PERF RMANCE 04 - The Performance Portal - Ernst & Young

Choosing the right technology
For example, we do not know whether
lithium-ion battery, the hydrogen fuel cell,
or the methanol fuel cell will disrupt the
automobile market. Anyway, once such
disruption occurs, the answer is no
longer relevant. But we do know they
constitute different levels of innovation.
A further advantage of this framework
is that we provide a method and metrics
to analyze technological change to make
informed decisions.
How can a firm choose among such
platform technologies? A firm can do so
by evaluating the pattern of evolution on
various dimensions of performance, as we
describe next. A dimension is a measure of
performance such as resolution (dots-perinc)
of printers or brightness (lumens-perwatt)
for lighting.
What is the pattern of
evolution?
The received wisdom is that technological
performance evolves along an S-shaped
curve (see Figure 4a). The S-curve arises
because the performance is initially low for
a new technology, then improves rapidly
after some breakthrough and ultimately
levels out in maturity. A new technology’s
performance supposedly starts a new
S-curve below that of the old technology,
crosses it once and then reaches a
superior level of performance (see Figure
4b). Managers were supposed to jump to
a new technology before its S-curve of
performance crossed that of the old one.
However, our analysis of these six
markets shows that technological evolution
violates this simple S-shape pattern. Figure
5a-f shows what we found. It illustrates the
evolution of performance in the six markets
we considered.
Figure 4a. Technological S-curve
Performance
Inflection
Figure 4b. Theory of S-curve
Performance
Old
Single crossing
New
1 2
Time/effort
Time/effort
A review of Figure 5 reveals several novel
aspects about the pattern of technological
evolution. First, where a new technology
enters the market provides no evidence
of its future trajectory. For example, in
Figure 5d, laser enters the printer market
above dot matrix while inkjet enters below
dot matrix. Second, once it enters, the
performance path of each technology
is typically neither linear nor S-shaped
but rather a series of step-functions.
Importantly, a big spurt in performance can
come after a period of apparent stagnation.
For example, in 1980, gas discharge
shows its biggest jump in performance and
surpasses arc discharge in brightness after
a period of flat performance for almost
20 years (see Figure 5a). Third, some
technologies show a steady trajectory of
performance. For example, dot matrix
improves in performance over time but
at a steady, lower rate relative to other
technologies (see Figure 5d). Most
importantly, these curves cross multiple
times. This pattern implies that superiority,
when attained, is never permanent.
A case in point is the competition in
performance between inkjet and laser in
the printer market (see Figure 5d). In the
mid 1980s and again in the mid 1990s,
laser was superior to inkjet in resolution.
Indeed, inkjet got a reputation for being a
cheap and low-level printing technology.
However, that was no reason to abandon
inkjet. Wisely, HP did not so, because in
1997, inkjet surpassed laser in resolution
and has stayed above laser. But that
again is no reason to now abandon laser
technology. To HP’s credit, it has supported
both technologies simultaneously. An
important implication of our findings is
that firms should consider investing in or at
least monitoring a portfolio of technologies
so they are neither blindsided nor overly
enthralled by the sudden growth of a
new technology.
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