uewtj]
HD28
.M414
Anirudh Dhebar
'ta csyj-j:)
School of Management
Massachusetts Institute of Technology
gj^^j^
38 Memorial Drive, E56-329
Cambridge, Massachusetts 02142-1347
Telephone: (617) 253-5056
e-mail address: adhebar@mit.edu
New-and-Improved High-Tech Products:
Speeding Producer, Meet the Balking Consumer
Anirudh Dhebar
WP # 3849
August 1995
ICRMOT WP
OCT
# 130-95
2 4 1995
LBBARIES
Copyright
Work on an
©
1995 Massachusetts Institute of Technology
earlier version of this article was supported by the Division of Research at the
Harvard Business School. The author is grateful to the Editors and two anonymous referees of
the Sloan Management Review for their comments on that version. The present version has
been accepted for publication in the Winter 1996 issue of the Reviexo. Please address all
comments
to the author.
New-and-Improved High-Tech Products:
Speeding Producer, Meet the Balking Consiuner
Abstract
All sorts of products,
seems, are being rendered "smart" and "high-tech" by the
it
increasingly ubiquitous microprocessor, and hardware producers and software developers are falling
over each other to be
first to
market with even-newer-and-even-more-improved versions. They
should constantly be asking the question, "What would consumers, especially consumers
'internalized' the existing version, think of the pace of product
improvement?" To use information
technology intensive products effectively, consumers often must
financial) investments in the product
once the investment
is
made
improved versions can throw
calculus.
It
and/or the overall system
a
to repeat the investment.
wrench
in the
and
and
which the product
is
and non-
used, and
number
of
The rapid introduction of new-and-
can make the consumer regret the act and timing of a previous purchase, hesitate over
this
reasons for
in
(financial
consumer's product-purchase and consumption
any new purchase, and agonize over similar situations
balk,
make long-term
they expect to be able to complete a certain expected
consumption cycles before having
who have
cannot be in the producer's long-term
in the future.
interest.
some
of these reactions.
consumers may
This article articulates the underlying
—and the consequences of—adverse consumer reaction
offers suggestions for n\itigating
In a sentence,
to rapid
product improvement
Introduction
I
purchased
my first car (a Honda Civic) and my first personal computer (an IBM PC
AT)
a
t
about the same time (the mid-1980s) and for about the same price ($6,000-$7,000; the price of the
computer was inclusive of a monitor and a
Both products were what economists call
printer).
"durable goods"; both were used in larger systems consisting of the user, complementary products,
and
infrastructure; both required mastering
complex user interfaces and protocols; and
the manufacturers followed
up
My experiences owning and
replacing the two were, however, very dissimilar.
An
years, for the most part with satisfaction,
not
much more superior,
rising,
I
was glad
As
replaced
I
and easily disposed
basic transportation goes, the
but
it
new
enough
for
it
my car when
(not because the
I
I
did and not
computer
itself
used
give
it
away; and when
it
my
car for eleven
under a third of the
purchased as a replacement was
the rate at which car prices were
later.
different:
I
could barely squeeze three
was wearing out, but because it was soon
my software, my display monitor, or my colleagues); at the end of
me,
to practically
car
I
off for just
it
was much more expensive and, given
My experience with the personal computer was very
years out of
both cases
the initial models with a sequence of "new-and-improved" versions.
annual stream of new-and-improved Civics notwithstanding,
original purchase price.
in
came
to a
replacement unit,
I
not powerful
three years,
I
had
looked at the stream of
cheaper, even-newer-and-even-more-improved computers, monitors, software, printers, and so on,
reflected on
my experience,
game in which
I
the
and
tried
my best
to
put off
its
consumer could never win. Regret (over
replacement purchase), and anxiety (about future trends
system) seemed the only outcomes one could be sure
I
suspect
I
am
not the only consumer
who
of.
feels
I
purchase.
my
I
felt
like
I
was playing a
past purchase), hesitation (over a
for all
the different compxjnents of the
was, to put
it
mildly, not happy.
somewhat helpless when coping with the
steady stream of even-newer-and-even-more-improved personal computer related products.
the following quote from a story in The Wall Street Journal:
In the beginning, there
was Microsoft Word
1.0,
wasn't perfect. So Microsoft Corp. developed upgrades:
and
Word
it
was
good.
2.0, 3.0, 4.0,
But
and
5.0.
it
Take
2-
Microsoft
with a devotion
isn't alone.
to the
The
entire software industry has
"new and improved"
that
would shame
a soap maker.
While such upgrades usually include many worthwhile
increasingly are balking at trading up.
"A
often as the vendors offer upgrades/' says
Society,
lot of
...
[the]
embraced upgrades
...
features, oonsun>ers
people don't need
to
upgrade as
president of the Boston Computer
...
"ll]t
seems
to
me
upgrades are nothing but bad news," says
...
[the] director
of information technology for [one of the divisions] of Hercules, Inc., Wilmington,
Del.
for
She complains about the complex process of exchanging every
new ones and
the time
In the five years that
suppliers have not slowed
it
takes to teach users about
have elapsed since the above
down
user's old disks
new features.^
story,
computer hardware and software
the pace of new-and-improved offerings:
Every few months there's a new generation of something
—hardware
or
software that increases the speed or power of a computer system. Advertisements
trumpet each breakthrough and
additional
power
is
The determination
it's
left
to
consumers
to
determine whether the
worth the investment.^
is
not easy given the multi-component nature of computer systems, the
standards-still-being-established phase of the industry, and the fact that
components follow
their
own equivalent of so-called Moore's law
every [eighteen months, revised in 1975
to]
the different system
("computer chips double in power
The demand consequences
two years").
for
new-and-
improved hardware and software can be worrisome:
Will the
fears that
mass movement
whatever they buy
of computers into
homes be stymied by consumers'
will instantly be out of date? [A reader in Dallas]
' Bulkeley, William
M. "Software Users Are Beginning to Rebel Against the Steady Stream of Upgrades," The
Wall Street Journal, September 20, 1990, p. Bl.
2 Mills, Joshua.
"Revving
Up Computers With New CD Drives,"
The
New York Times, August 10,
1995, p. C2.
wonders,
technology changing so
is
fast that "the cart is
going downhill faster than
the horse?"3
While the case of computer hardware and software
"the cart
may
be going downhill faster than the horse" extends
many but not all
home
equipment. All durable goods,
all
improved as
and smarter
product, learned
use.
rival
used in a system environment, and
all
being continuously and
designers try to outdo each other at putting microprocessors to
how to use it, and
the answers are, "Yes"
Take the telephone, the
entertainment system, the office copier, or factory automation
Have you ever sensed
and-even-more-improved version
If
product categories as well,
not look far for a validation of this assertion.
food processor, the camera, the
greater
to other
revolving around the increasingly ubiquitous microprocessor.
