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VIEWPOINT Figure 10-2 Model of Technological Diffusion Figure 10-3 Approximating the Rate of Diffusion

point of the innovation. Then the next stage is when the early adopters embrace it. The final stage is when the laggards follow the crowd and adopt the technology. This diffusion process was dubbed “creative

destruction” by Schumpeter, who described it as the catalyst of change in business. He wrote: It is the “fundamental impulse that sets and keeps the capitalist engine in motion [which] comes from new consumer goods, new methods of production or transportation, new markets and new forms of industrial organization.” Without going too far down this path of economic

theory, witness the real-world application of this process. The former CEO of Borders described the demise of his company as a result of “disruptive technologies.” Borders Group was extremely late to embrace e-books and e- readers and ultimately that new technology did the company in. To be sure, finding money was the immediate catalyst for the store’s liquidation in 2011, but the fundamental problem was well-put by its former CEO Mike Edwards. Although Borders may have embraced new products

late in the cycle, there are plenty of examples of getting the timing wrong. For example, in the mid-1980s, Chemical Bank (now part of JP Morgan Chase) made a huge push for online banking. They were clearly an early adopter of that technology. But they were too early and, in turn, lost a huge amount of money when the bank’s management ultimately closed that project down. Without a doubt, timing is important. In recent years,

luxury retailers, for example, made a conscious effort to be late adopters of online commerce since their customer base was slow to adopt that technology in their shopping.


Mass retailers, on the other hand, were scurrying to be the first to embrace the latest technology or social media application. Sometimes that worked and sometimes it did not. Consider J.C. Penney’s fanfare when it announced in

December 2010 that it was the first major retailer to have a “fully integrated Facebook e-commerce application.” But since that push, J.C. Penney, Nordstrom, Gap and GameStop were among the retailers that opened and closed their Facebook storefronts. The lesson learned was that not all technologies will be successful, but it demonstrated how the speed of change in opening and closing virtual storefronts was and the need for flexible operations to handle that. The message is clear: KNOW YOUR CUSTOMER and KEEP SYSTEMS FLEXIBLE! Some years ago, Wal-Mart’s CEO said that the

company was not a retailer, but a supply-chain manager. At the time, that description seemed unusual, but today it appropriately describes the business model for most retailers quite well, even though Wal-Mart does not seem to use that phrase any longer to describe itself. Think about it, a retailer today must seamlessly

integrate its physical and virtual channels with emerging electronic, mobile and social-media technologies. Retailers must operate globally for sourcing and even selling internationally. They must offer their customers user-friendly systems and stores that allow them to search and select products, transact the sale and handle distribution for immediate pickup of the item or delivery to the store or customer’s home—if the item is not in stock. Moreover, retail stores have become mini-


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