May 8, 2024 • 20 mins
What are early adopters, and why are they important? In this episode, we look at Everett Rogers theory of the diffusion of innovation and how new ideas get adopted by a population. Plus, we revisit the sad tale of the HD DVD format.
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Speaker 1 (00:04):
Welcome to Tech Stuff, a production from iHeartRadio. Hey there,
and welcome to tech Stuff. I'm your host Jonathan Strickland.
I'm an executive producer with iHeart Podcasts and how the
tech are you? So today I wanted to talk about
a particular theory relating to technology. Now, I've done episodes
(00:26):
on various quote unquote laws regarding tech. These laws are,
you know, like stuff like Moore's law, which today we
often interpret as this concept that every two years or so,
computing power doubles. The original observation, which was made by
Gordon Moore back in nineteen sixty five, was that semiconductor
(00:47):
chip manufacturers were doubling the number of transistors that could
fit on an inch square wafer of silicon at regular intervals,
although the length between those intervals has changed over time,
like whether it's twelve months or eighteen months or twenty
four months. Moore's argument was that economic factors drove the
push to make processors more complex, to cram more components
(01:12):
on processors, not that there was some fundamental force that
allowed this to happen. And in order to keep Moore's
law relevant, we have fudged his observation several times. So
rather than talking about physically doubling the number of transistors
on a chip, we talk about computational output, you know,
like processing speed, that kind of thing, because you can
(01:34):
make the argument that the more important thing here isn't
how many transistors are on the chep, it's how powerful
is that chep? Because doubling the transistors, at least in
the early days, was kind of shorthand for saying this
processor is twice as powerful as one that came out
last year. Right anyway, stuffing Moore's law or even stuff
(01:56):
like Worth's law, that kind of thing. That's all stuff
that I've I've covered on this show in the past.
Today we're going to look at a different theory that
relates to technology, and it's all about early adopters. Really, really,
it's more than that. It's about the diffusion of innovation.
That's what the theory is called. The idea comes from
a guy named Everett M. Rogers, who is a sociologist
(02:19):
and a professor who in nineteen sixty two published his
observation on how societies ultimately accept new ideas, including new
innovations like technologies. Now. He described his observation as sort
of a bell curve. So imagine a bell curve. Right,
it's low at the front end, then it peaks up
(02:39):
into a hill, and then it slopes off and becomes
low at the back end. Right, So the front end
would be a group of people that he called the innovators.
This would consist of just two and a half percent
of the overall population that ultimately adopts this idea. So
not two point five percent of the entire population of
(03:01):
the world, just two point five percent of all the
people who ultimately adopt whatever it is we're talking about.
So these are the innovators. Behind them are the early adopters,
and this represents another thirteen point five percent of that population.
And then after that you get the majority of adopters
and rogers. Divided them into two halves, he had the
(03:23):
early majority and the late majority. Each of these consist
of around thirty four percent of the population that adopts
this idea. Then, bringing up the rear are the laggards
sixteen percent of the population. These are the people who
are slow to accept this new idea or product, but
ultimately they do come around to it. But even with
all these there will still be people who just never
(03:46):
come around to accepting an idea or technology. So this
is really just a way to describe the folks who
do now. On top of that, to be considered an adopter,
each person first must be aware of how this thing
addresses some need or want. It's not enough for it
to just be a new whatever it is, a new
(04:06):
idea or a new product. That thing has to be
able to do something that people perceive as being useful.
If it doesn't solve a problem, then the company or
person whomever is putting forth this innovation they need to
come up with a way to invent a problem that
this thing does solve. Steve Jobs is pretty darn good
at this. He was good at convincing a general public
(04:28):
that new technologies from Apple solve problems they didn't even
know that they had had. The adopter also obviously has
to make the decision to take the plunge and actually
adopt this new idea, and then they have to use
it and continue to use it. So the theory also
identifies five factors that affect the adoption of a new idea.
(04:49):
They are relative advantage. So how and to what extent
does this new idea solve a problem or improve upon
an earlier innovation. There's compatibility. You know, is the new
idea or product or whatever aligned with the values and
needs of potential customers. If they're in conflict, people are
not going to adopt it. There's complexity. Is the new
(05:10):
idea or whatever is it easy to understand and use?
