Speeding High-Tech Producer, Meet the Balking Customer

In the mid-1980s, I purchased my first car (a Honda Civic) and my first personal computer (an IBM PC AT) at about the same time and for about the same price ($6,000 to $7,000; the price of the computer included a monitor and a printer). Both products were what economists call “durable goods.” Both were used in larger systems consisting of the user, complementary products, and infrastructure. Both required me to master complex user interfaces and protocols. And, in both cases, the manufacturers followed up the initial models with a sequence of “new and improved” versions. My experiences owning and replacing the two were, however, very dissimilar.

An annual stream of new and improved Civics notwithstanding, I used my car for eleven years, for the most part with satisfaction, and easily disposed of it for just under a third of the original purchase price. As basic transportation goes, the new car I purchased as a replacement was not much more superior, but it was much more expensive and, given the rate at which car prices were rising, I was glad I replaced my car when I did and not later.

My experience with the personal computer was very different. I could barely squeeze three years out of it (not because the computer itself was wearing out, but because soon it was not powerful enough for me, my software, my display monitor, or my colleagues). At the end of three years, I had to practically give it away, and when it came to a replacement, I looked at the stream of cheaper, even newer, and even more improved computers, monitors, software, printers, and so on, reflected on my experience, and tried my best to put off the purchase. I felt as if I were playing a game that I the consumer could never win. Regret (over my past purchase), hesitation (over a replacement purchase), and anxiety (about future trends for all the different components of the system) seemed the only outcomes of which I could be sure. I was, to put it mildly, not happy.

I suspect I am not the only consumer who feels somewhat helpless when coping with the steady stream of even newer and even more improved personal computer-related products. Consider this quote from the Wall Street Journal:

In the beginning, there was Microsoft Word 1.0, and it was good. But it wasn’t perfect. So Microsoft Corp. developed upgrades: Word 2.0

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References

1. W.M. Bulkeley, “Software Users Are Beginning to Rebel against the Steady Stream of Upgrades,” Wall Street Journal, 20 September 1990, p. B1.

2. J. Mills, “Revving up Computers with New CD Drives,” New York Times, 10 August 1995, p. C2.

3. “Bulletin Board,” Business Week, 11 July 1994, p. 24.

4. E. De Lisser, “If You Have a Rotary Phone, Press 1: The Trials of Using Old Apparatus,” Wall Street Journal, 28 July 1994, p. B1.

5. “Work on the interface between human and machine already consumes three-quarters of the development work on electronic products,” says Gary A. Curtis, a Boston Consulting Group Inc. vice president and leader of its worldwide information-technology practice. “Nonetheless, technology keeps getting more costly in terms of the time required to master it.” See:

“The Technology Paradox,” Business Week, 6 March 1995, pp. 76–84; quote, p. 80.

6. Ibid.

7. Figure 1 represents the normal case. If “network externalities” are present (consumption benefits increase with the number of users), the value of the future consumption stream may increase as the adopter network expands.

8. Recent emphasis on product quality, longer warranties, and so on can extend only the period for which the existing version continues to enjoy a satisfactory consumption value. This should cause existing-version adopters to stay with the existing version even longer — while suppliers are working overtime to bring out new and improved versions even faster.

9. “The Defenestration of Bill?,” The Economist, 8 July 1995, pp. 57–58.

10. Ibid., p. 57.

11. Ibid., p. 58.

12. L. Carroll, Alice’s Adventures in Wonderland (New York: W.W. Norton, 1971, p. 66).

13. All the buzz surrounding Microsoft’s Windows 95 introduction cannot fail to underscore the “happening” nature of the new product — and, perhaps, downplay the price tag of upgrading all the hardware and operating system software. Business Week cites the following statistics: Microsoft’s projected advertising and marketing expenses for the first year, $200 million; in-store demonstrations before August 24 launch, 1.2 million; point-of-sale displays, 250,000; people invited to product launch parties in 40 cities, 70,000; and How-to-Use Win95 books available by day of launch, 450. See:

“Feel the Buzz,” Business Week, 28 August 1995, p. 31.

14. The efforts at making the supply side more agile have been pervasive: products are being designed so they lend themselves to successive improvement, systems used to design products are being configured to facilitate rapid product improvement, processes and operations are being made more flexible with respect to product variety and change, and traditional modes of intra- and interorganizational communication are being reexamined to improve coordination and eliminate the lags that slow down product change.

15. “Computer Confusion,” Business Week, 10 June 1991, p. 74.

Acknowledgments

Work on an earlier version of this article was supported by the Harvard Business School Division of Research. The author is grateful to the editors of the Sloan Management Review and two anonymous referees for their comments on that version.