Question

What are some of the ways a firm can try to increase the overall value of its technology and its likelihood of becoming the dominant design?

Are dominant designs good for consumers? Competitors? Complement tors? Suppliers?

Answer 1

Firms can increase the likelihood that their technology will become the dominant design by:

a.increasing the technologies’ standalone value to the customer (e.g. superiorfunctionality at a competitive cost)

b.increasing the technologies’ network externalities value by

I)Encouraging developers of complementary assets to create products fortheir technologies,

ii.)advertising heavily to create a perception that the installed base is largerthan it is or that a new product with superior capabilities will be launchedsoon (so that consumers do not buy a product already available)

iii.)leveraging an incumbent technology’s complementary assets and installed base by making their technology compatible with the incumbent technology.

For consumers

YES: If the benefits accrued by consumers through widespread adoption of a technology outweighs the costs associated with a monopoly (e.g. higher prices, less product, variety, etc.)

NO: If the benefits accrued do not outweigh the costs.

For competitors

Might be YES: If the technology is “open” (not protected by intellectual property rights) or your firm is the owner of the technology that becomes the dominant design

NO: Firms that do not have their technology adopted lose their investment in their technology and also have to play catch up in order to compete with the firm that owns the dominant design–.

For complementors and suppliers

YES: A single dominant design is likely to the market uncertainty they face and the eliminates the cost of trying to support multiple competing technologies. Complementors can benefit from the establishment of a dominant design by not wasting resources developing for other platforms that do not thrive and from an expanded market for their products.

NO: A single dominant design is likely to reduce their power as suppliers

Thanks