That's pretty self explanatory. There's triability, as in, can someone
actually give this thing a whirl? Can they give it
a test before they commit to adopting it, and if so,
that definitely improves adoption. And then there's observability. Is it
(05:30):
possible to see or perhaps even measure the outcome of
adopting the innovation to say, I know that it has
been an improvement because here are the ways I can measure,
So can you tell that the thing is working? Generally speaking,
this theory, this diffusion of innovation is a pretty decent observation.
(05:51):
It's pretty rare for a new technology or idea in
general to just take the world by storm instantaneously. Usually
this is a process. We should also mention there are
additional factors when you take into account technology. This isn't
just a case of some people being more adventurous or
more open to new ideas. Other stuff makes a really
(06:12):
big difference, particularly when we're talking about tech, and one
big thing about that is cost, because often when a
new technology debuts, it's expensive. Really new technologies take a
lot of money to develop and to produce. The companies
that are making these things then pass those costs along
to us, the consumers, at least most of the time,
(06:35):
and that does make sense. You can't go making something
that costs you, you know, hundreds of dollars to produce
and then you turn it around and you sell it
for twenty bucks, because you would be out of business
in no time. But this does mean that the folks
who will buy your do hiky have to be both
willing to adopt something that is new and they have
to be able to afford it, and that reduces the
(06:56):
potential pool of customers a bit. So let's take the
HUM CD player as an example. The first commercially available
CD player came out in Japan back in nineteen eighty two.
In October of nineteen eighty two. This was the Sony
CDP one oh one, and Sony had worked in partnership
with other companies like Phillips to develop the CD player
(07:17):
technology for the market. So they had been working on
this throughout the nineteen seventies, and it sunk a lot
of money into making this thing happen, and there were
a lot of battles as well to actually ultimately arrive
at the CD form factor. The pitch of CDs to
the consumer was that they were going to offer far
(07:37):
more clarity than other forms of media that were available
in the market, like vinyl albums and cassette tapes. But
if you wanted one of these first players, you first
had to cough up one hundred and sixty eight thousand yen. Now,
back in October nineteen eighty two, in the CDP one
oh one first debut, the exchange rate of yen to
dollars was two hundred and sixty eight point five to
(07:58):
five yen to one US dollars. So this would mean
that the first CD player costs around six hundred and
twenty six dollars in nineteen eighty two dollars. Now, if
we adjust that for inflation, that would mean that buying
a CD player when it first came out would cost
you around two thousand and seventy five bucks or so
two grand for a CD player. And here's the thing,
(08:20):
other early CD players were even more expensive than the
CDP one oh one. And remember this is a brand
new technology. There's a limited library of CDs that are
even available to purchase to play on the ding dang
dern thing. So early adopters of CD tech had to
have a lot of income at their disposal as well
as a desire to experience something new in the world
(08:42):
of audio. That's a pretty small slice of the overall market.
Other technologies would follow the very same path. When the
first HDTV sets debuted in America, they had a pretty
hefty price tag as well. There was a Samsung rear
projection HDTV that went on sale in nineteen ninety eight
and it sold for eight thousand dollars. That's a lot
(09:06):
of money. Eight grand to get an early HDTV. Some
things were not quite as expensive when they first debuted.
I mean, they would still set you back a good
chunk of change, and they were really limited in their
initial variations. For example, the first MP three player could
only hold half an hour of audio and it sold
for two hundred and fifty bucks back in nineteen ninety eight.
(09:28):
Two hundred fifty dollars. I mean, that's a good chunk
of change. It's not the craziest number we've talked about
on this show, but for only half an hour of audio,
that's asking a lot. All Right, When we come back,
I'm going to talk more about early adopters and how
important they are and also how risky it is to
be one. But first let's take a quick break to
(09:49):
thank our sponsors. So one role that early adopters play,
typically at least in the tech ecosystem, is akin to
a beta tester. Right. When you're an early adopter of
(10:11):
a new technology, you're also a source of feedback to
the company, right, Like you can tell the company, hey,
this one feature is totally useless, or I really wish
this technology had X, Y and Z features, or this
is something that is really frustrating when I try and
(10:31):
use this tech. So early adopters are often important to
a company because they provide information about how to further
refine a product so that it will have mass market appeal.
