In the realm of high technology, the frequent introduction of new innovative technologies is a common occurrence. This prompts established players in various industries to revise their strategies, while new entrants develop strategies aimed at supplanting the use of outdated technology. This dynamic gives rise to four potential scenarios, determined by two key variables:
- Growth opportunity of existing technology
- Entry barrier for new technology
Below are the four scenarios that may exist, along with the recommended actions for both established players and new entrants:
#1 Creative Destruction
This scenario arises when the growth potential of the existing technology is minimal, and the barrier to entry for the new technology is low as well. The new technology is poised to swiftly achieve market dominance because it faces few obstacles to growth, while the existing technology lacks the capacity for significant improvement to counter the threat. In such cases, established players should seek out niches where their use cases remain relevant for the long term. For instance, when inkjet printing technology emerged, it rapidly replaced dot-matrix printers. However, dot-matrix printers still serve niche markets such as railways and post offices.
#2 Robust Resilience
This scenario arises when both the growth potential of existing technology and the entry barrier for new technology are high. Substitution occurs at a sluggish pace in this situation, as the old technology must maintain its leadership position over an extended period. In such a scenario, established players should intensify their efforts to expand rapidly, widening the gap for the new technology to bridge. Conversely, the new technology should concentrate on delivering its promises at an accelerated pace to surpass established players. An example for this scenario is the emergence of RFID technology alongside the existing barcode technology. While barcodes, initially introduced to streamline shopping, have evolved significantly, RFID technology has yet to surpass it in terms of widespread adoption and functionality.
#3 Robust Coexistence
This scenario arises when the growth potential of the existing technology is substantial, yet the entry barrier for the new technology is relatively low. Robust competition ensues as the new technology enters the market, while the existing technology continues to expand to protect its market share. This dynamic results in an extended period of coexistence. For instance, consider electric automobiles as the new technology and traditional petrol/diesel automobiles as the existing technology. Electric vehicles are entering the market aggressively, establishing networks of charging stations. Meanwhile, traditional automobiles are continuously improving their fuel efficiency over time.
#4 Illusion of Resilience
This scenario emerges when the growth potential of the existing technology is limited, while the entry barrier for the new technology is substantial. In such a situation, no significant changes occur until new entrants address the entry barriers. The existing technology maintains a larger market share, albeit with stagnant growth. However, once the entry barrier is overcome, rapid substitution occurs. Therefore, new entrants should prioritize creating value for their users. As established players discern the breakdown of entry barriers, they should pivot towards targeting niche markets where their offerings remain viable in the long term. For example, during the introduction of mobile telephones in India, adoption rates were initially low due to the high cost barrier compared to existing landline telephones. However, with the launch of Reliance Communication's first handheld device, Reliance CDMA, at an affordable price for the mass market in India, widespread adoption ensued, marking a point of no return.
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Resources to learn more on Platform Ecosystem
- The Age of the Platform by Phil Simon (Kindle | Paperback)
- Matchmakers by David S. Evans and Richard Schmalensee (Kindle | Audiobook | Hardcover)
- Platform Scale by Sangeet Paul Choudary (Kindle | Hardcover)
Interesting, I think based on this framework UPI vs Card should fall in the second category. Cards had a low penetration rate in the country, but huge avenues for growth. While on the other hand UPI in its early days had huge barriers to entry. However, cards did not press down on its expansion efforts and have now been overtaken by UPI which now dominates the payment ecosystem.
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