The reader need
significantly
the most compelling, the sense that
is
no sooner have you purchased one version
that
acquired the necessary accessories that there
—often, even
lower price?
at a
and "Not happy about
it,"
In the face of a touch-tone tidal
And what has
is
then you are not alone:
wave, many of the nation's dialers are
prefer to keep things slower," explains [an Atlanta
As
1
"I
reflect
how
don't like
things get faster and
in the
resident with
to
—basis that
just
— implications
racing to introduce new-and-improved versions of products should bear in
anything, can the producers
3 "Bulletin
^
De Lisser,
do
Eleena. "If
that
mind? And
to mitigate the negative reactions suggested in the
Board," Business Week, July 11, 1994,
Two, are
producers
three,
what,
examples?
p. 24.
You Have a Rotary Phone,
Journal. July 28, 1994, p. Bl.
being unreasonable, or is
can be conceptually articulated?
there any generalizable implications in terms of consumer reaction
if
nine rotary
mind. One, what would explain the
above examples: are the consumers
there substantive basis for their reaction
"I just
faster.""*
on these examples, three questions come
consumer reactions suggested
an even-newer-
been your reaction?
refusing to scrap their rotaries for the latest Trimline or cordless phone.
phones].
of the
Press
1:
The
Trials of Using
Old Apparatus," The Wall
Street
a
-4
New-and-Improved Versions
of
Why
High-Tech Products:
Consumers Care About the Pace of
Improvement
Consider
We enter
been on the market for some time.
The version
improved version.
choice
has
a "high-tech" (in particular, information technology intensive) product that
is
indeed improved:
unencumbered by investment
new
they would pick the
the other marketing
the story at the time of the introduction of a new-and-
in or habituation
if
consunurs could
a fresh choice
with the existing version of the product
version over the existing version.
mix variables such as
—
make
We
price, distribution,
—then
assume that the producer has
and conununications
set
so as to support
such choice.
A better product and right price, distribution, and communications, and
in place for
Specifically,
an enthusiastic market response
does
it
matter
how soon
to the
the pieces
new-and-improved version.
after the existing version the
new
version
is
seem
to
be
Or are they?
introduced?
And
why?
To answer these questions
satisfactorily,
we must understand
the nature and durability of
the consumer's investment in the product and, importantly, the overall system in
is
which the product
used.
Consumers Make Durable Investments
The products
telephones,
food
cited
the
in
processors,
They
are
all
Products
—and
introductory
cameras,
automation equipment, and so on
(1)
in
Overall Systems
in
section
—computer
home entertainment
systems,
—products that
durable products
make a long-term investment
in
When
consumers exjject
software,
factory
copiers,
to use
repeatedly
consumers purchase these products, they
them and,
in return, acquire the right to a long-term
consumption stream. The consumption stream has
new, but goes
office
and
—have a number of things in common:
over an extended period of time.
is
hardware
maximum value when the
down as the product gets older (with a
fewer remaining consumption possibilities and,
in
finite
any
product
life,
case, product
product
there are
performance
5-
may
deteriorate with use, ccxisumer needs
bored with the old and
(2)
start
may
grow, and/or consumers
not in isolation but with one or
more complementary
hardware
products in integrated, multi<omponent systems (examples: computer
nodes
in
an
lenses, amplifiers
office local-area
and speakers, copiers and printers as
networks, and factory automation equipment as part of
To use the products effectively,
a computer-integrated manufacturing system).
consumers must invest
in other
system components as well, and this investment can
exceed the investment in the product
lens reflex
(3)
itself
camera body, a Nikon FE,
three years in lenses,
filters,
get
craving for something new).
Many of these products are used
and software, cameras and
may
(example: in 1980,
for $250;
my
total
and converters was over
I
purchased a single-
investment over the next
$1,000).
Getting a multi-component system to work properly almost always requires more
than
just
placing the individual components next to each other. Interfaces must be
must be made, compatibility
defined, connections
information must often be exchanged.
additional investment
Putting
all
and
must be established,
this together
may
yet
entail
—not only financial investment, but also investment of time,
energy, and other organizational resources.
(4)
Most of the products
in question require
human
user friendliness notwithstanding, ease of use
these products.^
The average consumer
is
operation and, recent emphasis en
not a particularly strong point for
often must invest significant time, energy,
and, on occasion, frustration in learning
—
let
alone mastering
product as well as other components of the system.
—the
These learning
use of the
costs,
high
enougji in the single-user case, quickly escalate in a multi-user organization
and
"Work on the interface between human and nuichine already consumes three-quarters of the development work
on electronic products, says Gary A. Curtis, a Boston Consulting Group Inc. vice-president and leader of its
worldwide information-technology practice. Nonetheless, technology keeps getting more costly in terms of the time
^
required to master
it."
("The Technology Paradox," Business Week, March
6,
1995, 76-84; the quote
is
on
p. 80.)
dwarf the
initial
investment in the pwoduct
study, a recent Business
Week
article
(Citing a Gartner
itself
"The
states:
trouble-shooting,
administration,
software,
and
lifetime cost.
its
Inc.
purchase price of a
initial
corporate personal computer accounts for only 10% of
Group
The
Throw
training."^
in
rest:
the
telephone, the facsimile machine, the copier, the printer, the projection system,
even the coffee machine, and very
investment
employees
Points (1) through
you are talking about a substantial
sooti
—the
something very intangible
in
an
of
ability
organization's
to use these productivity-enhancing resources.)
(4)
have major implications
for
how
consumers respond
to a
new-and-
improved product version.
Why
the Pace of Product Improvement Matters
Let us begin with a case where only the
product that
is
first
of the
above four points applies: we have a
durable and can be used without any additional
What
products, user learning, or system infrastructure.
hapjsens
investment in complementary
when
the supplier of the product
introduces a new-and-improved version: will consumers purchase the
new
version, or will
they
hesitate?
The answer depends, among other
existing version,
things,
on whether
a given consumer
is
an adopter of the
an adopter of a competing version, or a non-adopter (who would be purchasing into
the given product category for the
The non-adopter's decision
first time).
by assumption, the new-and-improved version
is
is
the easiest to analyze:
indeed improved and, given the absence of any
past ties with the product, non-adopters can decide on the new-and-improved version on
merits, purchasing
it if
their valuation of the
product exceeds
Next, take the existing-version adopter.
version depends not only on the
6,
price,
to the
new-and-improved
but, significantly, also the length of
1995, pp. 76-84; the quote
own
and not otherwise.
His or her reaction
amount of improvement
"The Technology Paradox," Business Week, March
its
its
is
on
p. 80.
time
-7-
that
has elapsed since the introduction of the existing (pre-new-and-improved) version.
existing-version adopter cares about the
improvement
(the ratio of
amount
of
amount
The
improvement and the pace, or speed, of
of
improvement and the
inter-version time).
Formally, say the existing-version adopter purchased the existing version of the product a
the time of the version's introduction, at
t
=0. By purchasing the product, he or she acquired the
rights to a consumption stream. Let the value of the stream at time
decreases over time (see Figure l)-7 the consumption stream has
product
is
new, but goes
HGURE
be
u{t).
maximum
For most products, u
value (u(0))
when the
1
HERE.]
course, the consumer does not secure the consumption rights for free: the product under
consideration must be purchased, and this costs
have purchased the product
consumer would
realize
if
r
(note: tt(0)
in the first place).
relevant investment in the product
the
(
down as the product gets older.
