Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.
- Understanding the Diffusion of Innovation Theory
- Categories of consumers in the Diffusion of Innovation Theory
- Using the Diffusion of Innovation Theory in marketing
- Tesla Case Study
- The essence of scale
- Key takeaways
- Connected Business Concepts And Frameworks
- Other strategy frameworks
Understanding the Diffusion of Innovation Theory
The Diffusion of Innovation Theory was developed by sociologist E.M Rogers in 1962.
The basic premise of Rogers’ theory is that people spread, or diffuse, ideas and products through a population.
With enough time, they are adopted by wider society as a whole.
Indeed, adoption in this context means that a consumer does something that they hadn’t done previously.
For that process to play out in reality, the right type of consumer must be targeted. In the next section, we will look at how this might be accomplished.
Categories of consumers in the Diffusion of Innovation Theory
Individual consumers within a social system can be classified into five distinct groups according to their propensity for innovation.
Innovators are consumers who are the first to buy a new product after it enters the market.
In general, they come from higher socioeconomic classes and have the liquidity required for high-risk tolerance.
They are also very social and have many close contacts with other innovators.
2. Early adopters
Early adopters are similar to innovators in their degree of liquidity, education level and social status.
They are generally more opinionated about their life choices and enjoy a degree of leadership in this area.
However, their risk tolerance is lower and as a result, they are more discerning about the type of products they adopt.
3. Early majority
The early majority represents consumers who adopt a new product or technology after a sufficient amount of time has passed.
They are not as vocal about their life choices as the early adopters, but their opinions still carry weight in wider society.
4. Late majority
Late majority consumers approach a new product with scepticism because of their low liquidity and social status.
They will generally not adopt a new product until the majority of a population of consumers has done so.
Laggards are the last consumers to adopt a new product.
They tend to be found in older demographics who have traditional values opposed to change.
They also have small social circles and have little to interesting in voicing their opinions.
Using the Diffusion of Innovation Theory in marketing
For marketing departments, efforts are best served by focusing on the early adopters and early majority.
While the temptation may be to market to innovators, businesses should not confuse an innovator’s high tolerance for risk with the popularity of their products.
Efforts are best served by focusing on the early adopters and early majority.
For these reasons, these consumers create momentum that helps drive a product to its tipping point – or the point at which it becomes widely adopted in society.
Tesla Case Study
In short, when Tesla entered the market, it didn’t do it by trying to build an EV that could be distributed to the masses.
Indeed, Tesla was not the first to try to build a successful EV vehicle.
In the mid-late 1990s, General Motors built a car called EV1.
The car was supposed to target right on a more significant segment of the market.
This made sense for General Motors because, as an established automaker, it made sense to look into the development of an electric vehicle, only if this would go after a large market.
Yet, this turned out into a complete failure.
That’s the core difference between a startup and an incumbent.
When launching new products, an incumbent like General Motors tries to go after large market segments right on (targeting the late majority).
A startup with constrained resources must do the opposite.
What mattered was the ability to showcase the technology at first.
This is a core difference, as whereas new entrants develop markets by starting from tiny niches, incumbents try to launch markets by starting from the masses!
The former approach creates options to scale, where failure is cheap and bearable.
The latter creates a scenario where failure gets so expensive that if the product doesn’t reach the masses, it will be withdrawn, and progress will be stopped for years!
Over time, Tesla managed to produce – in parallel – other EVs to tackle larger and larger segments of the market.
It took Tesla fifteen years to start working toward mass manufacturing the Model 3.
And this strategy is still ongoing.
The essence of scale
Thus a few key lessons work remembering here:
Whereas incumbents try to tackle mass markets right off the bat.
New entrants, with limited funding and constrained resources, niche down to the point of tackling, what seems, an interesting microniche.
Over time, that microniche can turn into a giant industry!
Cost of failing
A new entrant instead niches down as much as possible to make failing fast and cheap.
In the case of General Motors, the failure of the EV1 was such that still, in the 2020s, the company had to recover and compete in full in the EV industry.
Options to scale
A key thing to understand is that when launching new products, you don’t need to go after an extensive market.
Tackling a large market requires economies of scale.
This process takes years to build up.
The opposite is not true.
When you try to make a product work at a large scale, failure is – almost guaranteed.
There is one exception to the rule, and that is Apple’s iPhone. The rest is mainly guaranteed failure.
Strategy vs. product launches
Instead, a strategy mindset requires understanding that for a product to be successful at scale, it needs to be rolled out through various stages of iterations, at various scales, for years. In some cases, it might take decades.
In other words, today’s microniches are tomorrow’s mass markets!
And to succeed, you want to limit your options today to create options to scale tomorrow!
- At its core, the Diffusion of Innovation (DOI) Theory examines how ideas are spread from introduction to much wider adoption and acceptance.
- The Diffusion of Innovation Theory proposes that consumers can be grouped into five categories according to their tendency to adopt new ideas.
- Marketing departments must focus their efforts on certain consumer segments who give more important feedback on product viability than others.
Connected Business Concepts And Frameworks
Other strategy frameworks
- Porter’s Five Forces
- Ansoff Matrix
- Blitzscaling Canvas
- Business Analysis Framework
- Business Model Canvas
- Blue Ocean Strategy