what I will say here and in this context, have their counterparts within businesses and in groups of employees, and I would tend to include that context within the general rubric of business systems friction too. Here, I will focus on what I will categorically carve out as a more consumer and marketplace manifestation of friction. (Yes, this could reasonably be folded into the general economic friction definition, but I separate it out to consider this set of phenomena from an explicitly more micro-level.)

Consumers and marketplace participants in general, make their decisions to purchase or not to purchase on the basis of limited information, and in the face of faulty and at times even significantly limited and even contradictory communications. This is obvious when considering rapidly changing industries and their products, where consumers do not for example necessarily know when a newer and better next technology updated product will come out as they make their next purchasing decisions now. It also applies to the questions of quality and reliability, ease of use, and value of the features offered, in what they have to consider for purchase and even when they know that a new purchasing option is available to them. That is why crowd sourced and other (presumably) consumer product reviews are considered to be so valuable as an increasing common due diligence resource, and for so many. But even then, how can you tell if a negative review is the legitimate expression of opinion of a real product user, or just a troll attack fraud and perhaps one posted in subversive support for a competitor? How can you tell if a glowingly positive review is legitimate, or a fraud too, and even one directly posted by the product manufacturer or provider, or posted for-fee on their behalf? Information is always going to be incomplete and imperfect. And it can be difficult and even impossible to know precisely what to make of the marketplace information and perceived knowledge that is visible and available, that could be applied to purchasing decisions.

But this tells only one half of the story that I would make note of here. For purposes of this narrative, the second half might be even more important: the asymmetry in both the information available to, and the levels and types of information accessed by individuals in the overall marketplace, depending on where they most comfortably fit into a relevant innovation acceptance diffusion curve.

I admit that I am offering a more stereotyped assessment here, but add in its defense that in this case that simply means accepting the basic functional definitions of terms like pioneer and early adaptor on one end of the scale, and late and last adaptors on the other.

• When a new product, and particularly a disruptively novel one first arrives in the marketplace, the first people to see it are often published new product reviewers who tend themselves to be early and even pioneer adaptors. And they focus on all of the new details and their strengths and weaknesses, but from a New accepting and even New-embracing perspective. Pioneer and early adaptors who are drawn to the New and Different, tend to be drawn to these reviews and to make their own reviews and assessments of the product details offered too, through online social media. So their decisions to buy in or not, tend to be granular and detailed and on a specific New product level. And they tend to be shared through like-minded communities.
• Late and last adaptors do not generally read these types of reviews – ever. And they do not in general post or share their specific reviews or opinions either, and certainly not online in the manner that early adaptors do. They start out with a presumptive, more categorical bias against New and Different per se, at least until value has been proven in others’ hands as safe and reliable enough to meet their due diligence requirements and on a “once new” by “once new” basis. So their approach here is essentially by definition anything but fine grained and granular in nature and it does not enter into widely shared review and evaluation conversations. Outside sourced information that they would seek out and accept in this, is in large part evaluated in terms of how it does or does not support their basic a priori conclusion-based due diligence approach which is more risk aversive than benefit accepting in nature.
• And mid-stage adaptors fit in the middle there, looking both outward for details of the specific products that have come out to see how they might work for them, and both outward and inward for threat assessment driven risk management decision making. They also want to see at least some prior user experience as necessary input for their risk and benefits evaluation, but they are not entirely driven by that in their purchasing and usage decisions.
• That raises an important point. Both early and earliest, and late and last adaptors carry out risk and benefits assessments (and so do middle ground adaptors.) It is just that early end of the spectrum adaptors tend to weigh possible benefits more heavily than they do risks and late and last adaptors tend to reverse that. For a very real world, clarifying example there, consider government agencies such as the United States FBI and particularly when they seek to upgrade their computer network and file and data management systems. They do in fact look into the technical details and in more detail than essentially any early adaptors would or could. It is just that by the time they have finished their multi-stage vetting process for that, what began as new and cutting edge can have become old and even obsolete. This is not a fictionalized example; I am in fact briefly recalling a specific failed attempt at a massive, information systems upgrade in the FBI that collapsed around the time I first began writing to this blog. Possible risk was viewed as so outweighing possible benefit that nothing positive was, or could be achieved from that upgrade attempt, that ended up costing the US government well over a third of a billion dollars and with nothing to show from it in the way of new technology in place and in actual use.

There are a number of salient conclusions that could be drawn from this comparison between early end and late end adaptors as considered from an innovation diffusion and acceptance curve perspective. One that I would point to here is that most late adaptors seek out much less outside information and much less new product-specific information than do early adaptors ( my FBI example notwithstanding, as a perhaps rule-clarifying exception.) And this difference in the levels and range of sources of information sought out, and of the range of conversation flows entered into, means fundamental differences in the types and sources of friction faced when making these purchasing decisions, and when determining the timing of those decisions, for those two groups.

I said towards the top of this posting that I will consider “both cultural and socioeconomic impact as innovative change and the opportunity for it advances all around us.” I will more explicitly delve into those issues and into the issues of early and late adapting communities in my next series installment. I simply add here and in anticipation of that, that this set of issues becomes definingly important in a ubiquitously connected, social media driven context that we now live in. (I will question that assertion in my next installment too, as part of its discussion.)

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. I also include this in Outsourcing and Globalization – and see that directory for related material. And I include a link to this posting as a supplemental addition to Section VII: Reexamining Business School Fundamentals (reconsidered), of Reexamining the Fundamentals too.

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