Everett Rogers and the diffusion of innovations

UK Uncensored: brought to you by Exponential Investor


In today’s issue…

  • The diffusion of innovation
  • S-curves and the energy transition
  • Beyond Oil is back again!

In the early 1960s, Everett Rogers suggested the existence of something he called the S-curve.

It relates to the speed at which new technologies are adopted – slowly, slowly, accelerating, then rapidly for a period, before plateauing.

It’s a term thrown around a fair bit these days. For example, regarding the rollout of electric vehicles today, or mobile phones a couple of decades ago.

But it’s quite vague, and can be seen as optimistic, or fanciful.

So what exactly underpins the theory?

In 1962, when Rogers wrote his book on the diffusion of innovations, there weren’t computers and phones, or many consumer goods to describe.

Instead, most cases in the book are about the spread of agricultural innovations in communities of farmers, in the US and other countries. The measurements from extensive fieldwork are plotted in many graphs showing the upward sloping “S-curve”.

Plotted on a graph, the curve starts flat, slowing gently upwards in the “infancy” phase.

Them it accelerates, briefly exponentially, upwards from low adoption to high adoption in the “expansion” phase.

Finally, growth slows and plateaus, in the “maturity” phase.

These three phases are marked by one key moment – when a product or technology reaches the 5% adoption mark.

This somewhat mystical figure is used as a marker point for when technologies might really take off.

The theory is that the first 5% are the hardest.

The people who buy are highly engaged, interested risk-takers.

For example, climate change campaigners buying electric vehicles, or tech-lovers desperate to try the first touchscreen phone.

But once 5% of a market or population has something, a tipping point of sorts is reached, in theory.

At that point, suddenly enough people have the product that organic growth starts to happen exponentially.

People start talking about it, showing friends, and these days sharing it on social media. The traction becomes self-fulfilling, and growth accelerates before the trend runs out of steam in the maturity phase.

According to the Rocky Mountain Institute, there are also technological and operational reasons why the take-off occurs:

The initial years are typically characterized by ongoing technological changes and improvements while product designs are still evolving. Adoption increases rapidly as customer-friendly dominant designs are adopted in the market and the trajectory for future growth is defined.

This was from a paper on “positive disruption” – how faster than anticipated technological adoptions can keep us below a two-degree temperature rise.

It’s in the transition that the S-curve is gaining some first traction.

I first heard it from guests I interviewed in our inaugural Beyond Oil conference.

Michael Liebreich and Gregor Macdonald both cited it regarding the adoption of renewables like wind and solar, or electric vehicles.

The first 5% is always the hardest, Gregor told me. The costs of production are much higher because there’s no scale or prior experience…

… technologies are new and under-developed…

… and consumers are resistant to the new concept.

But if a technology can reach 5% adoption, he said, that meant it had overcome all of the biggest hurdles and created a product that has mass market appeal, leading to a hockey stick take-off, where growth just accelerates after a small uplift.

Well renewables now generate 10% of all global electricity…

And electric vehicle sales are nearing the 5% mark at 4.4% of all vehicle sales worldwide since the pandemic has struck.

In these two key areas, the S-curve adoption model seems to be working, as both are now accelerating impressively.

The diffusion of innovation and the S-curve adoption model are both just theories.

They don’t always work and they’re not always perfect at predicting the future for any given technology.

But it’s a really interesting idea that I picked up on from interviewing these greats of the energy transition, all the way back in February and March 2020 for our first Beyond Oil summit.

It shows the value of hearing from the top people in a sector.

And that’s why we have been working hard, for the third time, to bring together an awesome panel of guests for another energy transition investor summit – Beyond Oil 3.

I would almost go as far as saying that the list of names James Allen has brought together for this third iteration is even more impressive.

You can find out more here.

As always, it’s completely free.

It’s bound to be full of brilliant insights and investing wisdom.

The energy transition is one of the most exciting themes in investing right now, and it is set to be so for decades to come.

The energy system is changing at an extraordinary rate. We think it’s vital that investors are completely up to speed with the changes and the direction of travel, and that’s why we’re putting on another summit for you.

Click here to sign up now.

Don’t miss out, when it’s gone it’s gone, and the guests we’ve brought together are really worth hearing from.

From people who set up successful solar companies as far back as the 1990s, or who’ve written books on sustainable investing, or who run investments funds focusing on renewables… We’ve got it all.

To hear from those three, and more, sign up now.

All the best,

Kit Winder
Co-editor, Exponential Investor

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