Part 3: 5 Self-assessment questions
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A dramatic example of the importance of process innovation for a product's success is mentioned in Section 1: 1.1 of this unit. What is it?
Section 1: 1.1 notes that the early ballpoint pens were on sale for approximately half the weekly wage of the time. A key contribution to this product made by Baron Bich was to develop a manufacturing process capable of reducing production costs and sales price significantly. The BIC disposable ballpoint pen now costs a few pence.
Rogers gives five characteristics of an innovation that affect how well it will sell and how quickly it will diffuse. Briefly use these characteristics to explain the rapid diffusion of the mobile phone.
Relative advantage. The main competitive advantage of the mobile phone is its very mobility. It freed people from having to find a public phone if they needed to make a call when travelling. This proved an attractive feature to business people and also for use in emergencies. As the network spread to near universal coverage (in the UK) the relative advantage increased. For some people cost, compared with landline telephones, is a factor preventing even more rapid diffusion.
Compatibility. Mobile phones fulfilled people's need for rapid and instant communication, at first for business then increasingly for social purposes. They were also compatible with the image of the use of technical gadgets reflecting the modernity of the user. Resistance to purchase comes from those who don't find this image attractive and find the mobile phone intrusive – they'd rather keep the world at bay.
Complexity. Mobile phones are relatively easy to understand and use for those who are familiar with and confident users of technological gadgets. This explains the high take up among young users. As the technology has developed some mobiles are getting more complex in terms of their functions, but with the aid of good design they are easy enough to operate. Some people won't buy a mobile because they see them as complex devices.
Observability. The extent to which mobile phones can be seen being used by others has certainly been a factor in their diffusion. They are observable products, being used in public more often than most innovations. Once again this very observability has probably led to some resistance from potential buyers.
Trialability. As with many new products, the extent to which mobile phones can be tried out before purchase is limited. Apart from an in-store demonstration, borrowing someone's mobile for a call might be the only opportunity to try the product before purchase. Once tied into a contract users can change to a different mobile handset, but trialability doesn't seem to have been a significant factor in the diffusion of the mobile phone.
Would you classify the following as examples of sustaining innovation or disruptive innovation?
(a) cordless domestic phones
(b) mobile phones
(c) Edison's electric light
(d) compact fluorescent lamps.
(a) Cordless domestic phones – largely sustaining.
Cordless domestic phones offered an improvement to the performance of existing handsets. The ending of BT's monopoly had already led to the appearance of more companies offering a variety of handsets. The arrival of cordless handsets on the market continued this process rather than launching a new wave of innovation.
(b) Mobile phones – disruptive.
The development of mobile telephones led to a new way of operating in the telecommunications market. Mobile telephony challenged existing companies to decide whether to ignore or embrace such new developments. Many new companies arose to exploit the market at the expense of existing telephone providers.
(c) Edison's electric light – disruptive.
As well as establishing a completely new industry based around the provision of ‘electric candles’ Edison's invention required the creation of systems for the delivery of electricity to homes and businesses. This in turn enabled an outlet for the invention of a wide range of products designed to make use of this delivered electricity. Entire new industries grew up around this principle, making the electric light a truly disruptive innovation.
(d) Compact fluorescent lamps – sustaining.
Compact fluorescents offered technical improvements to an existing product. They've created a new market niche rather than opening up an entirely new market.