You're not going to have a successful business if the
only customers you ever get are early adopters and no
one else ever follows suit. So listening to the early
(10:53):
adopters is really important, and companies might end up in
the process, shedding features in order to bring costs down
so that the mass market is more likely to accept it,
or maybe they're just features that no one found really
particularly compelling, or maybe adding in some stuff to create
it more convenience. So early adopters play a really vital
(11:16):
role for companies, not just in getting the ball rolling
for folks to adopt a new technology, but also the
refining process. To be able to get there, companies have
to do a lot of stuff like make sure that
the manufacturing process is refined to make it as efficient
and cost effective as possible. Otherwise you're never going to
get into a mass manufacturing situation. Like if you're doing
(11:38):
everything bespoke and by hand, it's always going to be
a niche product. Doesn't mean you can't make a business
out of that. You can just look at Bentley for example,
but it does mean you're not going to take the
pathway toward mass manufacturing and mass appeal. But if you
are able to do that, if you are able to
take those steps, that's when you can start to see
(11:58):
the price tag come down and become more affordable to
the general public. Tapping into early adopters requires a particular
approach to marketing because early adopters are kind of like visionaries.
They like big, bold ideas and they like to take
big leaps from where they currently stand, so you have
to kind of appeal to that sense. It's almost like
(12:19):
a sense of adventure. They get really swept up in
the excitement of possibility. By contrast, when you look at
the majority of consumers, the mass of people who, if
you're lucky, will follow those early adopters, they're once and
perspectives are different. You can't use the same marketing approach
or you will scare them off. So they want dependability,
(12:41):
they want practicality. They want to feel like there is
little to no risk when it comes to adopting the technology,
and they often will take a wait and see approach
to make sure that this new tech isn't just going
to disappear in a puff of smoke overnight. They're not
foolish to do this. Sometimes jumping on a new tech
bandwagon does not pay off. Let's consider one notable example
(13:04):
and take the sad tale of the HDDVD format and
its fate in the Great Format War. Now we've talked
about this particular format war before on the show. Many times.
In fact, the birth of tech stuff happened the same
year that the death of HDDVD happened, So I talked
about it a lot in the very early days with
(13:25):
my co host Chris Pollette. But the two main adversaries
in this format war were Toshiba, which was the company
behind the HDDVD format, and Sony, which of course is
the company behind the Blu ray technology. The goal was
to bring high definition video to home theater enthusiasts, so
that's what both of these technologies were meant to do,
(13:46):
and there were technical differences between the two, but for
a lot of people there wasn't enough of a difference
to make it easy to decide one versus the other.
So these two companies each individually announced plans to bring
the next generation of home video to the market way
back in two thousand and two. That's when they made
the announcement. It would actually take four years to do it. However,
(14:09):
it did not take long for the two companies to
consider trying to work out a truce between them. Because
format wars are expensive and they're risky. There is no
guarantee that the format you have created is going to win,
and if you engage in a format war. At that point,
you've already spent millions of dollars on research and development,
(14:31):
on production, on marketing, and that money is not gonna
return to you. You're not going to get that back,
especially if you lose the format war, and consumers obviously
are not crazy about format wars either. Competing formats hurts adoption.
A lot of that majority in the diffusion of innovation
theory will hold back when there are competing formats at play,
(14:52):
because no one wants to be the person who's holding
the bag who sunk potentially thousands of dollars in a
technology that ultimately goes nowhere. Trying to come to some
sort of compromise, Tashiba and Sony could find no common
pathway forward. The blu ray format could hold more data
on a disc, like significantly more, ten gigabytes more in fact,
but the HDDVD format was easier to incorporate into computer
(15:16):
systems and so would be less expensive to be able
to do that sort of thing, and it would require
less investment on the manufacturing side, because you could upgrade
a current DVD production facility to HD DVD for far
less money than it would cost to do Blu Ray,
and so Tashiba and Sony both got to work on
their respective technologies, which finally launched in two thousand and six.
