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Thursday, November 30, 2006

Human Behavior: How do people adopt new innovations?

Adoption of innovations is my favorite topic. It integrates business, technology, systems, and human behavior. Everett Rogers developed a model to predict the adoption curve of innovations. I simplified it for our discussion with help of my friend, Tom Carter.

There are five attributes of innovations which effect how innovations get adopted or customers change their behavior:

1. Relative Advantage: What advantage does the new innovation (product/service/etc.) offer over what’s available currently? The relative advantage could be price, new features, convenience, etc-anything customers perceive beneficial. Let’s take example of iPod which is one of the fastest adopted new innovations. iPod offers following advantages which were not offered by previous portable music players:

a. Better design: light weight, easy navigation, different colors, cool aesthetics.
b. Choice: ability to store up to 5,000 songs and no need to carry CDs.
c. New features: Ability to organize and search songs, long battery life, etc.

The better the relative advantage of new innovation, the faster the adoption!

2. Interoperability: How does the new innovation interoperate with existing products/services? It means the ability of the customers to use the new innovation without requiring additional hardware/software/service. For example, you can convert your current CDs into MP3 and put them on your iPod. It does not require you to repurchase all your CDs to get MP3 versions. The interoperability has to be both backward and forward. The CD conversion example is for backward interoperability. In this case, forward interoperability is ability to directly download digital songs from iTunes. Non-interoperability creates a pricing barrier.

The higher the interoperability of the new innovation, the faster the adoption!

3. Simplicity: How simple is the new innovation to use and communicate? Simplicity is critical! Most technology companies need to work better in this area. The design/use of the innovative should be intuitive. For example, iPod is marvelously simple. One does not need any manual to start using the device. It is very intuitive. The click wheel enables you do control all functions without compromising aesthetics.

The simpler the new innovation, the faster the adoption!

4. Trialability: How easy and inexpensive is it for customers to try the new innovation? The reason it takes us more time to sell to businesses than to consumers is triablity. The time-intensive processes and “who will pay for the trial” challenges businesses have to try the service delays the adoption in B2B world. People like to try before they commit to anything new. The customer experience on first trial plays a critical role in adoption of the new innovation. For example, iPod is very easy to try, go to any Apple store and now a days borrow it from a friend. Similarly, you can listen to the songs for 30 seconds on iTunes before you purchase them.

The easier and inexpensive the trial of new innovation, the faster the adoption!

5. Observability: How observable is the new innovation? This is similar to word-of-mouth which is still the best form of marketing. If people see other people using the new innovation and enjoying the benefits, they also want to try it. There has been a lot of innovation in the back-end systems in the last few years but companies are still upgrading to SAP R/3 etc. One of the reasons is that not many people see back-end systems. On the other hand, people see other people listening to iPods. It is highly observable.

The higher the observability of new innovation, the faster the adoption!

You can apply these principles to any new product/service/feature you are working on and predict its success. What do you think?