[INSERT
Of
t
is
>
r;
otherwise, the consumer would not
(Dnce the product
is
purchased, however, the
not the price paid at the time of purchase, but the proceeds
he or she were to dispose of the product (the "disposal value").
Like
the future-consumption-stream value, the disposal value also typically decreases over time (Figure
1:
"disposal value
(d)").
The
difference (u(t)
-
d(t))
measures the consumer's expected surplus
—the
difference between the value of future consumption stream and the contemporaneous investment in
the product at time
t.
Some comments on
typically is a significant
'
the shapjes of the curves represented in Figure
drop
1
are in order. First, there
in a product's disposal value at the time of purchase.
Figure 2 represents the normal case.
If
The drop
(r -
"network externalities" are present (consumption benefits increase with
the numb)er of users), the value of the future consumption stream
may increase as the adopter network expands.
where
diO"^)),
OCTisumers
pay
diO'*')
for a
the dispiosal value
is
"new" product, be
a refrigerator, a computer, a car, a
it
moment
whatever; the acquisition loses a chunk of value the
packing box. Second, while the actual curves
after the
and
purchase, represents the
just after
may
it is
premium that
machine
tool,
or
out of the merchant's door and the
be different than those represented in Figure
1,
product reaches a certain age, the gap between the value of the future consumption stream
the disposal value gets smaller as the product gets older.
Figure
1 is
improved version of the product.
version at the time of
new version
is
Two
•
its
Say the value of the future consumption stream
introduction
is
v and the version
genuinely improved {v > u(0)) and
choice then they
new-and-
useful in understanding the existing-version adopter's reaction to a
would choose
the
new
is
By assumption, the
offered at price p.
is
priced such that
if
new
for the
consumers could make a fresh
version over the existing version: v
-p>
u(0)
- r.
observations follow:
Observation
the sense
Legitimacy of the "new-and-improved" claim notwithstanding (in
1.
just articulated),
owners of the existing version
switching ("upgrading") to the
Explanation.
new
Suppose the new version
existing version will switch to the
the cost of switching, that
But these conditions
for small
(, it
is
may
is, \(
v
-
when
version
new
u{t)
is
it
is
-
d{t), or,
if
-
d{t)
> u(0)
-
r
t.
An owner
of the
benefits of switching exceed
equivalently, v -p > u{t)
not hold for relatively small
possible that u{t)
decide against
introduced in the market.
introduced at time
version only
>p
may
t:
we
see from Figure
and hence v
-
p <
u(t)
-
1
d{t)
-
d{t).
that,
even
though V -p> u(0)-r.
•
Observation
2.
The
later the
new
version
the existing version are to adopt the
Explanation.
For relatively large
This makes
more
it
t,
new
is
introduced, the
more willing owners of
version.
the difference u{t)
likely that the condition v
-p>
u(t)
-
d(t) decreases
-
d(t) will
with time.
be met.
The two observations lead
to
an important conclusion:
if
a
new-and-improved version comes
too soOTi after the introduction of the existing version (in other words,
improvement
too rapid), then existing- version adopters
is
version. Their reluctance to switch
itself,
but because, early in the
commensurate with the
life
is
not because they
the pace of product
choose not to switch to the new
do not value the improvement
in
and of
of the existing version, the benefits from switching are not
costs of switching.
The existing-version adopter's reluctance
•
may
if
relatively early in
its life
is
perfectly reasonable given that
(and, sometimes, for a long time thereafter), the existing
version continues to have a satisfactory consumption value for the existing-version
adopter;*
•
the adopter already owns the existing version
costs (for
—and,
importantly, has incurred
example, the "newness" premium that was referred
first-time transaction costs) that
would not be recovered
version disposal but would have to be re-incurred
if
to earlier
and other
at the time of existing-
the adopter were to switch to
the new-and-improved version; and
•
allowing
for
second-hand
inefficient
product markets
and
transaction
costs
associated with the disposal of the existing version, the existing-version adopter
may
not be able to realize the "true" value of the existing version over
its
remaining
life.
The import
of these three factors is greater in the earlier stages of the existing version's life
and
diminishes as the product ages; hence, the existing-version adopter's reluctance to switch to a new-
and-improved version
° Recent emphasis
if it
comes too soon
after the existing version.
on product quality, longer warranties, and so on, can only extend the period for which the
consumption value. This should cause existing-version adopters
existing version continues to enjoy a satisfactory
to stay with the existing version even longer
faster with new-and-improved versions.
—
all this
while suppliers are working overtime to come out even
-10-
This reluctance becomes even more pronounced when, as
complementary products,
invest not only in the product but also in
when
words,
all
existing-version
—and
system
this
four product characteristics identified
adopter continues
is
derive
to
usually the case, the user must
—in other
and learning
interfaces,
earlier
apply. To the extent that
consumption value from the
satisfactory
the
entire
value does not significantly increase by switching to a new-and-improved version
of one component of the system
complementary products,
—and to the extent that
interfaces,
and learning)
is
the consumer's system-wide investment (in
neither transferable to the
new
version nor
recoverable from disposal of the existing version, the consumer will be even more reluctant than
before to switch.
Two examples
and accessories
for
illustrate this point.
my $250 camera body.
Earlier
1
alluded to
That camera body
is
functionality (autowind, autofocus, sophisticated metering,
my $l,000-plus
investment in lenses
"manual" and does not offer
can see myself writing off of
for fifteen years)
my $250 investment in
and replacing
it
the old camera body (after
with a new-and-improved one.
the entire user-camera body-lenses-accessories system.
would
also need to replace
in lenses
and
accessories.
I
In other words,
although
I
at the
is
all,
valuable, and
I
have used
balk, however, once
To derive the benefits
my lenses, and am not yet ready to
the
and so on) that the newer, smarter,
microprocessor-laden "automatic" camera bodies do. The additional functionality
I
all
write off
product level
t
focus on
of autofocusing,
my $l,000-plus
my
I
i
I
investment
switching benefits are
greater than the switching costs, at the system level the switching costs exceed the switching
benefits; the result:
no new camera body.
The second example was the
subject of daily
media reports
at the
time of this article's
writing (August 1995) and relates to the Microsoft Corporation's introduction of
Windows
much-awaited upgrade of the market-dominant Windows operating system software.
just
the software from
version)
may
Windows
3.1 (the
existing version) to
Windows
cost less than $100, but that does not include the time
have expend unlearning the Windows
3.1 user interface
user interface (the two interfaces are different), and
it
95,
the
Upgrading
95 (the new-and-improved
and the energy the user will
and learning how
to
use the
Windows
95
does not include the price of a new computer
11
(or of
upgrading the old computer's processor, memory, and other accessories) that users of older
computers will need to avail themselves of
factor in these
the benefits that
all
system-wide considerations, the
real
Windows
may
switching cost
95 provides.
Once we
be not "less than $100" but
"a couple of thousand dollars or more."
A
how
Jolla,
recent article in The Economist provides interesting data
and representative comments on
these system-wide considerations might affect the market response to
Windows
California based Computer Intelligence InfoCorp, the article reports that
"[n]ot [be] for everyone" (see Table
1
their existing
who do
not have
MB or more of memory],!"^ the
machines or
to
buy new
...
add memory
the industry already.
