Emerging technologies have the potential to upend industries, but business leaders are often sold on the vision long before a technology is viable and widely adopted by consumers. But, being able to see through the hype and correctly time market entry can deliver a serious competitive advantage.
There’s no crystal ball, but a new report from Bain Consulting argues “tipping points analysis” can provide clearer visibility into likely future scenarios as well as the variables that could speed up or slow down change.
In the report, Tipping Points: When to Bet on New Technologies, authored by Bain partners Mark Gottfredson and Dunigan O’Keeffe argue the strategy provides leadership teams a head start on implementing and adjusting strategy.
“A growing number of companies … are using tipping points analysis to anticipate technological change that could threaten their business models or create new opportunities,” the authors write.
The research argues four forecasting tools, used together, can help predict whether a new technology will take off, when the tipping point will arrive and what the speed of market adoption will be.
- Experience curves (e-curves) show how unit costs decline relative to increased production volume; for example e-curve can be used to predict when the cost of lithium batteries will drop, driving the adoption of electric vehicles.
- Elements of Value® analysis (a registered trademark of Bain) identifies attributes customers value most in a product, such as reduced cost or saving time, indicates whether a product has value and how likely consumers are to buy it. Cloud computing is an example cited by the authors where improved capabilities, not price, propel consumer demand.
- The adoption curve (s-curve) is a tool that predicts how rapidly consumers will switch to a new product by forecasting sales over time. This calculation will vary depending on different customer segments.
- Analysis of barriers and accelerators, such as government policy, technology or consumer attitudes that could slow or speed the arrival and penetration of an innovation. For example, China’s 2007 decision to build large solar energy power plants and to purchase solar panels from low-cost producers was a key accelerator for the fledgling solar industry. According to the authors, these external factors become “signposts” which can help a company determine when to enter a new market.
“The leadership teams that have used this combination of lenses know that it won’t produce an algorithm to predict the exact timing or speed of the next disruption. What it does provide is a set of insights around which executive teams can construct the most likely scenarios, understand the variables that matter most, and monitor them to help decide when to act,” the authors write.
“Leading companies have used these tools to anticipate important innovations as much as three years ahead of widespread market adoption, significantly increasing growth and shareholder value.”