Technology Hype Cycle

We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.

Bill Gates

Plotting Technology against Hype

Emerging technologies provide an opportunity for early adaptors to gain a head start over competitors. At the same time, earlier adopters face the risk of hidden complexities. A risk that could see their investment yield a null return on the original promise.

Gartner’s Hype Cycle is a framework which can be used to evaluate a technology’s maturity against the hype and, by inference, the risk of adoption.

The technology hype cycle helps company's plot the maturity of a technology against the hype and adoption risk.
Gartner’s Hype Cycle

The Hype Cycle plots a technologies path along 5 points:

1. Innovation initiation

Social media initiates a wave of excitement as influencers first discover the technology. Technology evanalists fixate on the potential of the innovation.

2. Crest of promoted expectations

Few numbers of large successful implementations are published. Companies evaluate the technology based on the excitement. They attempt to hedge risk as far as possible.

3. Pit of disillusionment

Social media attention declines. Few companies are able to boast grand successes inline with original forecasts.

4. Ascent of enlightenment

More practical functions are found for the technology. Growth in implementation numbers increase off the back of revised business models. As skill availability increases more companies tentatively adopt the technology. Total number of published use cases increase.

5. Plateau of productivity

Larger market adoption takes place. The larger market views the technology as stable.

Timing

Technology does provide an advantage when adopted earlier than competitors. To yield an effective return timing needs to be accurate. The hype cycle framework helps determine the best moment to select a technology within the mixed chorus of excitement and resentment.

Selecting a business strategy

The essence of strategy is choosing what not to do


– Michael Porter

One of the many challenges facing young businesses is the effective decision making around pursuing freshly discovered opportunities given the company’s founding vision. In an attempt to diversify away from risk, aggressive opportunity grabbing often times leads to a distraction from founding objectives. What is needed is the formulation of a business strategy leaders can use to set direction and prevent distraction from valid but unsuited opportunities at hand.

A strategy is the mechanism and framing tool through which a company can use to outline a plan to achieve the decided objectives. A defined strategy makes it efficient to communicate to the wider company and shareholders. Put plainly, a defined strategy helps decision makers turn down opportunities that would distract the business and pursue matching opportunities with precision.

One framework that can be utilized to find an appropriate strategy is the “Grand Strategy Matrix”. This tool maps a company’s position on the intersection of market growth and competitive positioning and proposes a number of strategies that best suit that position. The first step is to gain consensus on the company’s position within the market. Many tools exist however SWOT analysis when responsibly engaged, provide a solid basis for the entry into a strategy finding activity.

1. SWOT

The most efficient mechanism to gain qualified information as an input into the Grand Strategy Matrix is to perform an internal and external audit. The internal audit will reveal the top 5 key internal strengths and weaknesses that rest under the control of the company. Equally, the external will should reveal a top 5 opportunities and strengths within the market the company operates in. The underlying outcome is a good understanding of the market, its growth, and the businesses position within that market.

2. Map the company position on the matrix

Once a context is created through the SWOT analysis the Grand Strategy Matrix provides the framework to plot the business across the axis of Market Growth and Competitive position. The result will put the business in one of four quadrants representing a set of strategies most appropriate for the company positioning.

In a previous post I outline each strategy more detail

Quad 1: Intensive set of strategies

Businesses positioned in a strong competitive position and strong market growth quadrant are positioned to further maximize gains by intensifying their market position in the growing market. As the pie grows these businesses seek a bigger portion of it. The following strategies are best suited such an objective:

  • Market development;
  • Product development or;
  • Market penetration.

Quad 2: Diversification set of strategies

Driven by weak market growth but strong competitive position these set of strategies seek to increase overall market share through expanded product/service offerings
The strategies involved in reaching the growth objectives are:

  • Concentric diversification;
  • Horizontal diversification or;
  • Conglomerate diversification.

Quad 3: Defensive set of strategies

Cost cutting and competition repelling strategies are needed when the business is situated within the defensive quadrant. The following strategies apply:

  • Defensive;
  • Retrenchment or;
  • Liquidation.

Quad 4: Integration set of strategies

Integration strategies seek to increase margin within a growing market by reducing the transaction cost in delivering a product/service to the customer. The following strategies apply:

  • Forward integration;
  • Backward integration or;
  • Horizontal integration.

Summary

The framework allows companies to filter opportunities through an accurate business strategy. When using the Grand Strategy Matrix company leaders are able to select a strategy based on company position within a dynamic market. The result is a reduced waste, increased efficiency, and tighter company alignment.

Setting direction – A short list of business strategy sets

One indicator of a healthy business is the sense of direction the business if pursuing as felt by all those emotionally or financially invested in the business, from shareholder to employee. An official direction not only unifies the company, but it also helps leaders filter opportunities to those most appropriate. A company direction starts with the setting of objectives in alignment with the vision of the company. The road to reaching those objectives is paved through the business strategy.

This post serves as a list of business strategies listed in groups. Later posts about strategy formulation will reference the options listed below.

Intensive Set of Strategies

Market Development
Implementors of a Market Development strategy seek new customers within their existing markets. Practically, new customers are found via expanding the company’s reach or targeting new segments within the same market.

Market Penetration
Market Penetration strategy attempts to gain greater market share through the selling of the product/service deeper into the existing targeted market segments. Businesses implementing a market penetration strategy hold a competitive advantage and attempt to drive out competition through unique positioning.

Product Development
A Product Development strategy attempts to meet a validated need within the existing market. The fulfillment of the need is met via upgrade existing products or the creation of completely new products.

Integration Set of Strategies

Forward integration
Company’s seeking to maximize profits, increase market share and take control of downstream distribution utilize a forward integration strategy through the removal of intermediary layers between the business and the customer/client.

Backward integration
Company’s seeking to reduce overall cost and take control of upstream producers/suppliers of products/services employ a backward integration strategy. The move entrenches the company within the market through increasing barriers to entry.

Horizontal integration
Horizontal integration is a mechanism for increasing market share and reducing competition through the acquisition of businesses on the same competitive level.

Diversification Set of Strategies


Concentric (related) diversification
Concentric diversification attempts to drive growth through the adding of new but associated products/services on top of a business existing product/service offering.

Horizontal (related) diversification
A horizontally diverse strategy adds products/services that are unrelated to the existing array of products or services but still targets the same target market.

Conglomerate (unrelated) diversification
Businesses implementing a conglomerate strategy add products/service that are significantly different from the current business offering.

Defensive Set of Strategies

Defensive
Businesses under threat seek to fight off direct competitors through the implementation of a defensive strategy. Businesses entrench themselves by blocking competitors using price cutting, discounts, incentive, and strong marketing drives.

Retrenchment
Retrenchment strategies attempt to bring financial stability to the business through aggressive cost-cutting measures.

Liquidation
A liquidation strategy is a final resort and involves the operational shutdown and selling of company assets.