Why Does the Market Favour One Technology over Another - Article Example

Why Does the Market Favour One Technology Over Another? Technology can be defined as a field of knowledge that can be used to develop skills, create tools and collect or extract materials. Technology entails the use of scientific methods and materials to solve problems or satisfy an objective. The need to make life even easier has resulted in the continuous need to develop and advance a myriad of innovative technologies. Consequently, markets today are spoilt for choice when it comes to selecting innovative technologies and have had to develop methods to enable them select the technologies that suit them in the best way. There are a number of factors that influence the market’s preference of one technology over another and these include innovation and lock-in forces. Innovation has been defined differently by different people but the one thing that is common in all its definitions is the need to complete the exploitation and development aspects of new knowledge or technology, not just its invention. Innovation is often confused with invention but the later is the first step of the lengthy process of developing a good idea into wide spread and effective use by consumers. A good invention does not guarantee market preference and therefore market success. Once a good technological invention has been created, innovation tools such as market development, project management, organizational behaviour and financial management, just to mention a few, have to be employed in order to make the invented technology successful in the market. For instance, when consumers or markets are faced with the decision to select a technology among many available technologies, the consumers will find it necessary to base their decision on several innovative aspects such as the technology that gives a richer user experience, is easily accessible, has evolving capabilities, is secure, and best serves the need of the business, among other aspects. The direction of technological innovation is a major determinant of the technology that gets preference in a market. Technological innovation can either be sustaining or disruptive. Sustaining innovations are those that seek to improve an already existing technology in order to increase its value to the market while disruptive innovations aim to introduce entirely new technology to the market in order to replace the old technology. Disruptive technological innovations often overlap with radical breakthroughs but sometimes represent advances in business models. Leading companies and governments in tend to be very successful at implementing sustaining innovation but rarely keep up with disruptive technologies. The main reason for this phenomenon is because their investments in equipment, employees and materials tend to be linked to existing technology. The price of changing to disruptive technology is likely to be very high and this is one of the factors that keep these organizations loyal to sustaining technology. Moreover, since disruptive technology is not compatible with sustaining technology, the switching costs are likely to be high and this discourages organizations from switching the technology that they are using. Sustaining technologies are also preferred by leading organizations in markets because they enable the organizations service their existing customers. The heavy investment in sustaining technology can therefore prevent a disruptive technology from gaining ground in a market. The preferred technology in a market can either result from a market pull or demand or from technology push. The demand for an innovative technology occurs when the available technologies in a market are unable to satisfy certain customer needs. Consequently, the market’s need to satisfy its client’s needs drives the market in search for innovative technologies. The market pulls approach starts with customers and is typically driven by marketing forces. Market research plays an important role in the market–pull approach and consumers, or the markets are often the sources of the new technology or product idea. Even though the market pull approach can result is one technology being dominant over another, this is not always the case because of the weaknesses present in the market pull approach. The most notable limitation of the market pull approach is the often mistaken assumption that the customers know their technological needs and describe them in a way that results in the development of the required technology. Customers generally know what they like or dislike about the technology currently present in their market and their feedbacks are usually made with this reference point in mind. Meanwhile, in the technology push approach, the need for innovation comes from external or internal research and is driven by the desire to make commercial use of new discoveries or knowledge. Technology push can occur regardless of whether or not a market demand for the new technology exists. The impulse for technological push comes from the observation of a technical possibility and the potential to capitalize on it. Alternatively, the technology push may arise from a discovery of how it could be applied in the market. Just like the market pull approach, the technology push approach also has limitations that might prevent an innovative technology from becoming the preferred technology in a market. One of these limitations is the assumption that there is a market place need for the innovative technology. Even in situations where a customer might have been clearly identified, the technology push approach ignores numerous substantive issues regarding the possibility of the customer purchasing the new technology and the possible reactions from competing firms in the market. Apart from innovation, yet another factor that can make a market to prefer one technology over the other is past decisions which may have closed doors for other technologies while locking-in an inferior technology. A lock-in in a market or economic sector implies that certain technological choices are basically irreversible. A lock-in results when a new technology is introduced to a market and performs so well that it assumes an unchallengeable lead and dominates the whole market in a manner that is difficult to reverse. The deep roots that are established by this technology make it very valuable to the users and this in turn makes it very difficult for newer technologies to penetrate the market. Metcalfe’s law explains this phenomenon in the sense that once a product is embraced by a majority of the market, the value of the technology increases at a proportion that is a square of the number of its users and this makes it difficult for the market to let go of that technology. A good example of this situation is the market domination of the QWERTY keyboard which has makes it difficult for other superior technologies such as the DVORAK keyboard to gain a considerable market share. The QWERTY keyboard, which was carried on to computers from typewriters, was designed at a time when it was necessary top slow down typists so they could not get ahead of the mechanical aspects of typing. Even though new technological inventions have since replaced the inefficient mechanics of typing, the dominance of the QWERTY technology and the substantial switching costs prevent any other technology from replacing the locked-in and inferior QWERTY keyboard. Apart from the lock-in market force, the incompatibility of a different technology with the current technology compounded with the massive switching costs also influences a market’s decision to favour current technology over a new one. Technologies used for automobile engines and US nuclear power plants are also examples of inferior technologies that have been locked in. There are indeed many factors that determine a market’s preference of one technology over another. This paper has explored a few of these factors and illustrated how they influence the dominance of one technology over others. New technologies will continue to be invented to make life even easier but it is forces such as innovation, lock in market and the price of switching from one technology to another, among other forces, that will always make a market to favour one technology over another. Read More