(15:39):
Teshiba tried to undercut Sony. The first HD DVD player
retail for five hundred ninety nine bucks, which if we
adjust for inflation today, would be nine hundred forty three dollars.
That's still really expensive. But Sony's first Blu Ray player
retailed for a whopping one thousand dollars. If we adjust
that for inflation, that's one thousand, five hundred Sony five bucks.
(16:00):
Sony's format cost significantly more than the Tashiba alternative. Sony
had one distinct advantage. They had exclusive content. You know,
Sony had the benefit of being both an electronics company
and also a movie studio, So when you're pushing a
home theater technology, it really helps that you're also the
source for some exclusive content. By withholding Sony Pictures films
(16:21):
exclusively for the Blu Ray format, Sony could apply leverage
on Toshiba. Other studios were less eager to throw all
in on either. Camp Warner Brothers in Paramount, for example,
both chose to release home theater films on each format,
and for about a year, Sony and Tashiba were in
pretty stiff competition among early adopters. So collectively they sold
(16:44):
fewer than a million units of HDDVD players and Blu
Ray players, I mean all put together, it was fewer
than a million units. Tashiba did have an edge over
Sony in the early days. But then Sony pulled another
ace out of its corporate sleeve, and that ace was
the PlayStation three, and he incorporated a Blu Ray player
into the PS three. And while Sony had decided against
(17:05):
selling early Blu Ray players below cost of manufacturing, they
did not do that same thing for the PS three,
and so Sony sold the consoles at a loss. And
in fact PS three consoles, a lot of them, were
priced lower than the other video players that were on
the market. So this got Blu Ray players into a
lot more homes. This was a move that really helped
(17:27):
tip the scales. But what really got things moving was
when other studios began to make the choice of Blu
Ray over HDDVD. Now that decision made sense for these
studios because they saw the installed base for the Blu
Ray format was growing very quickly, much faster than HDDVD,
largely due to the PS three. That would mean that
(17:48):
they could pick that format and hit more homes and
not produce DVDs or discs in both Blu Ray and
HDDVD format. They could choose just one and that would
cut way back on expenses. So if you're going to
make a choice of picking just one format, it makes
sense to go with the one that has the larger
install base among customers. So that's what they did. Various
(18:11):
studios made the decision to go all in with Blu
Ray and with Sony, and the very last big one
to do this was Warner Brothers, which signaled the beginning
of the end for HDDVD. There are even rumors that
Sony had made the decision a little easier for Warner
Brothers by greasing the wheels with a half billion dollar payoff,
but that allegation was never confirmed. As far as I
can tell, the death of HDDVD happened pretty quickly near
(18:33):
the beginning of two thousand and eight. I remember attending
cees that year and seeing the buzz about Tashiba canceling
the HDDVD presentation just two days before it was supposed
to happen, and that was all because of the Warner
Brothers announcement. Later in two thousand and eight, Tishiba announced
it would stop production on HDDVD systems, and the format
war had ended and Blu Ray was the clear winner.
(18:54):
So for some early adopters, the conclusion was a really
tough blow because some of those adopters sung a not
inconsiderable amount of money into HDDVD systems and libraries. That's
precisely the kind of thing that keeps the majority of
consumers cautious. It's why they are inclined to hold back
upon the introduction of a new technology, particularly if they
are competing formats. So that's why early adopters are really important.
(19:18):
They're kind of the guinea pigs for new ideas and technologies.
It's why the majority is also more cautious. They don't
necessarily have the access to discretionary income where they can
just spend it on a new technology that may or
may not work out. It's why some technologies just fizzle
out after a brief period of hype. I think of
(19:38):
things like Google Glass. Potentially the Apple Vision pro will
follow that same model. We'll have to see. But yeah,
I wanted to spend some time to talk about the
diffusion of innovation. It is a cool idea and I
think it's a pretty valid observation. You know, it's not
going to apply universally, but I think it's a good
general rule to look at, and it's something that a
(20:01):
lot of businesses pay attention to when it comes to
how they position their technologies, their new technologies with introducing
them to the market. Hope you enjoyed this quick episode
of tech Stuff, and I'll talk to you again really soon.
