Increasingly, hardware producers and software developers are falling over each other to be first to market with even newer and even more improved versions. To use IT-intensive products effectively, consumers often must make long-term financial and nonfinancial investments in the product or in the overall system; they expect to be able to use the product for an extended period before having to repeat the investment. The rapid introduction of new and improved versions can make a consumer regret a previous purchase, hesitate over any new purchase, and agonize over similar purchases in the future. It is not in a producer’s long-term interest if consumers balk. The author articulates the underlying reasons for — and the consequences of — adverse consumer reaction to rapid product improvement and offers suggestions for mitigating some of these reactions.
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.
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.
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.