Department of economics couse work from innovation economics theme: models of innovation processes

Understanding Diffusion of Innovation Models

Diffusion refers to a pattern that innovation or product takes to expand in the market. The pattern understands how the customers engage with the product right from awareness to final adoption. 

Everett M. Roger coined different terms for each group of adopters. The following categorizations are based on the characteristics of each group:

 

1. 
   Innovators: 
   

This group explores new ideas, new practices, or new technologies. They are open to taking risks with emerging new technologies. Hence, they have high financial liquidity & broad networking with other innovators. 

2. 
   Early Adopters:
   

Early adopters are the opinion leaders. They make discretediscreet choices. They are judicial in their activity of engaging with products.

Their evaluation helps in making improvements to the products. Therefore, their reviews act as a guide in making required changes to improve the output.

3. 
   Early Majority: 
   

They adapt to market innovation after a brief period. They come into the picture after innovators and early adopters. So, early majority engage and observe the reviews of the product before adopting the innovation. 

4. 
   Late Majority:
   

They are less active adopters in the process. They have a sense of skepticism in their mind. Also, they adopt innovation only if they get a strong positive feeling to purchase the product. So, they do thorough research and look for shreds of evidence before making the choice. 

5. 
   Laggards:
   

These are the lazybones. They adapt to innovation extremely late. They will read the other’s opinion about it before adopting it.

A Marketer needs to understand the behavior of these various adopters. So, examining their behavior will allow you to influence their actions.  Thus benefiting in creating strategies to generate an impact to acquire customers.

Business Models and Technological Innovation. Business models are fundamentally linked with technological innovation, yet the business model construct is essentially separable from technology. We define the business model as a system that solves the problem of identifying who is the customer, engaging with their needs, delivering satisfaction, and monetizing the value. The framework depicts the business model system as a model containing cause and effect relationships, and it provides a basis for classification. We formulate the business model relationship with technology in a two-way manner. First, business models mediate the link between technology and firm performance. Secondly, developing the right technology is a matter of a business model decision regarding openness and user engagement. It is recommended to follow an iterative approach. Use the following phases as a guide. Phases of business model innovation:

Discovery	Expected outputs:
Understanding of market Define the size of the market Identify key players in the market Understand evolution of the market	Size of the market (TAM) Main competitors in the market Key forces impacting the market

Table 2.

2. Problem Fit	Expected outputs:
Validation of user problem Size customer pains and segments Determine value of solving the pains Understand evolution of the problem	Size of the problem (SAM) Main customer segments Opportunities for innovation

Table 3.

3. Solution fit	Expected outputs:
Validation of solution Ideate multiple business models Evaluate viability of each model Test assumptions of each model	Size of the revenue potential (SOM) Completed BMC and BM Kit Initial validated assumption

Table 4.

4. Market Fit	Expected outputs:
Launch validated business model Test growth model Refine business model based on feedback	Fully validated business model Happy first customers Sustainable growth model

Table 5.