Tag Archives: sony

Why Holding a Disruptive Technology to a Standard of Perfection is a Mistake

Recently, Erik Brynjolfsson remarked, about artificial intelligence (AI), that we tend to hold it to a standard of perfection, and therefore can be pessimistic about its prospects. It is a very common mistake in the case of a disruptive technology. In fact it is not so much that we hold disruptive technologies to a standard of perfection as we judge their performance based on the existing technology’s dominant criteria. Let’s explore this and see why it matters, and how it leads to disasters.

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Technological, economical and usage breakthroughs: the case of the VCR

If you ask someone about the origins of the video tape recorder, you will most likely get answers such as JVC, Panasonic and the VHS standard. An older audience would probably remind of Sony and the Betamax. This selective memory is quite consistent with Michael Schrage theory about innovation : “innovation isn’t what innovators do ; it’s what customers and clients adopt.” A variation could read : “People don’t remember the invention, they remember when the invention became adopted by the public.”

So those who remember JVC and those who remember Sony as inventors of the video tape recorder are both wrong. The whole story is worth telling because it provides a good illustration of the different breakthroughs which go along with an innovation.

In 1951, Charles Ginsburg, a studio and transmitter engineer at a San Francisco area radio station received a call from Alexander M. Poniatoff, founder and president of the Ampex Corporation in Redwood City, California. Mr. Poniatoff believed Ginsburg could help him with an important project. Ginsburg’s mission was to develop the first broadcast-quality videotape recorder (VTR), which he did : the Ampex VRX-1000 (later renamed the Mark IV) videotape recorder was introduced on March 1956. The machine sold for $50,000 (approximatly the equivalent of today $424,000…). It was on that year that the video tape recorder became a reality ; ie. the technological breakthrough happened more than 50 years ago.

The video tape recorder would remain a purely professional machine for the next two decades. In October 1969, Sony introduced its “Color Videoplayer”, which can be considered as the prototype for the U-matic format, introduced in Japan in September 1971. The two initial U-matic products were a video cassette player, the VP-1100, which had a price tag of 238,000 yen (approximatly the equivalent of today $2900), and a video cassette recorder (the first VCR) the VO-1700, priced at 358,000 yen (approximatly today $4,400). Not exactly mass market products.

The Betamax format was announced by Sony on April 16th 1975. The first Betamax product was the SL-7200, a VCR combined with a TV set for a price tag of $1295 (approximately today $4,200). Less than one year after, the VHS (Video Home System) format was launched by JVC. Sony’s philosophy was focused on quality, whereas JVC was focused on lowering the price. The first JVC machine, the HR-3300, was priced at the equivalent of today $3,100. I won’t expand here on the “format war” (VHS versus Betamax) as a lot has already been written on the topic, but it might be worth noticing that Betamax cassettes were limited to one hour versus four hours for the VHS format (in the US, enough for an entire football game). In October 1977, RCA launched the VHS Selecta Vision VCR in the US with a $4 million advertising campaign. By the summer of 1979, VHS was already outselling Betamax by a margin of two to one in the US.

The economic breakthrough came at the beginning of the 80s. From an average US price of $800 in 1978 (today $2,100), VCR prices went down to $426 in 1987 (today $660) ; the actualized price had been slashed by almost 70%! It is quite interesting to notice that it took 30 years for the concept of video tape recorder to shift from technological breakthrough to economical breakthrough. Not surprisingly, the usage breakthrough came along the price fall : In 1980 less than one percent of all U.S. households owned a VCR ; by 1987, this number had raised to 50%.

The VCR life span as a mass market product, however, was only approximately 25 years. In November 2004, Dixons retailer stopped selling VCR because of the ever greater success of DVD readers and recorders. Nobody use VCR anymore.

For a trip at the origins of VCR, and for the fun, visit “Total Rewind”, the virtual museum of vintage VCRs, at : http://www.totalrewind.org.

So you still think starting a business requires a great idea ?

Then maybe it’s worth going back to the history of a few great companies.

That’s one of the things that Jim Collins and Jerry Porras did for the millions of readers of "Built to last". The first myth they shattered in their book was the "great idea" myth, meaning : "it takes a great idea to start a great company". You need evidence ?

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