Add
choice
in a
to all their offerings.
new
processor,
[for a
cough up the $2,000
1,
whether
to
upgrade
memory chips may
is
FIGURE
2
rise
a chip shortage in
and f)erhaps a bigger hard
Many may prefer simply
[INSERT TABLE
is
There
Windows
Now,
may
Most users could upgrade by purchasing
ones.
the price of beefing up an average PC to run
to
95
system with a 486 or
[a
another eight megabytes of memory. However, the price of
as PC makers rush to
Windows
La
):
For the two-thirds of users
Pentium processor and 8
95.' Citing
disk,
and
95 properly nears $1,000.
new Pentium,
16
MB based PC].
HERE.
place yourself in charge of computer systems in a large organization, and the costs
quickly escalate:
'
"The Defenestration of
Bill?",
The Economist, July
8,
1995, pp. 57-58.
fjaragraphs are from pages 57 and 58, respectively.
^"
What Windows 95
"really" needs
depends on
whom you ask; see Figure 2.
The quotes
in the following
two
-12-
INTECO
20%
for just
[of
Norwalk, Connecticut] predicts
of those adding the
the industry suspiect that
Instead they think
many
Windows [Windows
going straight to
NT needs even
beefier
Windows
95
As I heard
may never dominate
industrial-strength big brother,
nx)re
memory
The reason why corporations have
Windows NT is
that Microsoft
Indeed, some in
in 1995.
the commercial market.
the next year or so, and then ignore
exchange: better networking, more
to
machines
to old
corporate customers will stick with the current version of
3.1] for
its
program
that corporate users will account
is
(16
megabytes
is
reliability, faster
Windows
a start),
it
Windows
NT.
95 by
While
delivers
the
more in
operations.
to wait until "next year or so" before directly
porting the superior
a commentator explain, "The real solution
Windows
is
the
95 user interface to
Windows
switching
Windows
95 interface with
NT.
Windows
NT plumbing."
The above analysis
related to existing-version adopters
—consumers who own the
version and are thinking of switching to a new-and-improved version.
commented on
is
is
it.
own and
improved version under consideration.
similar to that
its
disposal
These values impact, respectively, their switching benefits
and switching costs as they consider a switch from the competing version they own
if
also
That leaves one consumer segment: competing-
the consumption value of the competing version they already
value in case they were to get rid of
switch
I
Their tradeoffs are similar to those of existing-version adopters, except that
version adopters.
concern
that,
the non-adopters' decision (with no investment in the existing version, their decision
not tied to the pace of product improvement).
their
Before
existing
I
to the
new-and-
shall leave the details to the reader, but the conclusion is
for existing-version adopters: competing-version adopters will
be reluctant to
the new-and-improved version is introduced very soon after the competing version.
The Special Case of High-Tech New-and-improved Products
Reviewing
—the
examples
the
—and
above discussion
notwithstanding
reader would correctly observe that everything
I
the
Nikon
have said so
and
far
Microsoft
would apply.
13-
more or
less, to
my car as well as my personal computer (or software, phone, camera, and so on). And
the reader would be correct: the four product characteristics identified at the beginning of the
previous section cannot, in and of themselves, explain the difference in
replacing
my experiences
owning and
my Honda Civic and IBM PC AT.
For that,
we must
refer to the personal
focus on the following differences
The differences were
partially
at least
by the Windows 95 example.
(a)
Although both
my
my 1984 Honda
first-generation
there were
marked
a
surprisingly, a precipitous
each
new
versions,
which the respective versions were
drop
version of the personal computer brought
in
functionality
—and,
with
but
frustratingly
not
in the disposal value of older personal computers.
Consistent with the observation in point
it
new model) and
year of a
first
unlike the car (with the increasing use of microprocessors in
improvement
significant
was the
IBM PC AT were followed by new-and-improved
cars, that too is changing),
it
Civic (1984
differences in the extent to
new and improved:
(b)
(I
computer in the points that follow, but the comments generalize to other
information technology intensive products as well).
illustrated
between the car and the computer
over the eleven years
(a),
owned
I
needed routine maintenance but no major upgrades (indeed, except
my car,
such
for things
—none of which had a
as air conditioning, the sound system, and the security systenri
bearing on taking
My
outlast
could upgrade).
The
it
computer, which had cost nearly as much as the car and probably could
physically, effectively
With the passage
itself.
it
1
computer, by contrast, started calling for major upgrades within months.
result: the
(c)
—there was not much
me from point A to point B
I
assumed
in case
of time,
1
all
I
had a much shorter
had
to
worry about
could get whatever spares
something went
v^rrong,
and the
I
life
than the car.
in the case of the car
needed, the mechanics
fuel required to run
the "system" changed in any significant way, and
I
contrast, in the case of the personal computer,
I
it.
was
who
the car
could fix
Not much
else in
could be fairly sure of that.
had
to
keep
my
eyes on
By
many
14
moving
each
targets,
computer
theory durable but in practice quickly obsolete: the
in
random access memory, hard disk
itself,
space, floppy disk drive size
and
format, display resolution and quality, printer drivers, operating system software,
application software, user and product-product interfaces and so on.
Alice
on the Queen's croquet
field
in
Lewis Carroll's
Alice's
like
felt
1
Adventures
in
Wonderland:
The
flanrvingo
...
begin again,
unrolled
chief difficulty Alice
and,
she had got
was very provoking
it
itself
when
found
...
its
at first
(d)
it
managing her
in
head down, and was going
to
had
the hedgehog
to find that
and, as the doubled-up soldiers were always getting
up and walking off to other parts of the ground,
conclusion that
was
was
a very difficult
game
Alice soon
came
to the
indeed.^^
New-and-improved models notwithstanding, I could be confident of one thing
in the
case of the car: driving infrastructure and protocol (habits, rules, and regulations)
would not change
so
fast
and
so
often
so
compatibility with the rest of the world. There
as
to
threaten
may be changes from one
the car to the next, but some "meta" standards were in place.
case of the personal computer, where generational changes
be separated by as
could leave
as two years
little
me with the
—in
periodically
No
version of
such luck in the
— the generations could
different components of the "system"
two equally unattractive alternatives: upgrade
insignificant expense), or
my
become increasingly incompatible with the
(at
a not-
rest of
the
world.
(e)
The term "compatibility with
meanings
"
in the
two
the rest of the world" takes on
cases. In the case of the car,
Carroll, Lewis. Alice's Adventures in Wonderland,
New York: W.W.
while
Norton
1
somewhat
different
shared the roadway, the
& Company,
1971, p. 66.
—
-15-
fuel source,
and the driving protocol with the
my own car
and did not exchange or share with another driver parts of the car or
through
created
"files"
the
driving
world,
rest of the
typically drove
allowed
This
process.
I
some
for
incompatibilities at the level of the car as long as they did not interfere
system-level compatibility needs. The case of the computer
may work on my
"file"
on
my
his or her
computer after I have worked on
share
server
a
and a
my
friend's computer,
printer.
