Mastering The Hype Cycle

As you rise up the slope of enlightenment to the plateau, don’t get arrogant. Your understanding is rising and so are the returns. But scaling an innovation has its kinks and bumps too. At this point, when it seems the hardest and most dangerous times are past, it is easy to loose concentration and make a silly mistake. Innovation leaders often have personality types that don’t make them strong natural ‘completer / finishers’. They start thinking about the next buzz and the next wave before the job is completely done. Don’t fall off before at the end, in front of the crowd with your face in the dirt just at the very time when you should be taking the applause. And remember to thank your support team vociferously so they will want to come with you next time; innovation adoption leaders are quiet heroes.

For an overview of ‘Rules for Riders’ see previous post

In a Financial Times online article dated June 2nd, Mr. David Smith - the Chief Investment Director of GAM (part of the Swiss wealth management company Julius Baer) discusses the hedge fund bubble burst of 2008. As part of his analysis he says:

The research group Gartner tried to prove the potentially positive outcomes of bubbles in its theory of the “hype cycle”, in which mass adoption of any product begins with a “technology trigger” that generates significant interest. This leads to a “peak of inflated expectations”. When reality fails to live up to these hopes, the industry enters a “trough of disillusionment” in which many businesses leave. Those that remain continue through to a “slope of enlightenment” in which a more practical understanding of the technology’s potential is reached. The final stage is the “plateau of productivity”.

One key factor missing from Gartner’s analysis is capital. The surge to the “peak of inflated expectations” can only occur if capital is cheap and freely available. And this is a key point to remember when analysing the hedge fund bubble of 2008.

The Gartner Hype Cycle was created to analyse technology innovations progress through their markets from an adopters point of view. While we are always very happy to see its use extended to other fields, it is not a general economic theory about bubbles and we would not wish to give that impression. We are not economists.

Mr. Smith makes a good point about the availability of capital. While the hype cycle will be in play for even the simplest and cheapest of innovations, its magnitude can certainly be amplified considerably by freely available capital. The dot com bubble is the most obvious example. The Silicon Valley funding of web 2.0 is another.

Hedge funds are not a new invention; they have been around since the early 1950s. Forbes Invstopedia suggests there was a hedge fund boom peak in 1968, followed by a crash in 73-4, then another boom in the 90’s which saw a major fallout in the early 2000s. So we have just passed through a third wave.  It therefore seems likely hedge funds form a repeated cyclical, or boom-bust investment market, like property, that rises and falls repeatedly.  Over the medium term (perhaps 5 to 10 years) this can sometimes be mistaken for a hype cycle. We have noted the difference before in this Blog.   In the Hype Cycle two underlying curves create the shape: the social excitement bell curve plus the innovation performance maturity S curve. It is not obvious that hedge funds in their current form are a new invention, maturing in their technical performance, in this decade.

So on balance, it seems unlikely that the Hype Cycle model can be applied to the current situation of the hedge fund industry. However it is possible that the hype cycle applies to some financial instruments - where they are genuinely novel innovations. For example, as we have raised in this blog previously, it is possible that the Hype Cycle applies to the instrument at the epicenter of this recession - the CDO.

I am certainly no expert in financial investment vehicles. So if anyone cares to expand on this debate, I would be very happy to hear from them.

Just sometimes the wave will breakdown and there is no way to make it work for you. If it looks like this innovation really just won’t resolve its teething troubles, take the decision, fail fast and learn. Don’t let the wave take you down and turn you over. Sometimes, when a big wave breaks a blame culture arises and individuals become casualties. It is safer for you to choose how to dive off cleanly and save your neck for another. Your practice and experience and a few key indicators will tell you if the wave is a dud – listen to your inner voice if things don’t feel right.  Don’t wait for the fall and make a big ugly splash. You could get career maimed by the board crashing down on your head apportioning blame.

For an overview of ‘Rules for Riders’ see previous post

Following Geovector’s selection as a Cool Vendor in 2006, we’re starting to see other early commercialization of augmented reality capabilities using cell phones, such as Mobilizy’s Wikitude and Tonchidot’s Sekai Camera.

We’re also seeing a growing body of well-informed discussion and debate around types of augmented reality and their relative maturity. In Augmented Vision and the Decade of Ubiquity, Robert Rice separates out four levels of AR, distinguishing the current batch of animation-enhanced video feedbacksystems (eg from Total Immersion) from those like Mobilitzy’s Wikitude that stay closer to the original vision of using knowledge of the user’s location and other context to superimpose relevant information. In the Augmented Reality Hype Cycle, Maarten of SPRXMobile positions the four styles and other additions on a hype cycle chart, triggering some interesting debate about capabilities such as dumb vs smart augmentation (ie does the system deliver a static piece of information linked to an object or place, or does it use context to deliver dynamic links).

This level of discourse, along with the beginnings of the commercial services, indicates that the topic is climbing higher toward the Peak of Inflated Expectations. We’ll shortly be updating the hype cycle entry for augmented reality for this summer’s Hype Cycle Special Report and we’ll move it along accordingly.

