The Law of Diffusion of Innovations
There are three parts inside this subject: Law, Diffusion, and Innovations.
We are going to explore in this article the three parts and why there is a concern about it since it is related to innovation, which is a major part of entrepreneurship.
Important definitions before we start:
What is Innovation:
In this context, an innovation, as defined by Everett M. Rogers, the writer of the book: "The Law of Diffusion of Innovations", is an idea, practice, or object that is PERCEIVED as the new by an individual, organization, or other unit of adoption.
What is Diffusion:
Diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. Diffusion is mainly a social process of individuals talking to individuals.
Why is it a Law:
It is a law because it has a general pattern studied since 1497 in agriculture and onward. There are 120 diffusion publications per year in many applications including marketing, which is our concern here, and there are more than 5,200 publications up to today where it applies with very similar patterns.
What is the law of diffusion of innovations?
Simply stated, it is a pattern to which people adopt innovations as per the following figure:
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| Adopters in the Law of Diffusion of Innovations |
The cycle of community acceptance of your innovation as an entrepreneur differs from case to case, and the pattern does not apply for 100% of innovations but it surely applies for more than 90% of them, mainly in marketing and more precisely in technology.
Today, you as an entrepreneur, create an innovative technology, so you are among the first adopters category of the above curve, consisting of 2.5% of the population.
You launch your technology and start executing your marketing campaigns to spread knowledge and awareness within your market, for the consumers to adopt it.
For almost every technology domain, there are early adopters who buy your technology no matters its price, its features or its benefits. They just buy it because they want to be the first people who use it. They differentiate themselves from all others by this character. The early adopters consist of 13.5% of the total population.
Than comes the early(34%) and late(34%) majority which consists of the mass market targeted by all manufacturers to dump their products and sell bulk quantities to win a desired market share.
Simon Sinek says that if you are going to target the early and late majority of people so that they buy your products, you need to pass the most important adopters phase of early adopters, which is not easily passed by most of the technologies, then the sales will start tipping at 20% (innovators 2.5% + early adopters 13.5%). That's why you need to focus on defining your vision and why you are creating this innovation clearly and state it before listing the benefits of your invention.
At the end of the curve comes the laggards category of people who buy a product only because they were forced to buy it for some necessity or they might haven't found a replacement.
For some technologies, you can be as an individual in any of the adopters type above and for others, you can be categorized as another adopter. For example, I might be an early adopter for Samsung mobile phones but as a laggard for televisions.
Rates of Adoption of Innovation
It is not fair to compare all innovations together and put them in one basket for analysis. Some innovations took decades to be adopted and other took few weeks. The above graph doesn't state the timing of adoption rather than the common diffusion pattern. The rates of adoption an innovation relies on five perception parameters as follows:
- Relative advantage: Degree to which innovation is perceived as better than the idea it supersedes. The greater the perceived relative advantage by the customer, the more rapid its rate of adoption
- Compatibility: Degree to which an innovation is perceived as being consistent with existing values and norms to the social system. Any idea requiring a change in the social system might take decades to be adopted as the social system change is very slow
- Complexity: Degree to which an innovation is perceived as being difficult to understand and use. Potential customers need not to develop new skills to adopt a new innovation
- Trialability: Degree to which an innovation may be experimented on a limited basis. Trialability represents a faster factor of adoption as users perceive its acceptance by trying it earlier and learning from it easily before buying
- Observability: Degree to which the results of an innovation are visible to others. People tend to decide to buy a product faster if a friend or neighbor rated it positively in front of them
Disciplines of Diffusion of Innovations
Researches are done by scholars and practitioners until today, and the disciplines differ but the pattern is generalized for all. Here are some disciplines that have intensive research amounts:
- Marketing
- Public Health
- Economics
- Sociology
- Communication
- Geography
- Management
- Education
- Public Administration
- Political Science
- Anthropology
Diffusion of innovation in Marketing
Marketing is a science, it's a design function of your business, it is mandatory for success, and it can lead to a catastrophic failure if not performed well. There are thousands of strategies and consultants that can be involved in this great field, which range from segmentation, targeting and positioning, to pricing, competitive analysis, marketing mix, SWOT analysis, PESTLE analysis, digital marketing, affiliate marketing and many other disciplines can rely on marketing including but not limited to finance.
Finance people are responsible of sales forecasting but without the marketing people or knowledge, they cannot perform an accurate forecasting.
Regardless of seasonality and other analysis related to forecasting revenues, the marketing and finance teams need to take into consideration the subject of diffusion of innovations seriously.
They need to rely on solid estimates of when to reach each stage of the pattern and not to set high expectations of sales while the tipping point was not reached.
When it comes to the tipping point, it is not mandatory reach the 16% exactly. It can be earlier or later within a variation range of 5%.
How to reach the tipping point?
If your total addressable market (TAM) is composed of one million potential customers and you just launched a new product, wouldn't you dream to sell more than one time for all those customers?
Your product is new, or can be perceived as a new product, let's say it is a shaving machine for men that helps them shave while at work or anywhere outside home. There is a percent of uncertainty, even if you advertise by videos and pictures about usage of the product. If you succeed to break that uncertainty successfully, you can bypass your tipping point and start enjoying your earnings.
Uncertainty could come in many shapes, some of them are existing culture, traditions, customer's social status, price to value ratio, danger of use, fear from change, communication channels, timing, and many others that should be studied carefully.
Individuals that will decide to adopt your innovation will collect information about it and process that information thoroughly, than gets the internal motivation to break the uncertainty behind the innovation. This process might take short or long time based on how you prepare yourself to all possible consequences.
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| Breaking the Uncertainty |
To break this uncertainty, you need to focus on the needs of the potential customers rather on the features of your innovative product, you need to put yourself in their shoes and ask yourself one question: What's In It For Me (WIIFM)? or Why Should I Buy it?
Once you answer that question, and you are convinced that you will buy this product, you can build your marketing campaign, distribute advertising materials, execute your social media plan, or whatever is your marketing strategy.
Next important step is to study the appropriate communication channels required for customer adoption, and launching several trials of your product and testing it with selected slices of your potential customers and getting their feedback, which can be re-implemented and evaluated, and which will give you insights on the decision of launching or improving the product.
If you ask me how to reach the total addressable market, I would answer easily by doing a simple calculation for segmentation and targeting. You cannot target the whole world, at least for the first launch or stage. Thus, you start segmenting and targeting your market by demographics, for example, all males in Riyadh city above 21 years old. It is easy to get their number by using the government statistics website. This logic applies for all segmentation and targeting strategies and marketers can dig into more details by assigning criteria and filtering the TAM step by step.
For detailed tipping point analysis, please read the following book: The Tipping Point for Malcolm Gladwell or read my review of it here: What is our life purpose from a broader view?
Resources
Diffusion of Innovations Book by Everett M. Rogers