A
it
on
friend
very different:
is
may work
on
my
my mine, and my friend and
—some
would argue,
different
with
file
1
I
on
might
greater
compatibility demand.
Differences (a) through
exfjeriences
also
taken together gp a long
(e)
owning and replacing my 1984 Honda Civic and
make poignant
the earlier discussion
way toward
my
explaining
first-generation
my
different
IBM PC AT. They
on the relationship between the consumer's investment
in
an overall durable-product-based system and the pace of product improvement: informationtechnology intensive products entail substantial, generation-specific, and not-easily-transferable
system-wide investments; individual components of the system, each of them a durable product,
improve rapidly; the improvements often are not
enhancements; and the consumer
and
react to all these
Points
(a)
field
—must make sense of
improvements.
through
(e) also
suggest the need for a more eclectic definition of the term "pace
1
characterized pace as the ratio of the amount of improvement
the inter-version time (the time interval
new-and-improved
flashy features but significant functionality
—not unlike Alice on the Queen's croquet
of product improvement." Earlier,
and
just
version).
of product improvement,
The
definition
some more
critical
between the introduction
is less
clear-cut
of an existing version
and a
once you allow for different dimensions
for a product's functioning
than others. Then, there
is
the fact that most product improvements are implemented in a product line context, with different
types and amounts of improvements being introduced perhaps at different times in different
"models" of the product
line.
Now, how does one measure
the
pace of product improvement?
-16-
competing product and complementary-product suppliers
Finally,
play
all
than coordinated)
(less
new-and-improved games, further muddling the concept.
The
eclectic orientation
may
provides a valuable insight: even though there
up in the pace of improvement of any one relevant product dimension
be no picking
any one system component,
for
the confluence of multi-dimensional, product line-based, multi-component changes can, at the level
of the system, convey the sense of a faster and faster pace. Thus, the beat of so-called Moore's
may remain two
years, but
what with one aspect
of a product changing now, a second six
law
months
later,
and
line,
and with different suppliers following not-always-coordinated timetables, the effective
different changes being
system-wide pace
imperative to oe
see pace as
for the
first to
implemented
consumer
may
at different times in different
models
in a
product
And, given the competitive
be less than two years.
market with a new-and-improved version of whatever, the consumer
becoming even
faster
and
may
faster.
Even-Newer-and-Even-More-Improved High-Tech Products: Durability, Revisited
The above discussion throws new
light
on
the concept of durability.
All things considered,
how
durable are information technology intensive high-tech products?
view
—the product's, the system's, the investor's, the consumer's, the producer's, or the
Each point of view implies a product
relevant
is
because
all
life,
wear
But
1
is
one
I
a limit
is
In theory,
1
like,
it
and
has unlimited
it
would never
life.
do not use the software by
itself;
on how often and
for
use
I
it
with
my
computer, an operating system
These have lives of their own, some of which are limited
(hardware, unlike software, can wear out and
is
to write this article.
can use the software as often and for as long as
software, a display, and a printer.
there
industry's?
these lives are different and "out of synch."
my car,
out. So, that
point of
and one reason why the pace of product improvement
Take the word-processing software 1 used
durability: unlike
And from whose
how long
context of the existing system. So, that
is
I
is
prone
to
break
down
eventually); consequently,
can gp on using the word-processing software in the
a second
life,
and
it
is
shorter than the
first life.
17-
My school purchased
the word-processing software and the other
and the whole setup cost a bundle. Obviously, the Dean
all
not keen on spending a large
were working
if I
capital investment depreciation
among
determined by,
Then there
is
—and
system
I
would
other hand, as
I
me, the consumer.
like to
get used to
two preferences, tension
Once
product
1
how
On
the one hand,
—and system—
development
efforts,
number
is life
three,
and
life,
is
the
have invested valuable hours
I
—individually
components
to use the different
it
is
jigging
and as a
amortize this investment over as long a time period as possible; on the
what
I
have, as
my
that
needs grow, and as
there,
I
want
would only be accentuated
resolve this tension (assuming that
Next, there
So, that
cycles.
other things, organizational policy and tax rules.
improved versions of the system components out
the system.
would be some policy on
for a for-profit organization, there
and replacement
the system together and learning
and
this
may
if I
hear of
1
upgrade. There
also
had a
all
is
the new-and-
a tension between
financial investment in
can), the result is a fourth
measure of
three measures.
first
who, given technological trends, in-house research and
supplier
and a broad
I
to
be different from the
set of other considerations
and-improved version and how new and how improved
determines
would
it
amount, and pace of product improvement. These decisions,
five
sum of money
over again any time soon. As an investor in the system, he has a certain pay-back period in
mind. Equivalently,
the
is
components of the system,
in
when
new-
to introduce a
be, in other words, the nature,
tum, imply a
—measure number
life
—for the existing version of the product.
Finally,
system that
is
Alice-on-the-Queen's-croquet-field
changing.
and-improved versions
lives.
The
If
resulting
all
of their
own, and these introductions
number
life is life
—and
strictly
is
not only one component of the
in the industry are introducing
collectively feed
back
to all the
new-
above
six.
there
may
be more
synchronized, then there would be no need for this
life
it
Competing and cooperating suppliers
these six lives
improving quality,
style,
article.
—were
of equal
The problem
from the product's point of view
is
is,
length
and perfectly
they are not. Because of
getting longer.
Because of
increased product complexity and growth in terms of number of applications and users, lives from
18-
the investor's and consumer's point of view are also getting longer.
technological progress and intense competitive pressure to be
and-even-more-improved product,
lives
values, investors and consumers
market with an even-newer-
from the system's, producer's, and industry's points of view
In a sentence, existing
are getting shorter.
first to
Meanwhile, because of
systems have increasingly satisfactory consumption
have larger outstanding investments
in existing systems, frequent
introductions of substantially improved new-and -improved versions of different system components
drive
down disposal
value, and, meanwhile,
new-and-improved versions continue unabated.
Rapidly Improving High-Tech Products: Impact on Consumer Attitudes, Expectations, and Purchase
Behavior
Having offered
concern
to
a
framework
for thinking about
why
the pace of product change
may
consumers of durable-product-based systems, and having argued that the concern
be of
may
be
particularly poignant in the context of information-technology intensive high-tech products, let vs
consider the impact of the rapid introduction of new-and-improved versions on consumer attitudes,
expectations and purchase behavior. Four questions,
all
framed from the consumer's point of view,
help structure the inquiry:
"What should
1.
"If
2.
I
3.
"What
will
4.
"How do
Of
the
new
have chosen differently
version that has just been introduced?"
1
I
do
feel
so soon
in the past?"
the next time around?"
about
all
of this?"
(1)
the four questions, the
first is
the easiest to answer,
and the two consumer segments that
have the greatest struggle over the question are the existing-version and competing-version
adopters. Both segments
(this
do about
had known that the new-and-improved version would be coming out
would
Hesitation
will
1
I
own a working version of the product, which
lowers their cost of switching
to the
has a dispxjsal value no doubt
new-and-improved version), but which also has a
19-
residual consumption value (and this lowers the benefits from switching).
suggests that
if
Our
earlier analysis
the new-and-improved version comes "too soon" after the existing or
competing version, then these consumers
may dedde
with the version they already own rather than
to
that
is in their
it
switch
some other
economic interest
to continue
new-and-improved version under
to the
consideration. For them, that early in the "life" of the version they already own, the switching
costs
may outweigh
and they
the switching benefits,
improved version
until
over past actions;
it is
some
put off purchase of the new-and-
will
future date. Their hesitation has nothing to do with remorse or regret
the result of hard headed, rational decision making.
