PERF RMANCE 04 - The Performance Portal - Ernst & Young

“ Good decisions require
careful analysis of all data.
It is critical to consider
the appropriate dimension
of performance.”
Choosing the right technology
The S-curve is definitely a simple and
appealing rule of thumb for evaluating
technological evolution. However, in-depth
analysis of all technologies in numerous
markets shows that it can be seriously
misleading. Unfortunately, the real world is
quite messy. Good decisions require careful
analysis of all data. Such analyses do reveal
patterns that can help make informed
decisions about investing in technologies
and the potential payoff. Figure 5 shows
the performance in various markets, each
on only one dimension of performance.
It is critical to consider the appropriate
dimension of performance.
What is the appropriate
dimension of performance?
A dimension is a measure of performance
such as resolution (dots-per-inch) of
printers or brightness (lumens-per-watt)
for lighting. The received wisdom is that
the dimension or performance is primarily
a demand issue, determined by consumer
tastes. Some authors go so far as to assert
that tastes are genetically wired within
human nature. However, our analysis of
seven markets shows that at any point in
time, a dimension may stand out as the one
on which firms compete most and which
consumers value the most. That is by no
means the only dimension of performance.
Actually, at any point in time, multiple
dimensions are at play. What makes the
world particularly interesting is that these
dimensions are in a state of constant
flux. This change is neither random nor
one driven primarily by consumer
demand. Rather it is change driven by
the emergence and evolution of new
platform technologies.
When a new platform technology enters
the market, it often introduces one or more
new dimensions of performance. The
new technology is sometimes (but not
always) superior to the old technologies
on those new dimensions. The new
entry sensitizes consumers to the new
dimensions and changes the configuration
of consumer demand.
For example in displays, in the 1970s and
in early 1980s, when the cathode ray
tube (CRT) display monitor was the sole
platform, consumer interest focused on
resolution, especially as that dimension
improved rapidly till about mid 1980
(see Figure 5c). When the liquid crystal
display monitor (LCD) came on the scene,
it created excitement and interest in two
new dimensions, thinness and lightness.
Consumers had the option to trade off
lower resolution (at least initially) for lighter,
thinner displays. In the 1990s, when
plasma came on the scene, it introduced
two more dimensions, brightness and large
screen size. Now, the organic light emitting
diode (OLED) display monitor has come
with foldable screens, introducing the new
dimension of convenience. Table 4 shows
how dimensions changed in the other
markers we studied.
Is evolution of dimensions
driven by consumer demand or
technological evolution?
It’s a philosophical issue whether desire
for these dimensions is inherent in
human nature or created by the emerging
technologies. In our opinion, technological
evolution is what brings dimensions into
play, makes them salient to consumers and
shapes consumer demand.
As technologies improve on these
dimensions, they also target new
applications in new, promising
environments or markets. The new
market may redefine selection criteria,
performance thresholds and price/
performance trade-offs 3,4 . These
factors, together with the abundance of
opportunities in the new market,
enable rapid growth in performance
of the new technology. For example,
wireless communication technology was
initially applied to wireless telegraphy,
then to broadcast radio and recently
to voice communications over cellular
telephone markets.
In some cases, the new technologies may
not even compete directly in the same
market because of low performance. For
example, LCD did not compete directly with
CRT for many years as the technology did
not offer high resolution. The technology
was initially used for pocket calculators,
3 Romanelli, E. and Tushman, M. (1994), “Organizational Transformation as Punctuated Equilibrium:
An Empirical Test,” Academy of Management Journal, 37(5), 1141-1166.
4 Levinthal D. (1998), “The slow pace of rapid technological change: gradualism and punctuation in
technological change,” Industrial and Corporate Change, 7, 217–247.
17