by: Idris Mootee

You probably hear about S-curves or industry discontinuous all the time and wonder if these are just academic theories or real. If they are real, how can one create an industry breakpoint and are there any pre-conditions? To make that happen, companies must be able 1/ to learn about the breakpoint potential in the industry and have a sense about when it will happen and 2/ commit to making a quantum organizational change and 3/ have an economic engine (cash flow) to sustain the transformation.

Can you make innovation happen within a time frame and use that to create an industry breakpoint? It is not easy in large organizational settings when there are so many silos and the systems and structures become the barriers. Creating a break point you need front line people to scan and look for new opportunities and this is often not in their job descriptions. Some managers need to play the role of 'innovation connector' to co-ordinate and balance the application of ideas within the mainstream organization or creating new products or services. Front line managers are a key part of any innovation process and they must be given a mandate to discover new opportunities. It means letting go for senior management and allow people to make some mistakes. Senior managers' roles would be to develop dynamic value creating relationships with key stakeholders extending beyond the enterprise.

There are generally two types of breakpoints. 1/ Divergent breakpoints tend to occur at the embryonic stage in an industry or later on in the life cycle when technological innovation can successfully rejuvenate a maturing industry. 2/ Convergent breakpoints usually occur in the transition from embryonic to exponential growth. The standardization (emerging platform) of production systems, as in the introduction of mass produced computer manufacturer, or of formats, as in the choice of video delivery, are good examples of convergent breakpoints. Most technology-based products are mostly impacted by convergence breakpoints. One example is Adobe decision to compete in the  'Office Productivity' software space and go head-to-head with Microsoft Office. Adobe has just launched their version of an online office suite complete with word processor (Buzzword), web conferencing / whiteboard app (ConnectNow), online file sharing (Share), file storage, (My Files), and PDF converter.

So how do you recognize industry breakpoints? Here are the early signs:
1/ falling demand for standardized products (look at film, did Kodak see it coming?)
2/ declining margins in the industry (the PC industry, can Dell get out of the commodity game?)
3/ rationalization of the availability of new sources of supplies or technologies
4/ start-ups that change the competitive value of the industry.

And indicators of convergence, on the other hand, include:

1/ the breaking down of traditional customer segment groups
2/ convergence between previously separate industries
3/ a relative absence of potential new entrants
4/ supplies and technology becoming standardized and commodity-like
5/ accelerated shift in bargaining power downstream towards the distribution channels.

When dealing with emerging technology it's important to scan underlying tends to provide a clearer picture of the real value it holds or how adoption happens. Market research isn't helpful in terms of identifying industry breakpoints. That's when you need an anthropologist? Here's an example:

Swisscom (The AT&T of Switzerland) has a User Adoption Lab run by anthropologist Stefana Broadbent and their research has looked at usage patterns associated with different communications technologies. Based on observation, interviews, and user logs conducted across several European countries they found that despite the opportunity to keep in regular touch with a wide circle of friends through their mobile phones, the typical user spends 80% of their time communicating with just four other people. One other interesting observation was how people used different communications technology in quite different ways. The fixed line phone was found to be the "collective channel", where calls are made "in public" because they are relevant to others around them. The mobile phone was predominantly used for last minute planning and to coordinate travel and meetings. Texting was used for "intimacy, emotions and efficiency", email for administration and to exchange documents and other media. While instant messaging and internet voice calls are "continuous channels" open in the background while people do other things. One of Broadbent's conclusions was that "each communication channel is performing an increasingly different function".

A remarkable discovery was that despite increased availability of essentially free voice communication, there has been little observed growth. Instead the increase has been in written channels. Broadbent observed, "Users are showing a growing preference for semi-synchronous writing over synchronous voice". We appear to be increasingly happy to multi-task and interleave our communication on a constant basis, irrespective of whether we are at work or at home.

Original Post: http://mootee.typepad.com/innovation_playground/2008/06/innovation-breakpoints-are-where-innovation-most-likely-to-happen.html

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