As the analog film business was extremely profitable, and there was no market for primitive digital cameras, Kodak management decided not to pursue it. Hence, the management decision, subsequently creating the Kodak moment, was not as insane as it sounds. This is a typical example of a decision-making challenge that highly successful innovators face at the very early stage of discontinuity when everything is going fine and no economic signals of deterioration surface. Hence, innovators need a thermometer to detect early signals of a corporation’s technology health. If a discontinuity is coming, chances are that the current technology is close to its limits, and some unstarts serving the nonconsumption market are trying an alternative approach. Hence, some insights could be drawn from the technology S-curve maturing signals to create some early warning indicators.
In the age of discontinuity, once an emerging technology wave takes over the matured one, the transition speed is determined by the relative economics of attacking (emerging) and defending (incumbent, maturing) technologies, affecting the rate at which competing technologies move. Unfortunately, seven out of ten Innovation leaders fail to detect the early signal of discontinuity.
Technology S-Curve
Technology S-curve refers to the relationship between the R&D effort put into advancing a technology product or process and the results one gets back from that investment. It’s called an S-curve, as the plotted results vs R&D investment visually show an “S-like” shape. It depicts that during the early stage, results or progress from R&D investment are low, as researchers have yet to discover the underlying science and find a systematic path of progression. This phase is often called infancy, followed by ramping up or growth phase. During the ramping-up phase, R&D productivity is very high. However, due to the limits imposed by science, R&D productivity slows down, showing signs of technology S-curve maturing.
Vital signs of technology S-curve maturing
Dissatisfaction about R&D outputs among the senior management
Suppose the senior managers are happy with the sales, revenue, and profit but unhappy with R&D progress due to slowing down in progress. In that case, it may be a sign of technology S-curve maturing. However, due to a lack of scientific and technological insights, senior managers often cannot investigate it further to figure out the root cause. Instead, they keep relying on technology people and increasing the R&D budget, expecting additional resources to speed up. However, deep-down investigation at this stage could have revealed the early signals of technology S-curve maturing.
Increasing development costs, delays for noticeable upgrades, and declining creativity
Declining R&D productivity indicates that technology is getting closer to the top of the S-curve. Hence, a minor performance specification upgrade increases resources and time. Consequentially, due to diminishing returns, it will get increasingly more expensive or less rewarding to upgrade. Hence, incumbent technology with the sign of maturity will be increasingly vulnerable to the next wave. Besides, creativity outputs will start showing signs of declining due to the growing complexity of advancement. As a result, the excitement of making progress and patent filling will start falling. Hence, at technology S-curve maturing, profitability from creativity will not be regained unless maturing technology is switched to emerging one.
Process R&D taking over product R&D, excitement in the lab declining, and frequent shifting of R&D leadership
Shifting attention or resources from product to Process innovation due to declining R&D productivity of product enhancement is a sign of technology S-curve maturing. Besides, such a shift also surfaces disharmony and discouragement in the lab. The underlying reason has been that the excitement of advancement has been declining due to technology S-curve maturing. As a result, the creative binding force starts declining, and arguments about resource allocation and dissatisfaction with poor R&D results start surfacing. Some management gurus share that informal expression about R&D targets and progress shared in the corridor would start giving technology S-curve maturing signs. Besides, due to growing dissatisfaction with advancement, management will begin changing R&D leadership frequently.
Market segmentation and advertisement are gaining importance for increasing the sale
To offset the slowdown of revenue growth due to declining product advancement, the marketing department start focusing on segmenting, launching segment-specific product features, and advertising. This indicates that due to the maturation of the technology S-curve, you can no longer have significant advancements in creating the willingness to pay “across the board.” Probably, this is a technology S-curve maturing signal.
Widening differences in R&D spending among competitors with no proportionate market effects
Due to declining advancement productivity, some competitors may start accelerating R&D budgets, widening disparity among competitors. However, if such steps do not lead to a proportionate market effect, it could be a technology S-curve maturing sign.
Losing market share in some niche market segments by significant players to new entrants
In the 1960s, space imaging was an attractive niche market segment for Kodak’s film camera. However, in the late 1970s, Kodak started losing this market as electronic or digital image sensors gained traction due to the ease of sending images through radio signals. It was a sign of film camera technology, the S-curve maturing sign, and the rise of the following technology, the S-curve electronic image sensor. Unfortunately, Kodak management did not pick up this early signal strongly and responded accordingly.
Losing niche markets to new entrants due to the uniqueness of their emerging technology core is a solid early signal of discontinuity. As an emerging technology, S-curve shows far higher R&D productivity than maturing technology S-curve; new entrants with far fewer resources find the scope of outpacing the incumbent innovation leaders. Being on two different S-curves, maturing and rising, tiny Startups grow and unleash Disruptive innovation effects on behemoths, as TI and Sony did on Westinghouse and RCA, respectively.
Resource-poor new entrants start showing much higher progress than innovation leaders
Due to the new technology core, new entrants show far higher progress than incumbent innovation leaders in advancing their respective products. Along with the entry in the ramping-up stage of the emerging technology S-curve, new entrants start taking over the market from the incumbents. Against the backdrop of the rapid growth of R&D productivity of the new entrants, incumbents start seeing diminishing returns on R&D due to their technology S-curve maturing sign.
With the high failure rate, seven out of ten, of incumbent innovation leaders to drive the subsequent long waves, the need for the early discontinuity signal is paramount. As there is competition between two technology S-curves, it’s essential for both the incumbents to pursue maturing technology life cycle and the new entrants to develop alternatives out of emerging technology core to pick up early signals. We hope that the seven signs of early signals presented by this article will increase decision-making accuracy, reducing the wastage of resources.
