Standardization + Low Cost = Increased Adoption
As we’ve seen with earlier innovation, the adoption of Social Age technology is accelerating proportional to the decreasing cost of communications. In many ways social networking is following a short, steep pattern of growth reminiscent of other recent transformational technologies such as the personal computer (PC).
Another example of such growth is the cell phone, which achieved 70 percent market penetration in only seven years. Even with a recession in 2008, the worldwide penetration of cell phones continues to grow at an unprecedented rate. Emerging regions such as Africa and Asia drive much of this increased demand with approximately 250,000 cell phones shipped to those regions in the first quarter of 2008. By comparison, television took nearly 20 years to reach 70 percent penetration. Industrial-Age automobiles took even longer to reach comparable acceptance—more than 100 years.
As each new technical innovation reaches the marketplace, the speed with which it is adopted becomes shorter and shorter. The acceleration of technology adoption has been caused by better communication and increased standardization, which ultimately leads to a lower cost of technology. In this way innovation creates a virtuous cycle—incremental improvements generate lower cost of production, which in turn leads to increased adoption and greater value to society.
By using the assembly line, Henry Ford was among the first to leverage the cost efficiency available through standardization. Perhaps the best illustration of Ford’s philosophy of standardization was his decision to offer his Model T in “any color, as long as it’s black.”13 More importantly, Ford understood the critical necessity to establish his technology with early adopters before any of his competitors. Ford leveraged the assembly line to lower cost of production that, in turn, lowered the cost of the Model T, making it among the most affordable cars of its time. Early adopters of the Model T drove strong growth and exceptional profitability for Ford, which encouraged competitors to enter the market using similar standardization and assembly line practices.
The Model T is an excellent example of the way early adopters drive a steep demand curve for new technology, which is the part of the adoption cycle with the highest profit margin. Although the initial penetration of the automobile market by early adopters was fast, overall market penetration didn’t achieve the 75 percent mark for 125 years. Today, 75 percent market penetration can be reached with new technology in only a few years, as illustrated in Figure 1.4.
As Ford demonstrated with the Model T, timing is everything to win in any new market. Ford not only reaped the profitable benefits of being first to market with his automobile, he was also the first to transform manufacturing processes with his new assembly line production approach. The result was a standardized product that many could afford, which ultimately led to the commoditization and mass adoption of the automobile. Ford and other entrepreneurs from earlier eras had at their disposal only unidirectional communication such as radio and television to advertise their products. In the Social Age, however, rapid market penetration and adoption of new technology happens much more quickly, and success increasingly depends on effectively marketing to social networking communities.
For an example of the dangers of failing to standardize, we need look no further than the competitive battle that raged in the mid-1970s between Sony Betamax and the VHS format of video recorders. Broad acceptance of the VCR was hindered primarily through a lack of standardization. Betamax and VHS were offered simultaneously, dividing the market for ten years (see Figure 1.5), and causing many consumers to delay their buying decisions—no one wanted to get stuck with obsolete technology! As we witnessed recently in the brief, two-year battle between Toshiba HD DVD and Sony’s Blu-ray format,15 such conflicts are quickly resolved in the Social Age. Social networking tools promote conversations about new technologies across a wide community. These conversations quickly result in a consensus about the superior technology, leading to standardization and broad acceptance.
Figure 1.5 Adoption of VCR was delayed for ten years during format battle between Betamax and VHS.
Importantly, history demonstrates that standardization also quickly leads to commoditization. As standardization is achieved, economies of scale drive costs lower, which in turn further propels adoption of the technology. Commoditization then leads to rapid global acceptance. Faster and lower-cost communication further accelerates the adoption of standardized technology. Two technologies that have commoditized recently—both within the context of fast, low-cost communication—are the personal computer and the cell phone, as demonstrated by their parabolic growth curves in Figure 1.4.
The cell phone is perhaps the most current example of the way low-cost communication has created a massive adoption of technology, which has benefited the Social Age, offering an additional medium of communication. In addition to low cost, the enthusiasm for cell phones is driven by several factors, including its highly customizable design, or its plasticity. From personalized games to ring tones, cell phones can be tuned to communicate any way their owners want. This plasticity will soon lead to cell phones becoming the primary means for collaboration and communication in the Social Age.
With new sensors embedded in cell phones, even credit cards as we know them might become obsolete, using applications such as e-wallet, an IBM-patented technology. E-wallet enables instantaneous connection with credit card companies, banks, and other payers from a cell phone, simplifying the point of sale process.16 Further transparency for mobile device users becomes available as they enable sensors that are context-aware. By always knowing where their users are, and communicating that information to others, mobile devices will essentially become social coordinators and electronic proxies for their owners.17