Copyright © 2004 Sherif Kamel Theory of Diffusion of Innovation Sherif Kamel The American University in Cairo.

Copyright © 2004 Sherif Kamel

Theory of Diffusion of Innovation

Sherif Kamel

The American University in Cairo


Theme of the theory

How ideas and technologies can spread and become accepted in a community?

Technology cycle includes:o Adoption

o Diffusiono Adaptation


Innovation

An idea, object(s) practice(s), or product perceived to be new by the relevant individual or group adopting it

Uncertainty exists about both the innovation’s purpose and value as well as the evaluation and consequences of use


Diffusion theoryEverett Rogers (1983)

The process by which an innovation is communicated through certain channels over time among members of a social system


4 elements of diffusion Innovation

o An idea, object(s), practice(s) that is perceived as new by an individual or other unit of adoption

Communication channels (knowledge)o Means by which messages get from one individual to another

Time (decision process)o innovation-decision processo Relative time with which an innovation is adopted by an individual or

groupo Innovation rate of adoption

Social System (structure)o A set of interrelated units engaged in joint problem solving to accomplish

a common goal (opinion leaders are capable of influencing others)


Types of innovations Innovations differ in their degree of newness and this helps to

determine how quickly products will be adopted by a target market The more novel the innovation, the slower the diffusion process Innovation continuum is based on the amount of disruption or

change


Original theorists

Gabriel Tarde (1903)o S-shaped curve for diffusion processes

Ryan and Gross (1943) – adopter categorieso Innovatorso Early adopterso Early/Late Majoritieso Laggards

Katz (1957)o media opinion leaders opinion followers


Rogers’ (1995) Diffusion of innovation – theory stages

Adoption Processo Awareness - individual is exposed

to innovation but lacks complete information

o Interest - individual becomes interested in the new idea and seeks additional information

o Evaluation - individual mentally applies innovation to his present and anticipated future situation, and then decides whether or not to try it

o Trial - individual makes full use of innovation

o Adoption - individual decides to continue the full use of innovation


Factors affecting diffusion

Innovation characteristics Individual characteristics Social network characteristics Others…


Innovation characteristics Observability

o The degree to which the results of an innovation are visible to potential adopters

Relative Advantageo The degree to which the innovation is perceived to be superior to current

practice Compatibility

o The degree to which the innovation is perceived to be consistent with socio-cultural values, previous ideas, and/or perceived needs

Trialabilityo The degree to which the innovation can be experienced on a limited

basis Complexity

o The degree to which an innovation is difficult to use or understand.


Societal conditions conducive to diffusion

Modernity Physical distance Opinion leadership


Diffusion process

Time

Percentof adoptions

0%

100%

Early Adopters

Late Adopters


S-shaped diffusion curverate of adoption

0

0.2

0.4

0.6

0.8

1

Per

cent

diff

usio

n

0 5 10 15 20 25 Time

100% adoptionor saturation

point


Critical issues in understanding high-tech customers

Factors that determine howdesirable customers are

Factors that affect purchase decision

Factors that affect timing of purchase decision

High Tech Customer

Perceived ease of use(TAM)

Perceived Usefulness(TAM)

Trust


Constituencies of diffusion of innovation

Innovators (2.5%)o Technology enthusiasts

Require a shorter adoption period than any other group Venturesome, risk takers Financial resources to absorb unprofitable innovations Understand and apply complex technical knowledge to

cope with a high degree of uncertainty Appreciate technology for its own sake Motivated by idea of being a change agent Gatekeeper to the next group of adopters



Early adopters (13.5%)o Visionaries

Greatest degree of opinion leadership Role model within social system, respected by peers,

successful Want to revolutionize competitive rules in their industry

(want to be first) Attracted by high-risk/high-reward projects (adventurous) Not necessarily very price sensitive (think-spend big)



Early majority (34%)o Pragmatists

Interacts frequently with peers, deliberate Holds positions of opinion leadership Comfortable with only evolutionary changes in business

practices, in order to gain productivity enhancements Want proven applications, reliable service Buy only with a reference from trusted colleague in same

industry Want to pick the same technology solution (avoid risk) Prudent; stay within budget Make slow, steady progress



Late majority (34%)o Conservatives

Responds to pressure from peers Economic necessity, skeptical, cautious Technology shy Very price sensitive Require bullet-proof solutions Motivated only by need to keep up with competitors in

their industry Rely on single, trusted advisor



Laggards (16%)o Skeptics

No opinion leadership, isolated Point of reference is in the past Suspicious of innovations, innovation-decision

process is lengthy, resource limited, traditional Want to maintain status quo Technology is a hindrance to operations Buy only if all other alternatives worse


Diffusion of innovation implications

High-tech firms must provide upgrades that allow firms to take advantage of new technologyo without scrapping investments in the prior generation

A “migration path” is a series of upgrades to help transition the customer to new generationso customer readiness is a must (awareness and training are

integral elements)


Measuring IT in the organizationItem

Corporate productivity

Technology deployment

Remuneration

Functional productivity

Infrastructure costs

Application costs

Purchasing performance

Development efficiency

Maintenances cost.

User involvement

Measures as Revenue per employee

IT cost per employee

Salary cost per employee

Output units per employee

Desktop/server/network cost per head

Application development/maintenance cost per head

Hardware/software cost per PC

Cost per delivered function point

Maintenance cost per PC

% user time in application requirements

Level1

2

2

2

3

3

4

4

5

5


Innovation scorecard

Knowledge creation Human resources Financial resources Knowledge diffusion Collaboration Market outcomes


Role of change agents

People who try to influence the innovation decisions in the direction desired by change agency

Change agents usually have technical training Gradual transformation is a key element for successful

information technology diffusion and implementation


How to minimize the knowledge gap

Be aware of differences in knowledge level of change agent and target

Provide foundation of knowledge on which to build Needs assessments (to increase involvement) Use highly accessible channels for effective diffusion


Remarks

Should we look at innovations as technological objects or at the innovation process? o Should focus on the innovation process with its economic and

social implications

Which dimensions of innovation should we exploreo Technical products/processes?o Organizational/market change?

Focus on technological innovation, its importance in competitive strategies, its impacts on changes in its product mix


Remarks

How can you classify newness and degree of innovationo New to the firm? First in the market? First in the world?o Incremental or radical innovations?

Focus on all modes of novelty, because of the extreme importance of incremental innovation and intra-firm diffusion in innovation effects

What kind of measurement concept/units should you choose?o Focus on financial flows because of the commercial importance

of innovation and the financial commitments made by the firm

Copyright © 2004 Sherif Kamel Theory of Diffusion of Innovation Sherif Kamel The American University in Cairo.

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