Foreseeing the Near Future: Marketing Based on The Diffusion of Innovation Theory and Early Adopter’s Effect

(This article is based on a webinar in July 2022. Nikkei Research is responsible for the summarization and translations.)

There are many ways to foresee the future, but in this article, I will introduce an approach that focuses exclusively on the trends of users/consumers of certain products. By looking at those targets in detail with the proposed method, we can see what will likely occur in the coming few years.

Stop chasing the major user types and focus on the extreme users (innovators and early adopters).

My work is based on a classic and famous theory that was first published in the 1960s by Everett Rogers — the Diffusion of Innovation Theory. Rogers was originally doing research related to agricultural pesticides and new corn. When a new pesticide is introduced, there are users (farmers) who will use it and those who will not, and their attitudes were completely different even though they were growing similar crops on the same land. It all began when he noticed that and began wondering why this was so.

One of Rogers' most famous words is his definition of diffusion — “the process in which an innovation is communicated through certain channels over time among the members of a social system.” The term “innovation” means the creation of new services and things, and the social changes triggered by them. The main idea of Rogers points out that the change might happen quite fast, but still, there will be a process of diffusion, and that diffusion may or may not be successful. The uniqueness of his work is the focus on the difference between those who implement early and those who take it in much later.

Rogers did not refer to companies that made or provided innovative products, or the inventors, entrepreneurs, or businesspeople as “innovators,” but rather he used that name for a specific user segment. Innovators, or “first adopters” in other words, are those who are the first to adopt a new technology or service into their daily life, the very leading segment of about 2.5% of the total population.

Before Rogers, it was said that this typology should be normally distributed, but it was called by many different names; sparkplug, igniter, etc. For a long time, each professor and researcher gave different names. Perhaps the most valuable achievement by Rogers was this categorization by the time of adoption: dividing users into five levels, with the first 2.5% as “innovators,” the next 13.5% as “early adopters,” the group slightly ahead of the average as “early majority,” the group below the average as “late majority,” and “laggards” at the end.

When names are unified, it does not just mean the labels are aligned, but it is equal to clarifying the social roles of innovators and early adopters. This is where the greatest consequence lies. I think the most praise he should get is by placing the name “innovators” on the user side.

In traditional marketing, most of the activities were inevitably focused on the majority; the two segments in Rogers' definition with “majority” in their names. The reason for this is, of course, the volume. The early and late majorities together account for nearly 70% of the market, and thus most of the marketing activities have been directed at these groups.

However, from the perspective of the diffusion of innovation, it is not enough, and we must focus on the extreme users (innovators and early adopters, or laggards who make up the last 16%), especially when we want to foresee the near future. The people on both ends, as the term “extreme users” suggests, are very special users with special behaviors. Even in the novel "design thinking" approach, this idea of looking at people at the edges of the market is often mentioned.

We all, who are involved in marketing, have probably heard about the importance of focusing on extreme users. Although, it is rather difficult to handle those segments. The main reason is that there are so few of them. Innovators compromise less than 3% of the total population and are inarguably difficult to approach.

Innovation has been driven by users.

When a product is first introduced to the market, innovators are the first to buy it, gradually penetrating to the next group of early adopters and so on.

While sometimes, as the innovation spreads, people start using the product in ways that are different from the initial purpose — which may be somewhat unpleasant for the manufacturer — and that new way being more socially persuasive, it spreads rapidly. When this happens, companies sometimes proceed to new product development, once they realize that the new utilization is far more convincing, or after receiving feedback, although they might not like it at first. There have been several cases that resulted in making a big hit.

After all, it is the same technology, the same service, and the same product, but the value changes in the real market. Why does the value shift? About 10 years ago, I wrote a book titled “Misunderstanding Innovation.” I named it as so because I found something slightly different from what was believed to be a general understanding.

There are many references to the phenomenon of product values changing after entering the market. New fads that users created can change the very nature of the product itself.

A popular example is mountain bikes. Mountain bikes were first created by users who customized their bikes to run on deserted lands and mountains, where it is now sold all over the world. Hashtags are often seen on Twitter and other social media. It makes it easier to categorize and search. This started from some American users and is now a standard feature, where it is necessary for news and other posts to work efficiently. That luminescent glowstick at concerts; the Cyalume, was originally just a simple lighting product to glow in the dark. The Japanese users started using them at concerts, shaking and playing with them, and today, probably the main usage of these products is in concerts. In a recent example, mostly female students send me pictures of themselves with the image inverted. They say it looks more beautiful when flipped. Perhaps they noticed this when they were looking at themselves in the mirror, or when they were taking pictures of their reflection image on the mirror. Nowadays, smartphone apps have a standard feature of inverting images. These changes in the product and service standards are happening frequently today.

This change in the usage and function of a product led by the users is called "user innovation". Eric von Hippel of the Massachusetts Institute of Technology created the concept in the 1980s and he has been following this phenomenon for a long time since then.

