Ron Adner

The Emergence of Emerging Technologies

What is discontinuous about the moment of radical technological change? Discontinuity typically does not lie in a radical advancement in technology itself; rather, it stems from a shift of an existing technical lineage to a new domain of application. Seeming revolutions such as wireless communication and the Internet did not stem from an isolated technical breakthrough; rather, their spectacular commercial impact was achieved when an existing technology was re-applied in a new application domain. The biological notion of speciation events, which form the basis for the theory of punctuated equilibrium, can reconcile the process of incremental technical change with the radical change associated with the shift of an existing technology to a new application domain. This concept can assist managers to cope with, and potentially exploit, such change processes.

The Case for Formal Theory

This special topic forum contains seven papers that illustrate many of the ways in which management researchers can use formal tools—mathematical methods, simulation, and formal logic—to develop management research. Here we offer an overview of these methods and their advantages as tools for theory building.

Ecosystem as Structure: An Actionable Construct for Strategy

Over the past 20 years, the term “ecosystem” has become pervasive in discussions of strategy, both scholarly and applied. Its rise has mirrored an increasing interest and concern among both researchers and managers with interdependence across organizations and activities. This article presents a structuralist approach to conceptualizing the ecosystem construct. It presents a clear definition of the ecosystem construct, a grammar for characterizing ecosystem structure, and a characterization of the distinctive aspects of ecosystem strategy. This approach offers an explicit examination of the relationship among ecosystems and a host of alternative constructs (business models, platforms, coopetition, multisided markets, networks, technology systems, supply chains, value networks) that helps characterize where the ecosystem construct adds, and does not add, insight for the strategy literature.

A DEMAND-BASED PERSPECTIVE ON TECHNOLOGY LIFE CYCLES

This article considers the relationship between consumers’ valuation of performance improvements and technology development over the technology life cycle. Presenting a demand-based perspective, it explores how the character of life cycle maturity, the nature of competitive threats, and firms’ innovation incentives all change when consumer demand for performance matures in advance of a technology’s performance trajectories. It characterizes demand maturity by introducing the idea of a demand S curve as a complement to the traditional technology S curve. In doing so, it offers a new lens for assessing firms’ prospects of achieving superior performance through the commercialization of new technologies.

Reply: Real Options and Real Tradeoffs

The commentaries on our article fail to come to grips with the distinct challenges raised by a process of experimentation that leads to the discovery of new possible initiatives. These challenges differ from those posed by an investment that provides privileged access to a prespecified set of possible follow-on investments. By treating these challenges as simple problems of implementation, the commentaries ignore the strategic tradeoffs implied by efficient abandonment processes and, therefore, fail to clarify where the logic of real options is likely to be more (and less) helpful to strategy thinking.

Positioning on a Multiattribute Landscape

Competitive positioning is a central, yet understudied, topic in strategy. Understanding positioning requires understanding two distinct mappings: how underlying policies are transformed into positions, and how positions are transformed into market performance. A complete treatment of positioning requires incorporating organizational design in the presence of policy interdependence; consumer choice in the presence of trade-offs among multiple product attributes; and competitive interactions among firms. We develop a model that integrates these elements. We show that in a multiattribute setting, trade-offs have critical, nonmonotonic effects on a range of strategy questions including the relationship between positions that are operationally efficient and those that remain viable in the face of competition as well as the concentration of market share in the industry. Of particular interest are implications for firm heterogeneity. We show that increases in business policy interdependence can decrease positioning heterogeneity among firms in an industry, depending on the nature of trade-offs. We also show that the relationship between strategy heterogeneity and positioning heterogeneity is moderated by the extent of policy interdependence. This paper was accepted by Bruno Cassiman, business strategy.

A Demand Based View of Sustainable Competitive Advantage

We develop an approach to analyzing the sustainability of competitive advantage that emphasizes demand-side factors. We extend the added-value approach to business strategy by introducing an explicit treatment of how firms create value for consumers. This allows us to characterize how consumer heterogeneity and marginal utility from performance improvements on the demand-side, interact with resource heterogeneity and improving technologies on the supply-side. Using this approach, we address a variety of questions including whether technology substitutions will be permanent or transitory; the sequence in which new technologies attack different market segments; how rents from different types of resources change over time; whether decreasing marginal utility and imitation give rise to similar rent profiles; the extent of synergies within a firms resource portfolio; the emergence of new generic strategies; and the conditions that support strategic diversity in a market. Our focus on consumer utility and value creation complements the traditional focus in the strategy literature on competition and value capture.

Frenemies in Platform Markets: The Case of Apple's iPad vs. Amazon's Kindle

We study the compatibility decisions of two competing platforms that generate profits through both hardware sales and royalties from content sales. We consider a game-theoretic model in which the platform hardware may offer different standalone utilities to users who have different preferences over the two platforms. We find that incentives to establish one-way compatibility — the platform with smaller standalone value allows users of the competing platform to access its content — can arise from the difference in their profit foci. As the difference in the standalone utilities increases, royalties from content sales become less important to the platform with greater standalone value but becomes more important for the other platform. Compatibility increases asymmetry between the platforms’ profit foci and, when the difference in the standalone utilities is sufficiently large, yields greater profits for both platforms. We further show that social welfare is greater under one-way compatibility than under incompatibility, and there exist no incentives for either platform to establish one-way compatibility the other way round. We investigate as well how factors such as different platform production costs, exclusive content, and endogenized royalty rates affect compatibility incentives.We study the compatibility decisions of two competing platforms that generate profits through both hardware sales and royalties from content sales. We consider a game-theoretic model in which the platform hardware may offer different standalone utilities to users who have different preferences over the two platforms. We find that incentives to establish one-way compatibility— the platform with smaller standalone value allows users of the competing platform to access its content—can arise from the difference in their profit foci. As the difference in the standalone utilities increases, royalties from content sales become less important to the platform with greater standalone value but becomes more important for the other platform. Compatibility increases asymmetry between the platforms’ profit foci and, when the difference in the standalone utilities is sufficiently large, yields greater profits for both platforms. We further show that social welfare is greater under one-way compatibility than under incompatibility, and there exist no incentives for either platform to establish one-way compatibility the other way round. We investigate as well how factors such as different platform production costs, exclusive content, and endogenized royalty rates affect compatibility incentives.

Right tech, wrong time

This publication contains reprint articles for which IEEE does not hold copyright. Full text is not available on IEEE Xplore for these articles.

Increasing benefits & reducing social costs of technological innovations

Technological innovation is a double-edged sword. It can help solve major problems, such as how to treat cancer, and can be an engine of economic growth, but it can also cost jobs, such as when automation replaces people. Both aspects raise issues that have major but so far little-recognized policy implications. One such issue is that new technologies are now taking the place not just of routinized jobs but of more complex positions. Another is that many government policies meant to foster needed innovation are based on an outmoded understanding of how innovation occurs and thus are not as effective as they could be. As behavioral scientists who study technology and innovation, we offer insights into addressing both issues.