Learn the various sections of a cycle that pervades the business world.
The Hype Cycle, developed by Gartner, serves to illustrate the progression of acceptance of innovations in their target markets. Identifying where an emerging innovation is located in the cycle allows you to make the consequential decision of whether to adopt the innovation now or later when it has gained wider acceptance.
An innovation can come in the form of a technology or a method; as long as it serves to disrupt the status quo, it may undergo the processes described by the hype cycle.
The hype cycle looks like this:
The diagram shows the levels of expectations for an innovation from the start of its trigger up to its widespread acceptance (or abandonment).
The hype cycle is a combination of two plots: the hype level and the innovation maturity level.
The hype level illustrates the level of hype for the newly-introduced innovation. The introduction of an innovation generates hype depending on the expectations for its capabilities; the grander the expectations, the taller the peak of the hype level will be.
The innovation maturity level describes the level of development and implementation of an innovation. At the start, the innovation is not yet fully developed; thus, implementation is not widespread. Over time, as the innovation is further improved to solve the challenges facing its implementation, more and more companies are now opting to implement it. Finally, the innovation is considered mature when it gains widespread acceptance in the market.
The combination of the hype level and the innovation maturity level forms the hype cycle. The hype cycle has five stages. One good example of an innovation that completed the hype cycle is e-Commerce.
Stage 1: Innovation Trigger (formerly called Technology Trigger): The Hype Cycle starts when a breakthrough, public demonstration, product launch or other event generates press and industry interest in a technology innovation.
One significant challenge for establishing e-Commerce platforms is securing transactions from wiretapping, electronic eavesdropping, and theft. The solution is data encryption: encrypt the transmissions on the client side and then decrypt it on the server side.
The first e-Commerce site was set up in 1994. It was called NetMarket, touted as the equivalent of a shopping mall in cyberspace. It managed to demonstrate data encryption in securing payment transactions.
This can be considered as the birth of e-Commerce.
Stage 2: Peak of Inflated Expectations: A wave of “buzz” builds and the expectations for this innovation rise above the current reality of its capabilities. In some cases, an investment bubble forms, as occurred with the web and social media.
From 1994, several e-Commerce websites were founded. One of them is Amazon, an online bookstore. Yep, it started as a bookstore.
Other e-Commerce services included Pizza Hut’s online portal called – you guessed it – PizzaNet, eBay, Rakuten, Alibaba, Pets.com, and Webvan. Investors start flocking to the emerging e-Commerce platforms.
Stage 3: Trough of Disillusionment: Inevitably, impatience for results begins to replace the original excitement about potential value. Problems with performance, slower-than-expected adoption or a failure to deliver financial returns in the time anticipated all lead to missed expectations, and disillusionment sets in.
The conditions during the growth of e-Commerce services in the late 1990’s led to the growth of the so-called dot-com bubble. Several Internet companies quickly ran out of cash, forcing them to declare bankruptcy and close down. These include Pets.com and Webvan.
Stage 4: Slope of Enlightenment: Some early adopters overcome the initial hurdles, begin to experience benefits and recommit efforts to move forward. Organizations draw on the experience of the early adopters. Their understanding grows about where and how the innovation can be used to good effect and, just as importantly, where it brings little or no value.
Several e-Commerce companies such as Amazon and eBay survived the dot-com bubble in the late 90’s and managed to later dominate the e-Commerce industry (especially true for Amazon).
New developments allowed the e-Commerce innovation to mature:
Stage 5: Plateau of Productivity: With the real-world benefits of the innovation demonstrated and accepted, growing numbers of organizations feel comfortable with the now greatly reduced levels of risk. A sharp rise in adoption begins (resembling a hockey stick when shown graphically), and penetration (growth in the prevalence of an innovation) accelerates rapidly as a result of productive and useful value.
Today, e-Commerce is now part and parcel of everyday life: around USD 4,280 billion flowed to it last year, and it’s expected to exceed USD 6,000 billion in 2024. The spread of e-Commerce platforms also show how prevalent it is: Shopify, BigCommerce, and WordPress are some of the most dominant services, but others are following their lead.
Each stage of the cycle has corresponding traps and opportunities. They are as follows:
Stage 1: Innovation Trigger (formerly called Technology Trigger)
The benefit of being the first to develop and exploit the innovation is obvious: a big advantage over your competitors. Additionally, you can exploit the early advantage by refining the innovation early to stay ahead of your competitors.
The downside is, of course, cost; depending on the size of your business, the cost may be too great and impair your operations. But remember that innovation does not only mean expensive, shiny new gadgets; it can simply mean a new method of doing a certain process. In our example of e-Commerce, the group who first successfully made a secure online purchase were not part of a big company.
Stage 2: Peak of Inflated Expectations
If you enter as the hype rises to its peak, this is your opportunity to improve the publicity of your business: good publicity means extra growth. Being seen as a trailblazer in your market is good publicity, and adopting an innovation early means that your company is dynamic.
Once the peak is reached, expect that disillusionment will creep in soon; adopting at this point without preparing for the upcoming dip in hype can trap your business, hindering future growth.
Stage 3: Trough of Disillusionment
Disillusionment occurs when the expectations, often grand and towering, are unmet. This is the stage where it is tempting to bail out to cut further losses. However, there is a massive opportunity here owing to the fact that there’s already an existing wealth of experience about the innovation at this point. What a business should do is start acquiring talent and experts; they can provide a sensible picture of the innovation and how you can adapt it to your circumstances and conditions.
Stage 4: Slope of Enlightenment
Waiting for some time after the trough of disillusionment can be a wise move if you cannot afford to make big, expensive mistakes in adopting an innovation. At this point, there is an abundance of expertise that you can bank on for adopting the innovation. A little earlier, you are still ahead of most of your competitors, securing your relatively early gains. The gains, however, may not be as impressive as they could be if you adopt quickly after the innovation trigger.
Stage 5: Plateau of Productivity
At this point, your competitors have most likely adopted the innovation and are reaping the benefits from it. While you would have lost the advantages of early adoption, there are a set of advantages that you could reap when adopting at this stage. Primarily, the innovation can be considered to be mature at this stage. This means that the risks and the costs have been reasonably minimized for mass adoption.
Taking note of these traps and opportunities can help you prepare for the adoption of an innovation at any stage of the hype cycle.
Some of the newest innovations in the hype cycle for 2020 are as follows:
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