There have been several reports by other researchers worldwide, mentioning that not just the supply side but the user side plays a very important role when users create new ideas. The first study by Hippel focused on electron microscopes. Looking back at the history of the development of electron microscopes, most of the microscopes were first built as a DIY project by researchers, which are the main users. Manufacturers sometimes visit researchers in their network, receive ideas, and then make a new product. Hippel claims that this is the development cycle of electron microscopes and in cases of products with highly specialized functionality, the users are heavily involved in the improvement process, while the manufacturers are merely taking those ideas and standardizing them later. The core concept of Hippel’s user innovation suggests such sharing of roles exists. Hippel’s initial discoveries came from this particular area but were soon discovered that they can be applied to a wide variety of products.

Innovators are innovative in their consumption behavior but might not have innovative ideas.

Workers in a company are usually considered as BtoB audiences, while they are also consumers on the other side, and thus we can define those employees to what type they fall in, such as innovators, adopters, or majorities. I once conducted an experiment where we propagated ideas across different segments and saw how they evolved. This experiment led to a very interesting discovery.

In the experiment, targeting people working in the same company, the respondents were divided into innovators, early adopters, and majorities by asking, for example, the date of purchase of a certain game console. Then we asked the first group, the innovators, what they would think of if they had the chance to develop a new console themselves. Next, we send the ideas to their colleagues, who are considered early adopters. The second layer, the early adopters, add their thoughts and then send them out to the next segment, and so on (third layer: early majorities, fourth layer: late majorities). It was a kind of message propagation game of ideas.

The experimented company had a relatively large number of innovators, so it was skewed toward the front and had a small portion of late majorities. After conducting this large-scale survey, a kind of post-it workshop activity of idea improvements with the full history of whose primary idea it was and who enhanced it came out. We invited innovation researchers and futurist consultants as judges to examine which ideas were truly innovative and which ideas have a great market impact.

The first and most shocking result was that ideas that innovators come up with are not innovative. Innovators gave out a bunch of ideas but the observing judges felt all those ideas were something they have heard before, or those ideas were too narrowed down and would have a small market impact. Innovators had only a 5.6% chance of generating truly innovative ideas. In contrast, early adopters had a 35.6% chance of generating innovative ideas.

The second finding was that ideas that were highly rated as innovative, were enriched among the second tier; the early adopters. As a result, 45.5% of the ideas that were exchanged among early adopters were thought of as innovative. The next largest share of innovative ideas generated was between the innovators and early adopters.

Furthermore, interesting ideas were generated when information was passed skipping one layer in between; from innovators in the first tier to the early majority in the third tier or the late majority in the fourth tier. However, there were statistically significant differences only when engaged between the innovators in the first tier and early adopters in the second tier, concluding that ideas that emerge there produce truly innovative ideas.

These two findings were shocking to me at that time. Innovators — although they are named “innovators” — are not much innovative in a creative way. In terms of behavior, they adopt the product early and is definitely a leading “innovator”, but when trying to look beyond the present to see how the product or service will change, early adopters are also important.

Focus on Innovators and Early Adopters for Idea Development.

So, we should pay attention to early adopters. They are great at generating new ideas. However, the consumption behavior of early adopters, when measured by surveys, is very mediocre. They adopt earlier than the majorities, but they do not have outstanding characteristics, which is quite difficult to extract in surveys. For this reason, I feel they have been ignored for a long time.

What if, we could have a detailed comparison of innovators and early adopters? Wouldn’t that make us possible to reveal how the product values change over time in the market? Taking a further step, we might be able to utilize the pitch of idea development among them to generate further ideas.

To make it easy for companies to handle such surveys daily, it is necessary to have stable access to quality respondents for approaching specifically defined innovators and early adopters. The target domain must be defined first since different products have different speeds of innovation, and different speeds of diffusion, or those products’ diffusion might not be wholly intended to reach 100% in the market. The definition of the adoption categorization is simply how fast they bought the product, but there are various ways to find out if a person is an innovator or not by asking certain questions about awareness, and we should decide what the most effective definition is based on a statistical aspect.

Perhaps, with the ideal survey in our hands, it may be possible to foresee how the value of a product will change in the market by just asking. For example, we would make foretelling based on various assumptions; some technology will quietly penetrate the market, the product value slides over the course of time instead of innovation, the product quality changes, the product itself changes, etc. If we can successfully conduct surveys that capture innovators and early adopters correctly, we should be able to get better foresight.

Summary

We need to stop chasing the majority type of users and focus on the extreme users (innovators and early adopters).
Surprisingly, many companies are failing to do so. They are pressured to answer the question “How much can we sell?” and end up looking at only the majority. Since innovators and early adopters make up only 16% of the market combined, it is difficult to overturn an internal opinion that making a hit among these segments is useless. However, if we want to foresee the near future, we should focus on the extreme users first.

Innovators are innovative in their consumption behavior, but they may not come up with innovative ideas.
Innovators are the first ones to buy new products. The novelty of their behavior is outstanding. But on the other hand, they represent only 3% of the total population. Moreover, if the results of my experiment are correct, they are not great at generating new ideas. Innovators come up with many ideas within their rich knowledge, not of their own but something that is being said somewhere. While it is the early adopters who can help generate truly innovative ideas.