New versions spread differently than entirely new products

Predictions about how products spread are usually based on the assumption that a few early adopters encourage an increasing number of people to start using a product. But our research shows that when a product simply updates or replaces an existing product, the growth curve is very different.

A better formula follows a power law, with rapid adoption in the beginning followed by much more gradual takeoff as users make individual adoption decisions. This model generates more accurate predictions about adoption and, in turn, more realistic expectations.

To study the adoption

of replacement innovations, we examined four areas: mobile phones, cars, apps and scientists’ research focus. In each of these areas we documented the early growth of replacement innovations “following a power law with non-integer exponents.” (This means that when the product was introduced, it had a singular growth momentum that was fundamentally different from its growth in the rest of sales periods.)

Consider what happens when Apple releases a new iphone. There may well be lines of early adopters outside the store for the device’s release, but the next waves of adopters will have to decide that they’re ready to replace their current phones. The slower, more deliberate decisions they make help to explain why replacement innovations grow more slowly.

We identified three mechanisms that are primarily responsible for the observed replacement dynamics: (1) recency, or how recently the new innovation has been introduced; (2) replacement propensity, as some products are more “fit” to replace original versions than others are; and (3) popularity, since more successful products are more likely to attract more new users.

A model that combines these three mechanisms enables us to explain the growth patterns of replacement products and to identify three parameters associated with this growth. These parameters are: fitness (how fit your product is to replace others), anticipation (initial excitement among potential users) and longevity (how long before the product may become obsolete). To understand intuitively how sales will go, ask yourself about each of these variables. The more recent or popular the innovation, or the better the product-market fit, the higher the sales.

If you’ve been applying the traditional adoption model to what could be considered replacement products, you’re likely underestimating the initial excitement about your new product while overestimating the overall speed and size of adoption. This could mean wasted opportunities, unrealistic expectations and misallocated resources.

•Dashun Wang is an associatepr ofessora t Northwesternuniversity