Any company planning on bringing a new innovative solution to market must accept the fact that not every customer will be willing to buy it immediately.
There will always be certain target customers who are more resistant to trying out new ideas than others.
One of the best and most important concepts to help understand the impact on your innovation strategy is the Law of Diffusions of innovation, also sometimes known as the Product Adoption Lifecycle.
The Law of Diffusions of Innovation was first popularised by communications professor Everett Rogers in his 1962 book Diffusions of Innovations.
Diffusion is the process by which a new innovation or product is communicated over time amongst the participants in a social system or market.
Rogers’ research was the culmination of analysing more than 508 examples of diffusion of new ideas across a wide range of industries and social groups.
As you probably know based on your own experience, there will be different groups of people who are more or less willing to try out new ideas or products, depending on how new they are to the market. Some people are willing to wait in line for days to be the very first person to own something new, whereas others will outright refuse to change they way they work.
This shows a difference in mindset towards being open to trying new innovations and products.
Roger’s theory showed that in broad terms, you can split the people in any market (and to a degree entire organisations) into five groups based on what mindset they have:
- The Innovators: These are the people who are most excited to try new ideas and innovations, even if there is no proof yet that they work, or may be expensive as they have not reached economies of scale yet. An example is someone who waits in line to be the first person to buy a new Apple Watch. Often there is a pride associated with being in an exclusive group of forward thinkers. This group makes up about 2.5% of the total market.
- The Early Adopters: Also willing to try new technology and innovations, once it can communicate its value. Often they are opinion leaders in a market, with high status and are able to influence others. Will often consider upgrading to a new version of a product. This group makes up about 13.5% of the total market.
- The Early Majority: This group is the first of the large proportion of the market, making up about 34% of the market. Often, they wait to see the reaction of the Early Adopters before they are confident enough to try a new innovation.
- The Late Majority: The next 34% of the market are usually much more resistant to trying new innovations, and will usually wait until the innovation has developed so far that it is now the norm for new products in the market. They are much more risk averse than the Early Adopters and Early Majority, and so will wait until the new innovation is well established, of proven quality and often at a lower price than when it was originally introduced. They are unlikely to try a new innovation if the Early Majority has not shown that they have as well.
- The Laggards: The last part of the market are those groups who refuse to try new technology for as long as possible. They want to keep using what they already have, and it can be extremely challenging to get them to admit that it is worth changing, and are very unlikely to adopt a new innovation unless they are forced to. Examples here are the roughly 1% of companies that still have IT systems based on Windows XP or earlier Windows versions, even those these are no longer produced or supported. Laggards make up about 16% of the population.
You will see that the Innovators and Early Adopters together make up about 16% of the total market, and together with Early Majority make up 50% of the market more open to new innovations. The latter 50% are more resistant.
Remember that the size or wealth of a company or individual doesn’t determine what category they fit into. There are some very large companies which are willing to invest in new technologies, and some small startups which are laggards when it comes to certain processes.
What is also important to consider is that if you are trying to sell your innovation to a company or business with more than one person, is to understand who the decision maker is. You might find large numbers of people in a company with an “Innovator” mindset, but if the person making the purchasing decisions (like the Owner, CIO or Head of Procurement) if more of a “Late Majority” style, then it might prevent the new idea being accepted there until much later.
So surely, all that a company or entrepreneur needs to do in order to make their innovation successful is to start by getting it adopted by some in the Innovator and Early Adopter group, and the rest will follow over time…
Research also often shows that one of the hardest gaps to overcome is transitioning from having enough Early Adopters to getting some Early Majority.
This doesn’t always happen, or if it takes too long, the money a company can make just from the 16% of the market willing to try their innovation at the beginning may be too little, especially when the innovation has not reached economies of scale and profitability. This is the time when a company can burn through cash flow when trying to grow and survive, and in some cases they never manager to make the breakthrough, and the innovation doesn’t reach the scale it needs to survive.
The gap between having enough Early Adopters, and starting to get some Early Majority is often called the “Chasm” because it is so dangerous for companies. It is often only after you have gotten over the chasm that you reach a tipping point and start to get critical mass with the first Early Majority.
This is where innovations begin to really scale and thrive, what Geoffrey Moore called Crossing the Chasm.
So how can companies cross the chasm and make their innovations scale?
Often, one of the main reasons why companies can’t scale their innovations is because they aren’t focussing on the right customers for that moment in time. Those customers who are willing to use it now, based on how much it is diffused and used in the market already.
This is often not just a strategic issue, but a sales and marketing issue.
Companies with a new innovation often want to get the message out to as many people and companies as possible, especially the big “Mass Market” where they think the majority of the money is.
So they spend a lot of money on marketing their innovation to the widest possible audience, in the hopes that scale will show the value of their innovation to enough people, and maybe even one major big client. This might take the form of brand awareness advertising, which aims to reach people consuming media in traditional ways like Television, Radio, Billboards, Magazines or even banner ads on popular websites.
What these companies don’t realise is that 84% of the market may not be ready for a new innovation, so that marketing cost, and the time spent following up on sales processes with them, is essentially wasted.
Instead, it is far more effective trying to focus the marketing efforts of a new innovation at the first two categories of decision makers, the Innovators and Early Adopters.
Because you need to have them on board to convince the mass market afterwards anyway. That’s how the perceived value of innovations diffuses through the market.
So ask yourself, if you have a new innovation or idea, who are you trying to convince it has value. And are they the people who would actually be willing to try it, or are you just hoping they are?
Here in this blog article is a video of Prof Rogers discussing his history in developing the Law of Diffusion of Innovations: