Challenges of Introducing New Tech: A Case Study in Taiwan
Potential Market for iPad in Taiwan
Challenges
- Limited Potential: Easy card system already integrated.
- Technological Knowledge Gap: Older population may lack tech expertise.
- iPhone Sales Trends: iPhones hold only 30% of the Taiwan market, with 70% using Android.
- Privacy Concerns: Potential correlation between iPad numbers and personal identity.
- Payment Dependency: Requiring an iPhone for payment creates a barrier to entry and risk in case of loss.
Chapter 4: Dominant Design and Increasing Returns
The technology lifecycle often leads to the emergence of a dominant design. Once established, focus shifts from exploring alternatives to refining the chosen design’s efficiency in production, delivery, marketing, and deployment.
Why a Single Dominant Design?
Many industries experience increasing returns to adoption, where a technology’s value grows with its user base. This is particularly true for complex technologies that improve through use. Increased adoption leads to:
- Revenue for further development and refinement.
- Greater knowledge and understanding, leading to improvements in the technology and its applications.
- Development of specialized complementary assets.
This creates a self-reinforcing cycle that can solidify a technology’s dominance, regardless of its inherent superiority. Two key drivers of increasing returns are:
1. Learning Effects
As a technology gains traction, revenue generation allows for reinvestment in its development. Firms become more adept at utilizing the technology, optimizing processes and organizational structures for better implementation. This continuous improvement cycle is exemplified by the learning curve, where cumulative production drives down costs and boosts productivity. Factors influencing a firm’s learning rate include:
- Process improvement projects
- Intentional innovation
- Interaction with customers and suppliers
- The nature of the task
- Firm strategy
- Prior experience
Past learning experiences contribute to a firm’s absorptive capacity – the ability to acquire and utilize new information effectively. Early technology adopters often gain an advantage by building a knowledge base through experimentation and refinement. This positions them to stay ahead of the curve, while latecomers face a steeper climb.
2. Network Externalities
Network externalities, or positive consumption externalities, occur when a good’s value increases proportionally with the number of users. This is evident in physical networks like railroads and telecommunications, where a larger network translates to greater utility. Network externalities also manifest in non-physical contexts, particularly where compatibility is crucial. A large installed base attracts users seeking seamless file sharing and access to a wider pool of potential collaborators. The “Wintel” platform (Windows and Intel) exemplifies this, dominating the market due to its vast user base and compatibility advantages. Additionally, investing time and effort in learning a widely adopted platform becomes more worthwhile. The availability of complementary goods also contributes to network externalities, further enhancing the value proposition of a dominant technology.
Chapter 4: Dominant Design and Increasing Returns (Repeated)
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