The Correlation between Hype and Opportunity in Product Development

Decide your strategic bets by reading the press and evaluating the social hype

A while ago I had a very interesting discussion on how we would evaluate the market’s readiness for a new product. We wished it were possible to say:

“According to my brand new crystal ball, we should start developing The-Perfect-Product in Q1 and launch in Q4. That way we’ll catch sustainable traction and get the lowest CAC.”

So I decided to drill deeper and see if it is really possible to analytically evaluate what products or features should be launched and when. This article is going to find a correlation between social hype and market adoption by building an overlay of Gartner’s Hype Cycle and Moore’s Market Adoption Lifecycle.

Gartner’s Hype Cycle and Market Adoption Lifecycle

Back in 1995, Gartner analyst Jackie Fenn proposed a standard model for emerging technologies. The Gartner Hype Cycle for Emerging Technologies is now an institution in tech, with oceans of money flowing across industries, according to the Gartner annual report.

The model basically describes how media hype and people’s expectations of new and innovative products change over time. 

Expectations and Desirability

Mr. Fenn and Gartner had identified five stages of people’s perception:

  • Technology Trigger → emergence phase, first MVPs are developed and announced

  • Peak of Inflated Expectations → excessive enthusiasm stage, especially in the tech bubble

  • Trough of Disillusionment → excessive disappointment, you read about the overpromise of GAI (General Artificial Intelligence)

  • Slope of Enlightenment → part of the hype is coming back as the technology gets traction

  • Plateau of Productivity → yes, is working and nobody talks too much about commoditized products

💡Tip: Gartner’s Hype Cycle maps only the expectations, not market penetration, and not user adoption.

Gartner’s model is an amazing tool, following social perception along the product life cycle. But the lifecycle is not complete, as it misses the end-of-life phase.

Expectations

Grave Memorial is the last stage of any product when the category dies and walks in peace in the place where all the greatest humanity’s inventions are ending sooner or later – a place where it would be in good company, surrounded by swords and fancy carriages, steam engines and crinoline skirts, DVDs and Walkmans, or the flat Earth concept (uhm, well…)

Decades before Gartner, in 1962, Everett Rogers, professor of rural sociology, published Diffusion of Innovations, a theory that seeks to explain how, why, and at what rate new ideas and technologies spread.

🍄 Fun Fact: The theory wasn’t new, its roots are in 1920-1930 when some sociologists tried to understand how new farming technologies and ideas were spreading across farmers in the midwestern United States.

Technology Adoption Lifecycle theory claims that the first people to use a new product are the “Innovators”, followed by “Early Adopters”. Next, comes the Early Majority, the Late Majority, and the last group to eventually adopt a product, the Laggards. For instance, a laggard may only use a smart bulb when it is the only remaining bulb type on the shelf.

The model was extended by Geoffrey Moore in his cult book Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. Moore’s point is that the key to scaling up a product to the mass market is to move from the first initial group (Innovators and Early Adopters) to Early Majority. In other words, to fill the gap between visionaries and pragmatists.

To summarize:

  • Gartner’s Hype Cycle maps how people are perceiving a new technology on its life cycle → this is the technology’s emotional value

  • Technology Adoption Lifecycle explains how different groups are adopting a new product/technology → this is the technology’s utilitarian value

Now let’s put the models together, by finding calibration points. 

The Two Models can be Calibrated Together

How? By finding two calibration points, the beginning and end of the market life cycle.

When does market traction start?
Market traction shows its first signs when Innovators engage with the first MVPs in the category. They are delighted, they advocate across social bubbles, and eventually more people follow them. 

Signs for traction: the product takes the scene on big shows like CES or some respected VC firms lead investments in series A/B 

When does market interest end?
At the end of the market life span, usually, the entire customer lake is drained out, or the category is already being disrupted by new players. Last, laggards finally adopt the product, but its days are numbered.

Signs for the market end: you see horses, carriages, and cars on the road at the same time. 

Market Cycle

By using the two points, beginning and market end, we are able to understand and visualize how hype and market adoption are correlated.

Hype and Market Adoption

1 – Innovators and early adopters inflate expectations

2 – The Chasm is reflected in the Disillusionment phase

3 – The tipping point fits with the Slope of Enlightenment

OK, but When Should We Start Investing and When Should We Launch?

There are four points where hype and adoption meet. We’ll call them the Gates Of Product Success.

Gates of Product Success

Pioneers Gate → The category starts → the first MVPs launch and hype is booming. The gold rush begins.
There are several types of entities that usually enter here: startups, serial entrepreneurs, university spin-offs or the big tech “garages.”

Golden Gate → Growth starts and hype decreases. This is the gate to the Holy Grail, the mass market, Early and Late Majority.
Most of the companies are still inside of Death Valley but some of them already got some good investment deals.

Disruption Gate → The category is disrupted → The category is already commoditized, has no innovation left, and lacks any differentiators besides price. This is the perfect moment for some new cowboys to start disrupting (solving the problem in different ways) and for old players to die.

The Grave Door → The category dies and goes in peace in the Humanity Innovation Memorial

A Short Case Study and How-To Example

Let’s imagine this not-at-all-hypothetical board discussion:

CEO: As you know, our primary objective for the next year is to invest and launch an AI-enabled version of our product. Or a completely new product, we should decide, but it has to be AI. This is a strategic initiative and I’d like to have an analysis and some proposals for the next Board meeting.

After the meeting, everybody came back to their teams, asked for ideas, and finally presented a few solutions that were on trend. Because yes, tech publications talk a lot about Edge AI, Conversational UI, and Smart Robotics. Also, Speech Recognition is a validated technology that works and has shown good ROI rates.

Hype Cycle

Gartner’s AI Hype Cycle

Instead of this approach, we are proposing a new, structured way of thinking:

Step 1: See if Gartner published a Hype Cycle research on your industry. If not, try to map it on your own. Or contact us, Modus can help!
Step 2: Identify 1-2 technologies or products that are already on the market and show some early-stage adoption.
Step 3: Identify the point at the end of the Hype Cycle that drives the products out of the market (are the cars meeting horses on the streets?).
Step 4: Draw an adoption curve with the starting point in Step 2 and ending point at Step 3.
Step 5: Look for the intersection points and identify the Gates of Product Success (see above).

Step 6, optional but very nice to have: think like a VC. Do we have an opportunity for this bet? (related to the investment thesis). How big is the potential return for the fund and its investors?

So, to wrap it up: 

IF

  1. The technology category you want to jump in is nearby Peak of Inflated Expectations

  2. The entire tech bubble is talking about it

  3. You are not a big tech giant nor a well-funded startup

THEN

Look elsewhere

ELSE

Start invest / execute

According to the gates model described above, the advice is to look for technologies and categories that are positioned around the Golden Gate (the second intersections between the two curves). Like Machine Learning, NLP, Voice Assistants, RPA, and Computer Vision.

Conclusions

There is a correlation between social hype and market adoption. The Gartner Technology Hype model and Moore’s Adoption Cycle can be unified by using market open/close moments as calibration points.

There are two conditions for disruption: the current solution is already commoditized and a new solution and/or innovation is technically feasible.

In spite of common beliefs, the market starts to perform well when the hype is low.

The moment when public perception and hype skyrocket is the most dangerous time. Don’t open the champagne yet, tough times might come.

“Only when the tide goes out you discover who’s been swimming naked” – Warren Buffet


Note: This article was initially published by Modus Create, Inc.