There are ways by which the new-and-improved version producer can get existing- and
competing-version adopters to reduce their hesitation, and
around the problem
is to
reduce the switching
costs, either
new-and-improved version (software vendors,
for
we
see examples in practice.
One way
through aggressively low prices for the
example, provide special
price
deals
for
consumers who are upgrading from an existing version or switching from a competing product), or by
helping to create or support an active second-hand market (this can increase disposal value and
decrease transaction costs; Hewlett-Packard, for example, advertises a special deal offering to
purchase people's existing printers
Another option
More
to the point,
may
they were to switch to one of the company's newer printers).
even greater levels of product improvement, thus increasing
is to offer
switching benefits. Not only
take.
if
this be not easily possible,
it
may
also be an expensive route to
both this and the low-price-for-the-new-and-improved-version options
increase the existing-version consumers' sense of regret over having purchased the existing version
in the first place (see next section),
Finally, there is the risky
talking
and
I
believe this
is
not in the producer's long-term interest.
—but that does not mean producers do not resort to —strategy
it
up the new-and-improved version and talking down the
of
existing version: consumers will
perceive higher switching benefits and will be less cognizant of the switching cost.^^
'^ All
the buzz surrounding Microsoft's
Windows 95
introduction (in
its
August
28,
cites the following statistics ["Feel the Buzz," p. 31]: Microsoft's projected advertising
1995
issue. Business
Week
and marketing expenses
for
—
20-
Regret
My first-generation IBM PC AT came with 512 KB of
disk, a 6
360
MHz clock speed, an RGB (red-green-blue) display,
KB and one
faster version
1.2
MB). Less than
a
came out with a PS/2
spreadsheet software
required 2
line that
my ATs
Tv«) years after that,
1
have been
if
1
I
had waited
differences in the prices of the
have been, "Yes,
I
—or
particular
the
first
KB
of
and
random-
of the
software, and this
my point.
1
I
The answer
to the
I
question
from the use of the computer in the
realized
could have derived from a newer version, adjusted for
in other
of
money and consumption
benefits.
components of the entire personal-computing system,
number
of times
when
the answer would easily
am
going by the evidence of
should have waited."
reported anecdotes, but
seeing
have made
only for six months?"
not easy, but there were a
The reader probably has
all
1
two versions and the time value
Given the non-synchronized changes
is
at least 640
line
as these changes were taking place was, "Wouldn't
—even
intervening period and the greater value
AT
discontinued the
it
a
Lotus Development Corporation whose 1-2-3
the
depends on the tradeoff between the benefits
analyzing the tradeoff
later,
IBM introduced
expansion cards or display, and came with 3.5"
can go on, but
my mind
hard
Soon thereafter, the
also $500 cheaper.
was then using came out with a new version
recurring thought in
better off
the computer,
had a new internal architecture and
MB of random-access memory.
One
was
new display standard and, two years
memory, could not accept any of
floppy-disk drives.
it
MB
and two 5.25" floppy-disk drives (one
months after 1 had purchased
six
with a more capacious hard drive;
company introduced
access
random-access memory, a 20
my
sense
his or her favorite examples.
is
that such feelings of regret extend to other product categories,
used in systems involving
and information technology
— the
increasing
year, $200 million; in-store demonstrations before
fail
application
of
microprocessors
in
in general.
August 24 launch,
250,000; people invited to product launch parties in 40 cities, 70,000;
around day of launch, 450) cannot but
I
to
underscore the 'This
and, perhaps, downplay the price tag of upgrading
all
1.2 million; point-of-sale displays,
and How-to-Use Win95 books available by
is
a happicning" nature of the
new product
the hardware and operating-system software.
21
"If
Of
course,
nothing
is
only
what
If
had waited
decided
is
is
a real
is
nothing
—and
else,
A sense of regret, and a
owns and
—human
come
to
has been spent has been sunk, and
that
reaction;
strictures notwithstanding, regret
it
can
—and
—influence future
does
not risk get burnt again.
(2)
to
hang on
predicated on the following line of reasoning,
I
revisit past decisions.
be a doggpd determination by the consumer to hang on to the
The consumer's determination
version
go back and
to
These rationalist
spilt milk.
may
wish
money
decided, whatever
often powerful
there
version he or she already
Hesitation
..."
gained by crying over
nevertheless
action.
I
have and
in setting
naught.
am
I
up
the
"I
product version he or she already owns
to a
invested a lot of time and
whole system, and
I
going to continue using the
determination not to have past investments come
to
am
determined not
existing
naught leads
version
to
money
in
is
buying the
have the investment
come what may." The
to hesitation, a hesitation that is
motivated by considerations different from the switching benefits-switching costs based analysis
we saw
earlier,
Be
too
it
the
is
first
hesitation nevertheless.
type of hesitation or the second type,
many consumers balk,
There
to
but
is
then
demand
for the
those
It is
who
does not bode well for the producer:
possible that the consumers
likely
who
find
i
f
version will be adversely affected.
another respect in which consumer hesitation
do with the segment of the market most
version.
new
it
to put off
it
is
bad
for the producer,
and that has
purchase of the new-and-improved
most advantageous
to
put off purchase are
are at the "high end": these consumers have the greatest value for the product and in
whatever improvement that
is
being introduced, and they
may be most interested
in waiting for
the
next new-and-improved version. Unfortunately for the producer, high-end consumers are also those
who have
the greatest willingness to
pay
the producer's ability to price skim: sell
lower prices
to
for the product.
first at
This
high prices
to
may have
a detrimental effect on
high-end consumers, and later a t
low-end consumers. Furthermore, some waiting high-end consumers
may
defect to a
-22
competitor, possibly taking their future custom with them.
come from
presence
When
it
to
Where
will the cash flow
and market
fund and launch the next new-and-improved version?
comes
to hesitation
over purchase of the new-and-improved version,
it
is
not only
and competing-version adopters the producer must worry about. Non-adopters, on hearing
existing-
reports of the adopters' regret (over past choices) and hesitation (over present choices) nnay also
hesitate,
and
this
can really
doom
the new-and-improved version.
they have the same sense of regret
maybe they should
just
wait
it
when
The non-adopters'
concern; will
the next new-and-improved version comes along;
if
so,
out.
Anxiety
Observations about the pace and nature of past product evolution and word of mouth about
other consumers' experiences affect consumer expectations about future evolution and shape consumer
attitudes toward present and future purchase, with one thought playing back in the consumei's
mind: "This had better not happen
It is
•
useful to identify
two
a concern that
to
different expjectation effects:
there will be similar or even
future, with repeated
•
me."
need
to write off
more rapid product changes
in
the
long-term system-wide investments; and
a lack of stability in the expectations themselves ("The future
is
uncertain, and
I
am even uncertain about how uncertain it is.").
