Thursday, May 26, 2011

Conflicting Technologies

It is so common to find that two technologies are substitutes of each another to accomplish certain process. Think of Apple vs. IBM PC, VHS vs. Betamax, front wheel vs. rear wheel drive cars, and so on. It is certain that one of the two methods will become the preferred one. Sometimes, the two methods keep on being used side by side for a long period of time. This gives the impression that one process will never be superseded by the other. Such reading is usually erroneous and often very costly. If consumers have similar access to both methods (in terms of price, distribution and service) , and both methods accomplish the same task, the method that is more cost effective will attract more customers, lower its cost through economies of scale, and push the other method out of the market. In determining which technology is more cost effective, one must distinguish technological efficiency (i.e. physical performance), and consumer preference (i.e. convenience of usage). It is the latter that is determinant.

Take for instance, Betamax that was recognized as technologically superior to VHS. Yet, it is VHS that consumers liked better eventually, possibly because there were more VHS VCR's, and cassettes could be exchanged between users. Another example is that of floppy disks. The three and a half disk format pushed the five and quarter format out of the market because the latter had an open exposed area that users were afraid to touch, even though the five and a quarter format was much cheaper and could hold almost the same amount of data. The exception that confirms the rule is that of Apple computers that offered a MacIntosh visual (i.e. on screen mouse controlled) operating system that users liked better than DOS, and that Microsoft duplicated in its Windows operating systems. MacIntosh continues to survive because it has become Windows compatible, while retaining advantages of its own operating system.

One may note that in many cases the successful technology is not necessarily the one of the company that is considered the technology leader in the industry. Sony is and has been considered the technology leader in electronics, and the failure of its Betamax format was its most bitter failure. Likewise in the PC industry where IBM format became the most widely used technology, IBM itself pulled out of the PC market because it was underpriced by competitors.


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