Diffusion of innovations is a theory explaining how, why and at what rate new ideas and technology spread along the adoption curve, illustrating that ecommerce success is achieved by early adoption.
Technologies tend to be adopted over time in a similar pattern. This is called the adoption curve (blue line above).
The first users to try something are represented by a small slice of the population called Innovators, ready to try the next new thing at the drop of the hat.
As time moves on, if the technology is successful, more and more people adopt it.
Early Adopters are a small but critical group to the success of a technology’s spread. If a technology can succeed with that section of the population, it will hit a tipping point.
That’s where things get really interesting, as the next two stages involve the majority of the population adopting the technology, crossing 50% market share (yellow line above).
The secret to ecommerce success achieved by early adoption
Identifying companies that are successfully moving along the early stages of the adoption curve is a proven strategy for growth-oriented ecommerce retailers.
Identifying the companies that are doing so very quickly and at an accelerating pace can lead to tremendous, life-changing profits for retailers in a short amount of time.
In other words, speed matters.
- Reduced competition: Companies that get to majority market share quickly benefit from a large technology and branding moat behind them.
- More revenues: The more people use your product, the more money comes in the door. Capturing “Early Adopters” means 6.4x more users (and revenue) than only having the “Innovators”, and getting the Early Majority triples your user base from there.
- Less marketing expenses: Companies that accelerate through the adoption curve usually do so because of successful network effects built into their product and good old-fashioned word of mouth. Opinion Leaders are doing their marketing for them, leaving more cash in investors’ hands.
- Growth becomes automatic: There are huge risks of failure at the Innovator and Early Adopter phases of adoption, but once a company has made it through the Early Majority phase, new user growth almost becomes a self-fulfilling prophecy. Think about how easy it was for Facebook to add users 250 million -300 million compared to users 1 – 50 million. “Everyone is on it, so I’ll join too.”
To summarise, companies that are accelerating through the growth curve are locking out competition, spending less money to make more money, and making future successes much easier and more likely.
How to Spot Companies Accelerating Through The Adoption Curve
One way to figure out if a company is accelerating through the adoption curve is to simply keep an eye on it. Innovators and early adopters are pretty good at spotting new technologies, like artificial intelligence, machine learning, predictive analytics, or predictive personalisation, and watching their take-up rates among other businesses.
Unfortunately, this is only a partial view, and subject to some pretty glaring bias.
Putting It All Together
- Companies and technologies work their way through the ecommerce adoption curve.
- Companies can move through adoption curve further and faster than laggards.
- An accelerating pace through the adoption curve indicates enthusiastic ecommerce adoption.
- Companies with dramatic acceleration through the adoption curve can become extremely lucrative revenue gainers due to multiple earned advantages.
- Quantitative data from new technologies can help ecommerce retailers understand both scope and pace (acceleration) of early adoption.
So the next time you’ve considering adopting new technology, remember where you are on the adoption curve – and whether or not it is accelerating its way to the pot of gold called majority adoption.
SwiftERM is a Microsoft Partner company.