(20:21):
Tech Stuff is an iHeartRadio production. For more podcasts from iHeartRadio,
visit the iHeartRadio app, Apple Podcasts, or wherever you listen
to your favorite shows.
Welcome to Tech Stuff, a production from iHeartRadio. Hey there,
and welcome to tech Stuff. I'm your host Jonathan Strickland.
I'm an executive producer with iHeart Podcasts and how the
tech are you? So today I wanted to talk about
a particular theory relating to technology. Now, I've done episodes
(00:26):
on various quote unquote laws regarding tech. These laws are,
you know, like stuff like Moore's law, which today we
often interpret as this concept that every two years or so,
computing power doubles. The original observation, which was made by
Gordon Moore back in nineteen sixty five, was that semiconductor
(00:47):
chip manufacturers were doubling the number of transistors that could
fit on an inch square wafer of silicon at regular intervals,
although the length between those intervals has changed over time,
like whether it's twelve months or eighteen months or twenty
four months. Moore's argument was that economic factors drove the
push to make processors more complex, to cram more components
(01:12):
on processors, not that there was some fundamental force that
allowed this to happen. And in order to keep Moore's
law relevant, we have fudged his observation several times. So
rather than talking about physically doubling the number of transistors
on a chip, we talk about computational output, you know,
like processing speed, that kind of thing, because you can
(01:34):
make the argument that the more important thing here isn't
how many transistors are on the chep, it's how powerful
is that chep? Because doubling the transistors, at least in
the early days, was kind of shorthand for saying this
processor is twice as powerful as one that came out
last year. Right anyway, stuffing Moore's law or even stuff
(01:56):
like Worth's law, that kind of thing. That's all stuff
that I've I've covered on this show in the past.
Today we're going to look at a different theory that
relates to technology, and it's all about early adopters. Really, really,
it's more than that. It's about the diffusion of innovation.
That's what the theory is called. The idea comes from
a guy named Everett M. Rogers, who is a sociologist
(02:19):
and a professor who in nineteen sixty two published his
observation on how societies ultimately accept new ideas, including new
innovations like technologies. Now. He described his observation as sort
of a bell curve. So imagine a bell curve. Right,
it's low at the front end, then it peaks up
(02:39):
into a hill, and then it slopes off and becomes
low at the back end. Right, So the front end
would be a group of people that he called the innovators.
This would consist of just two and a half percent
of the overall population that ultimately adopts this idea. So
not two point five percent of the entire population of
(03:01):
the world, just two point five percent of all the
people who ultimately adopt whatever it is we're talking about.
So these are the innovators. Behind them are the early adopters,
and this represents another thirteen point five percent of that population.
And then after that you get the majority of adopters
and rogers. Divided them into two halves, he had the
(03:23):
early majority and the late majority. Each of these consist
of around thirty four percent of the population that adopts
this idea. Then, bringing up the rear are the laggards
sixteen percent of the population. These are the people who
are slow to accept this new idea or product, but
ultimately they do come around to it. But even with
all these there will still be people who just never
(03:46):
come around to accepting an idea or technology. So this
is really just a way to describe the folks who
do now. On top of that, to be considered an adopter,
each person first must be aware of how this thing
addresses some need or want. It's not enough for it
to just be a new whatever it is, a new
(04:06):
idea or a new product. That thing has to be
able to do something that people perceive as being useful.
If it doesn't solve a problem, then the company or
person whomever is putting forth this innovation they need to
come up with a way to invent a problem that
this thing does solve. Steve Jobs is pretty darn good
at this. He was good at convincing a general public
(04:28):
that new technologies from Apple solve problems they didn't even
know that they had had. The adopter also obviously has
to make the decision to take the plunge and actually
adopt this new idea, and then they have to use
it and continue to use it. So the theory also
identifies five factors that affect the adoption of a new idea.
(04:49):
They are relative advantage. So how and to what extent
does this new idea solve a problem or improve upon
an earlier innovation. There's compatibility. You know, is the new
idea or product or whatever aligned with the values and
needs of potential customers. If they're in conflict, people are
not going to adopt it. There's complexity. Is the new
(05:10):
idea or whatever is it easy to understand and use?