Innovation adoption hype cycle surfers must stay cool at all times. This is especially true in the plunge from the peak of inflated expectations to the trough of disillusionment. Nine times out of ten the hype cycle will bottom out and start to recover, but for those coming on the ride with you it won’t feel like that – especially if they are newbies. As an innovation leader you must maintain your poise and your external confidence. Let the competitors give up – your visible tenacity, continued and assured evangelism is what will help you win. The thrill, pace and excitement at the start of the wave may slow down, but you must bring this thing all the way into the shore to reap the final reward and ultimate respect.

For an overview of ‘Rules for Riders’ see previous post

It won’t surprise you to know that Jackie and I feel proud and privileged to be the co-authors of ‘Mastering the Hype Cycle’.  What might be news is that it’s the sixth in a series Gartner has published with Harvard Business School Press.  That collection is a very cool achievement indeed.  We think it’s a major contribution to Business IT management education. The seventh, ‘The Real Business of IT’ by Richard Hunter and George Westerman, is coming this Fall.
Apart from the authors, there are a couple of Gartner people behind the scenes who made this happen. Heather Levy is our internal head of book publishing. Andrew Spender is our corporate head of communications. This collection has been a labour of love for them both over the last 5 years.  Can you imagine trying to shepherd very busy and sometimes precocious analysts through the writing process and getting them to deliver a manuscript on time? They command our highest respect and gratitude.

Don’t even bother to make a half hearted attempt at adopting the innovation on this wave, you will be certain to fail. Decide when to go and then put your full energy into it. Innovation isn’t easy. Changing anything, particularly in larger organizations will always turn out tougher than you initially expect. Staying the course will require your full concentration. Don’t wander, don’t delegate too much – if you let your attention drift sudden subtle changes in the wave could throw you off balance. There are many unknown twists and turns you must be alert to and be prepared to take quite suddenly in order to keep the initiative afloat. This is continuous learning.

For an overview of ‘Rules for Riders’ see previous post

I really owe it all to Miss Mackie, former headmistress of the City of London School for Girls. Once a week she instructed our class of energetic 11-year olds in English literature, keeping us pinned silently to our desks by force of her imposing presence. The book open in front of us was John Bunyan’s Pilgrim’s Progress, an allegorical tale from the 17th century that is apparently such a significant work of literature that it has never been out of print.

Try telling that to a bunch of squirming 11-year olds. I don’t remember much about the book, but the places that the hero Christian visited along the way obviously etched themselves deep into my psyche.  The “Slough of Despond” was clearly the inspiration for the “Trough of Disillusionment” on the Hype Cycle, so I though it might be worth looking back to see if some of the other locations on Christian’s journey offer us any insight into the side roads and less-traveled paths of the technology pilgrimage.

My favorites::

Doubting Castle - those top executives who never exhibit the enthusiasm you’d hoped for. The only way out according to Bunyan is the key “Promise” - commit to what you can deliver, but keep it realistic.

The Valley of Humiliation - to avoid that “oh @$%&, my project’s a disaster” sensatation, make sure you evaluate the real benefit to your organization rather than being driven by external hype, and re-evaluate periodically as you learn more (see next entry).

Wicket Gate - pilgrims can only enter the straight and narrow path to the Celestial City through this gate. Innovators should use their own “stage gate” process to build in decision points about which innovations to continue with and which to put on hold until they mature further.

What else should we watch out for in the technology adoption landscape?

As I have mentioned before in this blog, the search phrase ‘next big thing’ is a very useful one for emerging trends and technologies tracking.  Yes, its a cliche and used way too much by journalists - but their headline quick fix is your radar tracking gain.  Here’s a small collection of recent references I pulled up today. Caution: this is reportage not analysis!  I am not endorsing the voracity of any of these claims.

Enjoy

• Microholographic storage
• Trade show text message content tagging
• Fashion industry surgical masks
• Space based solar power
• Non-food based biofuels
• Augmented reality advertising
• Africa
• Bovine audio players
• Smartphone malware
• Taiwanese Submarines
• VOIP telephony speed dating
• Waterproof OLED
• Fennec - ‘the firefox for phones’
• Eco-friendly clothing
• Aboriginal fusion cuisine

Generally speaking the hype cycle is much better for tracking a generic market innovation (e.g. ‘mobile email’) rather than products or companies (e.g. ‘Blackberry’).  However the hype cycle is a bit of a Swiss Army Knife - usually fairly useful when you don’t have the perfect tool for the job.

With that in mind I have been playing with public data about the Google Chrome browser to see if it helps evidence a hype cycle curve for that piece of software.  I used Google Trends (search volume) as an indicator of social excitement and browser share as an indicator of market penetration and real progress. It seems to work fairly well.  Remember - the Y axis of the cycle is ‘Expectations’ - there is no perfect measure for that so we must look for proxies and markers to build evidence.  The Hype Cycle is, in the end, mostly a qualitative management tool for expert judgement.

However - here is the indicator curve I plotted from the data.

So what can we learn from the green line that combines the two factors?  Chrome appears to have had a short sharp rise to the peak of inflated expectations - and a quick fall.  We might expect that, because it’s only an incremental innovation (another browser) not a breakthrough, but Google is a major and closely followed company.  Chrome didn’t spend long in the trough of disillusionment - barely 3 months. However it seems to be following a long slow crawl out of there - up a shallow slope of enlightenment.

I’ll try to revisit this in few months time, to see what happens next.