What causes the technology hype cycle (and what to do about it)?

The Internet of Things…Machine Learning…Self-Driving Cars…Artificial Intelligence…Big Data…Smart Cities…Decision Intelligence…my friends talk to me about their excitement about a whole lot of trends.  But which ones are real, and which will fizzle?

Before founding Quantellia, I spent six years as a technology analyst, where I was privileged to have an inside look at how tech trends boom and bust.  I learned a few important lessons.

It’s funny: the Hype Cycle is well-understood: those curves from Gartner, Geoffrey Moore, and others that show how technology follows a hype/disillusionment/acceptance curve.

Like this one:

But to really master this situation, it’s also important to understand the underlying system dynamics that drive the shape of the curve, that explain why so many technologies follow it, and what we can do about it.

If you’ve read much of my work, you’ll know where I’m going with this: it’s a feedback effect.  If we understand what drives the initial exponential growth, and why it ultimately crashes, then as innovators we can do a better job of understanding where our customers are going, and when technology is emerging into the mainstream.  And sensing these signals is an essential capability—arguably the most important ability—for innovation

If you’re in the market to purchase cutting-edge technology, too, you need to know what’s real.

It turns out there there are a few simple principals you can consider to rule out the most obvious losers, especially in markets for larger (“enterprise”) systems, which is what I know the best.  Here are a few I’ve discovered.

Bias towards the sell side

Most fundamentally, understand that these trends are often driven by the “sell side”: those vendors who have a lot to gain from a buzz around their marketplace.  Just because there’s a lot of talk about a particular topic doesn’t mean that a) anybody is paying money for that technology nor b) that they necessarily ever will.

Simply put: large companies don’t make substantial purchases because of technology trends. They have specific needs that they must fill, and are diligent with their spending.   This is especially true since 2008. If the technology doesn’t fill an important need, then it won’t be purchased in any widespread way.

The truth-busting mutant feedback cycle

There’s a mutant feedback loop that (rhymes with) mucks up the system:

1. A market trend begins to emerge, for whatever reason
2. Vendors decide to make a bet on that trend, and begin product development for a product in that market
3. Vendors begin massive marketing campaigns.  This includes briefing analysts, television, social media, and more. (And this is all just fine, because that’s their job.)
4. Here’s where the train goes off the rails.  Journalists and media personnel are much more exposed to messaging from vendors than they are from buyers.  Why? Because vendors have a vested interested in promoting both their technology (the latest IoT self-dimming lightbulb, for example) as well as the importance of the wider marketplace in which it plays a part (e.g. IoT as a whole).  Buyers: not so much.

Eat your vegetables

So busy analysts and journalists (which is all of them) receive a highly biased view of the market.  Fed a steady diet of “self driving cars are on their way”, we’ll start to believe it’s inevitable, whether or not it really is.

In my years as an analyst, I found it was dead-easy to land an interview with a vendor. Indeed, vendors will pay your way to their event, ask you to speak as a keynote, shower you with tchotchkes, free dinner, paid consulting work, and more.

To get a buy-side interview, on the other hand, is much, much harder.  Purchasing decision makers have much less intrinsic motivation to speak to the press, and lots of reasons (such as confidentiality, avoiding being overrun with vendors) to avoid them.

So unless the media is on its toes, and knows the “secret sauce” to obtaining buy-side interviews, analysts can unknowingly feed this beast: contributing to an ever-increasing feedback loop of vendor interest falsely validated by press coverage.

I’m proud of my former Stratecast team at Frost & Sullivan (and presumably the places they’ve ended up, such as Shira Levine at Infonetics and Tim McElgunn at Bloomberg) for their integrity here: unlike some others, we did have a good fraction of buy-side sources.   But we had to be constantly vigilant: as there was an ever-present temptation to write based on easy-to-obtain ideas from vendors.  In contrast, it typically required about two weeks, five emails, and three phone calls to get a chance to talk to a buy-side decision maker.  Hard work, but well worth it.

What to do about it

And here’s the thing: often the buy- and sell-side folks have very different things to say.    I remember a big push around a telecom standard called IMS, for example, whose reality was much slower to materialize than the hype around it. This pattern played out in many markets that I covered.

Smart buy-side professionals, too, know how to buck this trend. They use their analyst and press relationships wisely: both to receive early insight into new technology trends, as well as to exert their influence on those trends through analyst pieces written for the vendor community that are basically along the lines of “you’re building X, but we really need Y”.

So if you’re selling stuff,  don’t fall for the shortcut of selling what everyone is writing about.  This information is distorted at best, and sometimes fundamentally misleading, due to the media feedback loop. This is a signal that can be polluted with a lot of noise.

Talk to your customers.  And don’t just ask “what problems do you have?”, but ask “of the many problems that you have, which ones do you see as a strategic priority, which will receive budget in coming years?”.

If you’re in the market to buy technology, then use analysts and the press, but ask them carefully how much they use buy-side as opposed to sell-side sources.

And you should also know that the analyst community—as well as the press in general—can be your great friends.  You are a rare asset to them: someone who can provide an honest appraisal of industry needs in the future, absent the ever-present noise.  You can send valuable signals without disclosing confidential information by speaking about general needs and priorities that aren’t being met in your industry, and, through the media, to help to steer vendors back on course, towards what you and your colleagues truly need.