The former
effect
may
influence cxansumer purchase behavior but, at least,
consumer can plan around. The
latter,
it
is
something the
on the other hand, can throw the consumer's decision-making
process into disarray.
The chances
croquet-field effect.
of disarray
Now
only increase
when you allow
for the
Alice-on-the-Queen's-
the consumer must formulate expectations about the evolution of all the
elements of a multi-component system and plan the acquisition of individual components with a
watchful eye on the evolution of the entire system.
interactions,
The number
and scenarios explode, and so may the anxiety
level.
of relevant decision variables,
23-
Ultimately, anxiety about
—and
tech products
its
what the future may hold
in
terms of new-and-improved high-
adverse impact on expectations and product-purchase decision making
be even more damaging than regret about the past and hesitation over the present.
consumers en masse into luddites, but
What,
If
which was
limit,
may
not turn
cannot be good news for the producer.
Anything, Can the Producer Do?
Earlier,
initiative
it
It
—can
when
totally
talking about hesitation,
satisfactory:
can be restricted
to
I
suggested a range of possible solutions, none of
aggressive low pricing of the new-and-improved version (the
consumers who own an existing or competing version;
but, taken to its
such a strategy can culminate in an industry bloodbath and result in greater consumer regret),
an new-and-even-more-improved version
can use up scarce resources and will result in greater
(this
consumer regret), an active second-hand market (but
this
may
divert non-adopters from the
new-
and-improved version), and talking up the new version and talking dovm the existing version
(What happens when the
truth
comes
out?).
will
I
now
outline
some
additional options.
An "Optimal" Pace of Product Improvement
If
there
and recoup
is
one thing the discussion so
far points to
it
is
that consumers require time to digest
their durable investments in information technology intensive products
systems in which the products are used, and producers must factor this
in
and the overall
when pacing the
introduction of new-and-improved versions.
Factoring the demand-side considerations detailed in this article into an "optimal" pace of
product improvement
between, on the
is
no trivial
one hand, the
matter.
It
momentum
requires the producer to strike a judicious balance
of technological
innovation,
the
imperatives
of
competition, and the capability of the supply chain to deliver product improvement and, on the
other hand, the willingness and ability of the
demand
The desired balance can only be struck
processes and the discipline necessary to
let
if
side to accept
and adapt
to the change.
the producer organization has the decision
making
—and not
demand-side considerations have a voice
to
-24-
let
decisions on the pace of product improvement be
barred competitive race of technological virility
even-newer-and-even-more-improved version?").
made by
("Who
default, as an outcome of a no-holds-
and market
gets to concept
The point bears
special
first
emphasis
with an
in today's
business environment, for not only are the competitive pressures in the concerned industries greater,
the stakes larger, and the
hard
of opportunity smaller, but the supply side has also
in recent years to deliver the rapid product
thought
with
windows
to call for.^^
contestants
Unless there
falling
is
improvement that the business environment
a deliberate check against
over each
other
to
worked
introduce
it,
is
speed can become the game,
even-newer-and-even-more-improved
products in the market.
That deliberate check
would the consumers be
•
is,
"Suppose we can rush a new-and-improved version
willing to accept
a constant reminder that
it
it
and adapt
is
to it?".
the total system
—the
interconnected totality of the
all
and the appropriate
—that
about, and
it
is
and communications protocol
the total system that
is
market,
Answering the question requires
product, the relevant complementary products, the user,
rules
to the
the relevant interfaces,
the consumer cares
the relevant reference frame determining
the consumer's response to the new-and-improved version;
•
information on the relative sizes of the various consumer segments
(in particular,
existing-version adopters, competing-version adopters, and non-adopters) and a
dynamic understanding
of existing-
and competing-version consumers' residual
consumption value and disposal value curves
•
a
conceptualization of the
different
"lives"
discussion and working measures of the same;
1 o
'•'
The efforts at making
the supply side
at the overall
system
as characterized
level;
earlier
in
the
and
more agile have been pervasive: products are being designed so they lend
themselves to successive improvement, systems used to design products are being configured to facilitate rapid
product improvement, processes and operations are being
made more flexible with respect to product variety and
and inter-organizational communication are being reexamined to improve
eliminate the lags that slow down product change.
change, and traditional
coordination and to
modes of
intra-
25-
•
The
an appreciation of the interactive
effect of past experience
on the consumer's
and purchase
attitude toward,
discussion on regret ("whether there
is
of,
regret or not
and future expectations
a new-and-improved version.
depends on the tradeoff between
the benefits realized from the use of the product in the intervening period and the greater value the
consumer could have derived from a newer version, adjusted
money and consumption
versions and the time value of
product improvement. The pace
is
"too fast"
for differences in the prices of the
two
benefits") suggests one test for the pace of
or most consumers see the product as improving in
if all
"present value terms": the present-day discounted consumption value of an anticipated new-and-
improved version exceeds the consumption value
to regret their choice
off
when
of the existing version
and consumers, not wanting
the new-and-improved version will come out, will be tempted to hold
purchase of the existing version.
My
comments on the optimal pace of product improvement
between consecutive versions of a product and not the speed
market: once a new-and-improved version
conducted, then
concept
is
it
is
is
it
is
a
good strategy
to the
time interval
which a product concept
is
brought to
conceptualized and the above "deliberate check"
incumbent on the producer
articulated, then
at
relate
to bring
to
it
promptly
to
market; similarly, once a
have a new-and-improved version and ready for
launch at an appropriate time. Rapid product development and speedy market introduction
the organization nimble, responsive,
Two Good Reasons for a High
A
installed
lot of the
and
Pace: To Stimulate
discussion in this
base's) reaction to the
population, the installed base
base reacts adversely,
the
competing-version adopters
efficient,
is
article
and there
Demand and
to Capture/Hold on to
pace of product improvement.
small, then
switch and/or
—maybe—
it
argue against
that.
Market Share
focused en the existing-version consumers' (the
argument being that
to
is little to
make
may
the
it
is less
If,
in
the
relevant
consequential that
consumer
the installed
new-and-improved version may induce
stimulate significant
adopters. In such instances, rapid product improvement may, in
fact,
new demand among
be prudent.
non-
26-
Even when the existing-version installed base
argument
for rapid
may defect
to the competitor's
competition
to leapfrog
product change:
is
we don't do
not small,
may
be a defensive
'new-and -improved' product." This argument has merit and, indeed,
every producer,
for speed;
it
seems, wants
every other producer.
improved version
least
is
this scenario is that,
seen to be
on the one hand, racing ahead with a new-andalone competitive success while, on the other
critical for survival, let
over the long run, an industry cannot be well served
if
large
putting off product purchase and the installed base must often lick
postpone purchase
profit
there
the competition will, and our installed base
it,
one of the strongest motivator for the race
The problem with
hand, at
'If
is
is particularly
wounds.
worrisome because of the negative impact on
margins from the new version.
individual producers need
its
numbers of consumers
The negative impact comes
more and more resources to fund
faster
and
at
faster
a
start
The tendency
initial
critical
sales of
to
and
—when
time
product development.
