Predictions about how products spread are usually based on the assumption that a few early adopters encourage an increasing number of people to start using the product. This assumption has largely been true of new technologies. But our research on phones, cars, and apps shows that when a product is not new but instead updates or replaces an existing product (which we call replacement innovations), the growth curve is very different, and managers making estimates around exponential growth are setting unrealistic expectations.
How New Versions of Products Spread Differently Than Entirely New Products
A better formula for estimating the early growth of a replacement innovation, or a product whose new version is replacing the older version of that product, follows a power law, with rapid adoption in the beginning followed by much more gradual takeoff as users make adoption decisions. This model generates more accurate predictions about adoption and, in turn, more realistic expectations and better understanding of resource needs. For managers making decisions about when and how to release replacement products and innovations, this finding means that if you’ve been applying the traditional adoption model to what could be considered replacement products, you’re likely underestimating the initial excitement about your new product while overestimating the overall speed and size of adoption. This could mean wasted opportunities at the outset, followed by unrealistic expectations and, potentially, misallocated resources for the expected growth phase. On the other hand, our finding for the adoption of replacement innovations can help to create better prediction models, which may lead to better long-term organizational performance and create a significant advantage that competitors using other models can’t match.