That's pretty self explanatory. There's triability, as in, can someone
actually give this thing a whirl? Can they give it
a test before they commit to adopting it, and if so,
that definitely improves adoption. And then there's observability. Is it
(05:30):
possible to see or perhaps even measure the outcome of
adopting the innovation to say, I know that it has
been an improvement because here are the ways I can measure,
So can you tell that the thing is working? Generally speaking,
this theory, this diffusion of innovation is a pretty decent observation.
(05:51):
It's pretty rare for a new technology or idea in
general to just take the world by storm instantaneously. Usually
this is a process. We should also mention there are
additional factors when you take into account technology. This isn't
just a case of some people being more adventurous or
more open to new ideas. Other stuff makes a really
(06:12):
big difference, particularly when we're talking about tech, and one
big thing about that is cost, because often when a
new technology debuts, it's expensive. Really new technologies take a
lot of money to develop and to produce. The companies
that are making these things then pass those costs along
to us, the consumers, at least most of the time,
(06:35):
and that does make sense. You can't go making something
that costs you, you know, hundreds of dollars to produce
and then you turn it around and you sell it
for twenty bucks, because you would be out of business
in no time. But this does mean that the folks
who will buy your do hiky have to be both
willing to adopt something that is new and they have
to be able to afford it, and that reduces the
(06:56):
potential pool of customers a bit. So let's take the
HUM CD player as an example. The first commercially available
CD player came out in Japan back in nineteen eighty two.
In October of nineteen eighty two. This was the Sony
CDP one oh one, and Sony had worked in partnership
with other companies like Phillips to develop the CD player
(07:17):
technology for the market. So they had been working on
this throughout the nineteen seventies, and it sunk a lot
of money into making this thing happen, and there were
a lot of battles as well to actually ultimately arrive
at the CD form factor. The pitch of CDs to
the consumer was that they were going to offer far
(07:37):
more clarity than other forms of media that were available
in the market, like vinyl albums and cassette tapes. But
if you wanted one of these first players, you first
had to cough up one hundred and sixty eight thousand yen. Now,
back in October nineteen eighty two, in the CDP one
oh one first debut, the exchange rate of yen to
dollars was two hundred and sixty eight point five to
(07:58):
five yen to one US dollars. So this would mean
that the first CD player costs around six hundred and
twenty six dollars in nineteen eighty two dollars. Now, if
we adjust that for inflation, that would mean that buying
a CD player when it first came out would cost
you around two thousand and seventy five bucks or so
two grand for a CD player. And here's the thing,
(08:20):
other early CD players were even more expensive than the
CDP one oh one. And remember this is a brand
new technology. There's a limited library of CDs that are
even available to purchase to play on the ding dang
dern thing. So early adopters of CD tech had to
have a lot of income at their disposal as well
as a desire to experience something new in the world
(08:42):
of audio. That's a pretty small slice of the overall market.
Other technologies would follow the very same path. When the
first HDTV sets debuted in America, they had a pretty
hefty price tag as well. There was a Samsung rear
projection HDTV that went on sale in nineteen ninety eight
and it sold for eight thousand dollars. That's a lot
(09:06):
of money. Eight grand to get an early HDTV. Some
things were not quite as expensive when they first debuted.
I mean, they would still set you back a good
chunk of change, and they were really limited in their
initial variations. For example, the first MP three player could
only hold half an hour of audio and it sold
for two hundred and fifty bucks back in nineteen ninety eight.
(09:28):
Two hundred fifty dollars. I mean, that's a good chunk
of change. It's not the craziest number we've talked about
on this show, but for only half an hour of audio,
that's asking a lot. All Right, When we come back,
I'm going to talk more about early adopters and how
important they are and also how risky it is to
be one. But first let's take a quick break to
(09:49):
thank our sponsors. So one role that early adopters play,
typically at least in the tech ecosystem, is akin to
a beta tester. Right. When you're an early adopter of
(10:11):
a new technology, you're also a source of feedback to
the company, right, Like you can tell the company, hey,
this one feature is totally useless, or I really wish
this technology had X, Y and Z features, or this
is something that is really frustrating when I try and
(10:31):
use this tech. So early adopters are often important to
a company because they provide information about how to further
refine a product so that it will have mass market appeal.
