Classroom Companion: Business

 
Chapter 12 · Lock-In and Switching Costs

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187
12
Box 12.1 The QWERTY Keyboard
Most of the keyboards in use today fol-
low the QWERTY layout. This layout 
was generally adopted in the late nine-
teenth century after the success of the 
Remington 2 typewriter. The specific 
QWERTY layout was selected to make 
the typewriters work as smoothly as 
possible and to avoid jamming of the 
metal bars in the machine when two let-
ters were typed in fast succession. 
Enforcing a standard, such as the 
QWERTY layout for keyboards, is ben-
eficial—though not necessary—for 
both keyboard users and keyboard 
manufacturers. However, since the 
QWERTY layout became dominant, it 
was hard for competing layouts to enter 
the market since switching costs built 
up as more and more users adopted and 
were trained for the QWERTY layout. 
The layout is shown in 
.
Fig.  
12.2
.
The competing DVORAK layout 
(
.
Fig.  
12.3
) was patented in 1936 by 
Dr. August Dvorak. It is, by many, 
believed to be superior to the QWERTY 
layout, in terms of typing speed. 
However, when it was launched, it 
failed to get any market foothold due 
to high switching costs and the lock-in 
of QWERTY. Since the QWERTY lay-
out had a dominating position in the 
market, it was hard to convince both 
users to learn and manufacturers to 
produce keyboards with the DVORAK 
layout. Today, almost all PCs, laptops, 
and smartphones use the QWERTY 
layout.
The choice of the QWERTY key-
board layout as a standard is also an 
example of path dependence. The early 
decision to adopt the QWERTY layout, 
which was perfectly logical at that time, 
locked keyboard designs into a path 
which would be extremely hard, if not 
impossible, to leave. Adopting the 
DVORAK keyboard layout would have 
been better for the society at large 
(though this conjecture is contested by, 
e.g., S. J. Liebowitz and S. E. Margoliz 
(Liebowitz & Margoliz, 
1994
)); how-
ever, the switching costs are currently 
too big for revitalizing DVORAK.
“friends” and rapid dissemination of information within the groups. It has become 
virtually impossible for other suppliers to launch a similar or better service. To do 
so, the supplier must offer something that gives the users better experiences and 
must be able to build up communities at least as professionally as Facebook. It must 
also be possible for the users to move at least part of their Facebook content to the 
new website to switch to the new service provider. Otherwise, the users may lose 
information they have built up over time. For the users, loss of information may be 
a strong reason for not switching to a similar service offered by another supplier.
YouTube attracts users—both viewers and publishers—because of the popular-
ity of the service (bandwagon effect) and strong network effects associated with 
reviews, recommendations by other viewers, and ratings. This also leads to lock-in 
since it is both difficult and expensive for competitors to build up a competing ser-
vice that will give users access to such a volume of video content and provide so 
much visibility to publishers of new video material.
Lock-in to a technology is also often caused by network effects. The two most 
quoted examples are the adoption of the QWERTY keyboard (see 
7
Box 
12.1
) 
and VHS as a video cassette standard (see 
7
Chap. 
11
).