Modular Upgradability
Perhaps the best way
installed base suffer
to sustain a rapid
and consumers put
off
pace of product improvement and yet not have the
purchase
existing (and future) version owners to selectively
dispose of
it
consumers more flexible with respect
contexts where there
who most value
is
a
to their
empty
socket
is
Modular upgrades can make
They are an especially
that
created the
module
that
is
is
attractive solution in
"lives."
they disaggregate the product, which
by consumers and competitors as an assemblage
rather than as an integral entity. There
allow
upgrade the version they own rather than
growing disparity between the product's various
is
— to
investment in a durable product, and they can be
the upgrades.
One problem with modular upgrades
increasingly be seen
modular upgradability
and purchase a new-and-improved version.
entirely
targeted at consumers
is to offer
of "plug
may
and play" components
nothing inherently wrong with this except that once an
plugged in
may
and-play easily leads to mix-and-match, and consumers
also be supplied
may mix different
by a competitor; plug-
producers' modules.
27-
Phasing in Product Improvement
Product Line
in a
Producers introducing new-and-improved versions of high-tech products can avoid some of
the pitfalls alluded to in this article by availing themselves of the multi-dimensional nature of
the product. Consumers typically
different
preferences for and valuation of
are heterogeneous in their
product dinriensions, and
may
it
be possible to pace and phase improvements along
individual dimensions such that the specific improvements from one product version to the next are
not seen by any one consumer group as being too rapid.
Cameras are
a case in point.
The Nikon Corporation introduced
bodies beginning in 1985. The
first in
winding
Nikon N2020, was introduced a year
as a
film.
new
The second,
the
the series, the
series of autofocus lenses; the
its
Nikon N2000, offered
"N"
series of
camera
a built-in motor drive for
later, in 1986, at
N2020 provided autofocus capability
the
same time
for the first time to
Nikon's "amateur photographers" market segment. In 1987, there was the Nikon N4004, an "entrylevel"
was
camera body with an improved autofocus module. Another year
the N8008, a camera for the higher-end segment; the
new form of microprocessor-assisted
professional
Nikon F4 with
all
metering. Finally, in
of the above
improvements
later, in spring 1988,
there
N8008 introduced "matrix metering," a
1988, there
fall
was the top-of-the-line
—and some.
Concluding Comments
have
I
in
my
shirt
pocket
my
father's 35-year-old
purchase, the pen's manufacturer has introduced
writing
— there
is
nothing
my
customary position between
through
many
accustomed
I
to the
it
pen, and there
article.
Installing the 30-plus
fingers as
I
glides over the sheet of paper
value that security as
used to write this
my
I
I
is
fjen.
many new-and-improved
pen's newer cousins can do that
into its
uses so
fountain
it
I
versions, but
—in terms of
cannot. Moreover, the pen slides
start to write
on which
In the years since its
and
write.
its
nib has been sculpted
In a very
deep
sense,
I
am
a certain security resulting from that knowledge.
struggle to master
thought
1
my other word
had succeeded, but
shrink-wrapped disks on
my computer's
I
processor, the software package
I
recently upgraded the software.
hard disk took 45 minutes. Then,
I
28-
had
to
new
customize the
in the version
memory
had
1
just
version, a hopeless task since
upgraded from. Next,
to run the software.
f)ages with footnotes;
1
A
final
Mind you:
Yes,
I
I
value
result in
my
the preference settings
laptop did not have enough
blow: the software insists on placing random page breaks en
in this
document before
crave for the security of
my fountain pen as
1
it
is
copx?
my having to junk entire systems
am
office copiers,
and so
spent
I
scared of
making
titan.
with some other products in
my
on.
life:
To be
versions of these products, but frequent improvements
that are in otherwise perfect
learn differently
1
developed by the industry
"home entertainment systems,"
many of the improvements in new
me to learn, unlearn, and
looked right, and
it
and
this is version 6.0 of the software,
computers, software, telephones,
sure,
discovered that
all
cannot solve the problem, and neither can the supplier's Help desk.
over an hour forcing page breaks
changes.
I
don't rcmember
I
how
working order; they require
to use the consecutive versions;
and they leave
me
confused, with less and less reliable algorithms for planning for the future.
In its June 10, 1991 issue. Business
Quoting a Price Watcrhouse survey of 300
71%
problem
[of
five
Week
carried a cover story on
British businesses, the story reported
the respondents] indicated
years ago,
it
"Computer Confusion."
that
while
has become a major one
...
uncertainty
today.
...
was
39%
not a
(of
the
respondents] said they are dealing with computer confusion by simply avoiding
purchases...
There's message in that
industry executives:
sales
slowdown.
buying decision
Maybe,
it's in
...
..."
statistic to
send
Unless computer confusion
"Any time
is
down
the spines of computer-
cleared up, they risk a serious
there's confusion, there's the opportunity to delay a
says Intel Corp. Senior Vice President David L. House.^^
clearing the confusion and planning for an uncertain future that consumers
need the greatest help.
^*
chills
"Computer Confusion,"
Business Week, ]une 10, 1991, p. 74.
29-
Value of future consumption stream (u
]
Time since purchase
FIGURE
1.
Durable Product: Value of Future Consumption Stream and Disposal Value.
30-
Total 1995 worldwide "ibm pc-compatible" installed base:
202
million units, of
MB
(megabytes) or
which
39%
use a "486" or "Pentium" microprocessor, have 8
more
22%
of
memory, and can
Windows
efficiently run
use a 486 or Pentium microprocessor, have 4-7
need merTX)ry upgrade
needs
at least
MB
4
of
Windows 95
run
to
memory
but
will
95,
MB of
memory, and
(the
efficiently
will
program
MB
work much better with 8
or
more),
14%
use a 386, 486, or Pentium microprocessor, have 3
memory, and
will
need
a
at least
memory upgrade
MB
to run
or less of
Windows 95
(upgrading the 386 processor would also help), and
25%
use a 286 or below series
95
Source:
(the
The
of
microprocessor and cannot njn Windows
program needs a 386 or higher series
Defenestration of
Bill?",
The Economist July
8,
of microprocessor).
1995,
p.
57, with adaptation.
tongue-in-cheek look at the difference bebween wfiat Microsoft say
what may be needed
for
running the program
TABLE
1.
efficiently,
Windows 95: Not
Om&miSS fTFim APFUCAWM9ATA CMIVU. tTAieO
tUAHBA FASim MiatOPRO...
.C&9X:fi.
see the Doonesbury
for
...HJITH89MORC-FOR.
Of^lCS rfitX)RaM$, AMP...
wllti
2.
znmBBseiBBi
F!T'$ACCM-
MANP$!
petmission of
nCURE 2. Windows 95's
Z218
Figure
HaY.../TJU9nUMaP
MQKMeSAmBS
1995 G.B. Jrudeau. Reprinted
strip in
Everyone
OfilWHARPPRlVe...
DOONESBURY copyright
For a
Windows 95 needs and
UNIVERSAL PRESS SYNDICATE.
"Real" System Needs?
"3r^
All rights
reser
Date Due
MIT LIBRARIES
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