The emergence of new technologies has long been considered a pillar of economic growth. However, new technologies also harbor considerable uncertainties about their economic potential.
Take autonomous vehicles as an example. Interest in self-driving cars has been growing for almost 20 years. This interest was accompanied by high expectations for commercialization by a variety of large companies such as Google, Uber, General Motors and Tesla. However, the estimates of the commercialization timelines vary enormously, between less than three years and several decades.
Driverless cars illustrate the difficulty managers have in anticipating how new technology might develop and flourish. But by simply claiming that the emergence of technology is associated with high levels of uncertainty, we can limit the role managers can play in realizing a technology opportunity.
To have more power in realizing these opportunities, managers can use a structured approach to unbundling the sources of uncertainty. This involves a shift away from simply considering technological uncertainty (i.e. will the technology work?) Towards explicitly considering uncertainty in relation to:
- The market applications that the technology can serve
- The users who adopt the technology
- The ecosystem of activities that support the commercialization of the technology,
- the business model used to commercialize the emerging technology
Like our researchIf done correctly, this unbundling of uncertainty can help identify:
- When new technologies emerge successfully and develop further
- How companies might be able to innovate and take advantage of the opportunities offered by these technologies
- How such interactions can affect the resolution of uncertainties
- The resources and coordination requirements necessary to secure technological progress
Sources of uncertainty
As a technology emerges, there is considerable uncertainty about its performance and the precise estimate of the effort and time it will take to get to market. Such advances also do not take place in a vacuum. Multiple alternative technologies and predominant technologies can evolve at the same time.
Another source of uncertainty is the possible applications of a technology. In many cases, companies simply lack the knowledge of where the new technology can be used successfully. As a result, the “best” application can only be discovered over time. There is also user uncertainty within any application as organizations are unaware of users’ preferences and acceptance patterns.
With regard to the ecosystem, companies need to consider the range of actors who add value to an innovation. Uncertainty arises here from the question of how these actors build this value in a particular ecosystem or what role the regulatory authorities will play (for example by prescribing safety test standards for autonomous vehicles).
Ultimately, companies must choose a business model that best enables a new technology to be commercialized. However, it is often unclear which business model is preferred for an emerging technology.
In thinking about these sources of uncertainty and the questions related to them, it is important to remember that the uncertainty associated with each source may not exist in isolation. In fact, these sources often interact. For example, there may be sequential interactions because only when the uncertainty about a workable application is removed can the uncertainty about the users be addressed (e.g. safety concerns and costs of implementation).
It follows that a structured unbundling of uncertainty requires an examination of all sources of this uncertainty and their interaction.
How can this unbundling help managers? By supporting the way managers 1) seize opportunities and 2) seize them.
Sensors includes the “filtering of technology, market and competitive information both inside and outside the company in order to understand it and determine implications for action”.
The consistent unbundling of the sources of uncertainty and the clarification of their interactions facilitates these processes by offering a structured approach to identify where the uncertainty is high and which source could be the primary “bottleneck”. It also takes into account a holistic set of factors behind the commercialization of a new technology that managers can easily communicate.
Once recognized, companies must seize technology opportunities and make strategic commitments, which is also supported by a structured approach. In the case of a sequential interaction, for example, the resource allocation process follows a coordinated approach in which a company expends resources to first resolve uncertainty in one source and then, depending on the resolution, repeat the process at the next important source.
Overall, the proposed approach goes beyond the aggregated characterization of the uncertainty surrounding a new technology as simply high to one of various sources of uncertainty and the possible interactions between them.
Innovation is too important to be hampered by uncertainty. A conscious unbundling of the unknown around a new technology can unlock the immense potential of this innovation.
By Thomas Klueter, Associate Professor of Entrepreneurship and Analysis of Business Problems at IESE Business School, and Rahul Kapoor, Professor of Management, Wharton School, University of Pennsylvania.