In an era when the pace of technological disruption is rapidly transforming industries — think of streaming services challenging cable, ride-sharing apps versus taxicabs, or electric versus hybrid cars — both incumbents and new entrants must predict how consumers will respond to innovative offerings. Most predictive models, however, fail to account for the reality that the market doesn’t change overnight.
For example, for some time after DVD players hit the market, the decline in VCRs’ market penetration was relatively minor; many customers held on to both technologies before fully committing to DVD players. A variation on this pattern may happen with hybrid and electric cars, even as all-electric Tesla has overtaken hybrid pioneer Toyota in stock market value.
The authors of a recently published study set out to provide a more realistic picture of technological disruption by constructing a model that takes into account the rate at which consumers disengage