Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
  • How do you encourage speedier adoption of your product or service?
  • How do you increase the value your product or service creates for your customers?
  • How do you extract more of the value created by your product or service for yourself?

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What Is a Technology System?

Wikipedia defines technology as “the usage and knowledge of tools, techniques, crafts, systems or methods of organization in order to solve a problem or serve some purpose.”

I define a technology system as all the products and services that may be combined, either simultaneously or sequentially in time, by the system user for him or her to enjoy the consumption experience provided by the technology system. In such an ecosystem, the destinies, strategies, and operational capabilities of customers and suppliers, partners and competitors are all connected at the most fundamental level, which affects the competitive and operational dynamics of all the players.*  In particular, in this ecosystem, all contributers involved at any point the supply chain, from design and manufacturing of each part of the system through integration into final products and consumption by end users, are interconnected

Systems Have Become Much More Prevalent over Time

Over time, technology systems have become increasingly complex, requiring ever-larger numbers of components, each of which are supplied by different entities.  As a result, markets have become increasingly fragmented, yet increasingly interconnected globally, so that actions by one producer or consumer increasingly depend on and affect those of others.  The case of products requiring both hardware and software components, each of which are produced by different suppliers, provides a specific, yet ubiquitous, example.  In this, the Digital Age, technologies comprising many different hardware and software components are increasingly becoming the heart and soul of operations and actions undertaken by producers and consumers alike.

This phenomenon of interconnectedness is due in no small part to the plummeting of transportation and communication costs, which have enabled producers to extract ever more benefits from economies of scale and specialization in the production of goods and services.  At the same time, global competition has forced them to do so at an increasing pace, or risk being bypassed by new and better innovations.

What with all the interconnected components of production processes and consumption systems, players in the market for new and existing technology systems face a complex state of affairs, indeed.  One can only imagine how difficult it is for suppliers to try to optimize production decisions when confronted with all such potential outcomes and uncertainties.  Yet, adoption of new technology systems and their continuing success in the marketplace require that suppliers do just that.  To make sure new technologies have the highest possible chance of being successfully adopted and existing technology systems have the highest possible chance of continuing to thrive, systems players must understand the ins and outs of both the production and the consumption processes.  That is, they must understand the potential incentives, actions, and reactions of all players in, or the ecology of, the product communities.

 

* This concept was taken from Marco Iansiti and Roy Levien, "The New Operational Dynamics of Business Ecosystems: Implications for Policy, Operations and Technology Strategy." 2002, pp.5-6.