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Copyright © 2004 Sherif Kamel
Theory of Diffusion of Innovation
Sherif Kamel
The American University in Cairo
Copyright © 2004 Sherif Kamel
Theme of the theory
How ideas and technologies can spread and become accepted in a community?
Technology cycle includes:o Adoption
o Diffusiono Adaptation
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
Diffusion theoryEverett Rogers (1983)
The process by which an innovation is communicated through certain channels over time among members of a social system
Copyright © 2004 Sherif Kamel
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)
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
Factors affecting diffusion
Innovation characteristics Individual characteristics Social network characteristics Others…
Copyright © 2004 Sherif Kamel
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.
Copyright © 2004 Sherif Kamel
Societal conditions conducive to diffusion
Modernity Physical distance Opinion leadership
Copyright © 2004 Sherif Kamel
Diffusion process
Time
Percentof adoptions
0%
100%
Early Adopters
Late Adopters
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
Constituencies of diffusion of innovation
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)
Copyright © 2004 Sherif Kamel
Constituencies of diffusion of innovation
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
Copyright © 2004 Sherif Kamel
Constituencies of diffusion of innovation
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
Copyright © 2004 Sherif Kamel
Constituencies of diffusion of innovation
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
Copyright © 2004 Sherif Kamel
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)
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
Innovation scorecard
Knowledge creation Human resources Financial resources Knowledge diffusion Collaboration Market outcomes
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
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
Copyright © 2004 Sherif Kamel
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