You're not going to have a successful business if the
only customers you ever get are early adopters and no
one else ever follows suit. So listening to the early
(10:53):
adopters is really important, and companies might end up in
the process, shedding features in order to bring costs down
so that the mass market is more likely to accept it,
or maybe they're just features that no one found really
particularly compelling, or maybe adding in some stuff to create
it more convenience. So early adopters play a really vital
(11:16):
role for companies, not just in getting the ball rolling
for folks to adopt a new technology, but also the
refining process. To be able to get there, companies have
to do a lot of stuff like make sure that
the manufacturing process is refined to make it as efficient
and cost effective as possible. Otherwise you're never going to
get into a mass manufacturing situation. Like if you're doing
(11:38):
everything bespoke and by hand, it's always going to be
a niche product. Doesn't mean you can't make a business
out of that. You can just look at Bentley for example,
but it does mean you're not going to take the
pathway toward mass manufacturing and mass appeal. But if you
are able to do that, if you are able to
take those steps, that's when you can start to see
(11:58):
the price tag come down and become more affordable to
the general public. Tapping into early adopters requires a particular
approach to marketing because early adopters are kind of like visionaries.
They like big, bold ideas and they like to take
big leaps from where they currently stand, so you have
to kind of appeal to that sense. It's almost like
(12:19):
a sense of adventure. They get really swept up in
the excitement of possibility. By contrast, when you look at
the majority of consumers, the mass of people who, if
you're lucky, will follow those early adopters, they're once and
perspectives are different. You can't use the same marketing approach
or you will scare them off. So they want dependability,
(12:41):
they want practicality. They want to feel like there is
little to no risk when it comes to adopting the technology,
and they often will take a wait and see approach
to make sure that this new tech isn't just going
to disappear in a puff of smoke overnight. They're not
foolish to do this. Sometimes jumping on a new tech
bandwagon does not pay off. Let's consider one notable example
(13:04):
and take the sad tale of the HDDVD format and
its fate in the Great Format War. Now we've talked
about this particular format war before on the show. Many times.
In fact, the birth of tech stuff happened the same
year that the death of HDDVD happened, So I talked
about it a lot in the very early days with
(13:25):
my co host Chris Pollette. But the two main adversaries
in this format war were Toshiba, which was the company
behind the HDDVD format, and Sony, which of course is
the company behind the Blu ray technology. The goal was
to bring high definition video to home theater enthusiasts, so
that's what both of these technologies were meant to do,
(13:46):
and there were technical differences between the two, but for
a lot of people there wasn't enough of a difference
to make it easy to decide one versus the other.
So these two companies each individually announced plans to bring
the next generation of home video to the market way
back in two thousand and two. That's when they made
the announcement. It would actually take four years to do it. However,
(14:09):
it did not take long for the two companies to
consider trying to work out a truce between them. Because
format wars are expensive and they're risky. There is no
guarantee that the format you have created is going to win,
and if you engage in a format war. At that point,
you've already spent millions of dollars on research and development,
(14:31):
on production, on marketing, and that money is not gonna
return to you. You're not going to get that back,
especially if you lose the format war, and consumers obviously
are not crazy about format wars either. Competing formats hurts adoption.
A lot of that majority in the diffusion of innovation
theory will hold back when there are competing formats at play,
(14:52):
because no one wants to be the person who's holding
the bag who sunk potentially thousands of dollars in a
technology that ultimately goes nowhere. Trying to come to some
sort of compromise, Tashiba and Sony could find no common
pathway forward. The blu ray format could hold more data
on a disc, like significantly more, ten gigabytes more in fact,
but the HDDVD format was easier to incorporate into computer
(15:16):
systems and so would be less expensive to be able
to do that sort of thing, and it would require
less investment on the manufacturing side, because you could upgrade
a current DVD production facility to HD DVD for far
less money than it would cost to do Blu Ray,
and so Tashiba and Sony both got to work on
their respective technologies, which finally launched in two thousand and six.
(15:39):
Teshiba tried to undercut Sony. The first HD DVD player
retail for five hundred ninety nine bucks, which if we
adjust for inflation today, would be nine hundred forty three dollars.
