Classroom Companion: Business

 
Chapter 4 · Digital Economy Ecosystem

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4
Teletex service for transmitting documents over telephone networks. The video-
phone service required expensive user terminals and offered the users only small 
advantages compared to the simple and cheap telephone service. Moreover, the 
videophone service was subject to strong network effects: the first videophone 
has zero value since there are no other communication partners. The timing of 
the introduction of Teletex was bad, and the service was almost immediately 
substituted by the free-of-charge e-mail service over Internet.
5
Early market adoption is particularly important if the market growth depends 
on network effects (see 
7
Chap. 
18
). Social services, such as Facebook, are 
examples of services that are subject to strong network effects having difficulty 
attracting early users.
5
The adoption of a technology or digital service may depend on other technolo-
gies or digital services to be widespread and fully adopted by consumers. For 
instance, Uber would have never become a success without the high adoption 
rate of smartphones and wireless Internet access. The video-on-demand service 
requires broadband access by users and depends on optical network technolo-
gies for sufficient traffic capacity in the network and for access to the database.
5
When a technology or digital service starts to attract consumers and the use of 
it increases, it may trigger the evolution of new technologies or services. The 
two most obvious examples are Internet and mobile networks prompting the 
entire evolution of digital services. A less obvious example is touchscreens for 
mobile terminals stimulating the development of apps.
5
New dependencies and entirely new stakeholders may appear as the digital 
service evolves and gets adopted by even more users. Offline use of credit cards 
prompted new operators to offer automatic card reader facilities for direct pay-
ment in shops and hotels. This has further stimulated the evolution of card 
readers in petrol pumps, parking meters, public toilet locks, and payment 
automata in public transport. Apps on mobile phones are now taking over sev-
eral of the applications previously supported by credit cards.
Hence, analyzing the targeted technology or digital service in isolation will not 
predict how attractive it will be—several other services and functionalities 
needed for the adoption of a technology or a digital service must also be consid-
ered. All these interdependencies make up the ecosystem of the digital service. A 
quantitative consumer adoption model based on the Bass equation is presented 
in 
7
Sect. 
18.2
.