That's still really expensive. But Sony's first Blu Ray player
retailed for a whopping one thousand dollars. If we adjust
that for inflation, that's one thousand, five hundred Sony five bucks.
(16:00):
Sony's format cost significantly more than the Tashiba alternative. Sony
had one distinct advantage. They had exclusive content. You know,
Sony had the benefit of being both an electronics company
and also a movie studio, So when you're pushing a
home theater technology, it really helps that you're also the
source for some exclusive content. By withholding Sony Pictures films
(16:21):
exclusively for the Blu Ray format, Sony could apply leverage
on Toshiba. Other studios were less eager to throw all
in on either. Camp Warner Brothers in Paramount, for example,
both chose to release home theater films on each format,
and for about a year, Sony and Tashiba were in
pretty stiff competition among early adopters. So collectively they sold
(16:44):
fewer than a million units of HDDVD players and Blu
Ray players, I mean all put together, it was fewer
than a million units. Tashiba did have an edge over
Sony in the early days. But then Sony pulled another
ace out of its corporate sleeve, and that ace was
the PlayStation three, and he incorporated a Blu Ray player
into the PS three. And while Sony had decided against
(17:05):
selling early Blu Ray players below cost of manufacturing, they
did not do that same thing for the PS three,
and so Sony sold the consoles at a loss. And
in fact PS three consoles, a lot of them, were
priced lower than the other video players that were on
the market. So this got Blu Ray players into a
lot more homes. This was a move that really helped
(17:27):
tip the scales. But what really got things moving was
when other studios began to make the choice of Blu
Ray over HDDVD. Now that decision made sense for these
studios because they saw the installed base for the Blu
Ray format was growing very quickly, much faster than HDDVD,
largely due to the PS three. That would mean that
(17:48):
they could pick that format and hit more homes and
not produce DVDs or discs in both Blu Ray and
HDDVD format. They could choose just one and that would
cut way back on expenses. So if you're going to
make a choice of picking just one format, it makes
sense to go with the one that has the larger
install base among customers. So that's what they did. Various
(18:11):
studios made the decision to go all in with Blu
Ray and with Sony, and the very last big one
to do this was Warner Brothers, which signaled the beginning
of the end for HDDVD. There are even rumors that
Sony had made the decision a little easier for Warner
Brothers by greasing the wheels with a half billion dollar payoff,
but that allegation was never confirmed. As far as I
can tell, the death of HDDVD happened pretty quickly near
(18:33):
the beginning of two thousand and eight. I remember attending
cees that year and seeing the buzz about Tashiba canceling
the HDDVD presentation just two days before it was supposed
to happen, and that was all because of the Warner
Brothers announcement. Later in two thousand and eight, Tishiba announced
it would stop production on HDDVD systems, and the format
war had ended and Blu Ray was the clear winner.
(18:54):
So for some early adopters, the conclusion was a really
tough blow because some of those adopters sung a not
inconsiderable amount of money into HDDVD systems and libraries. That's
precisely the kind of thing that keeps the majority of
consumers cautious. It's why they are inclined to hold back
upon the introduction of a new technology, particularly if they
are competing formats. So that's why early adopters are really important.
(19:18):
They're kind of the guinea pigs for new ideas and technologies.
It's why the majority is also more cautious. They don't
necessarily have the access to discretionary income where they can
just spend it on a new technology that may or
may not work out. It's why some technologies just fizzle
out after a brief period of hype. I think of
(19:38):
things like Google Glass. Potentially the Apple Vision pro will
follow that same model. We'll have to see. But yeah,
I wanted to spend some time to talk about the
diffusion of innovation. It is a cool idea and I
think it's a pretty valid observation. You know, it's not
going to apply universally, but I think it's a good
general rule to look at, and it's something that a
(20:01):
lot of businesses pay attention to when it comes to
how they position their technologies, their new technologies with introducing
them to the market. Hope you enjoyed this quick episode
of tech Stuff, and I'll talk to you again really soon.
(20:21):
Tech Stuff is an iHeartRadio production. For more podcasts from iHeartRadio,
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to your favorite shows.
TechStuff News
Host
Jonathan Strickland
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