Billions could be saved, only if we had a crystal ball. What happens in future is of interest to everyone. Apple, Microsoft, Sony, Samsung, and above all Nokia, each one of these companies is investing multibillion dollars in understanding the demand patterns, product life-cycle and setting up market research departments.
Researchers, data analysts, scientists and mathematicians have developed different forecasting methods like Bass Model, Fisher Pry, Gompertz formula, assisting us in developing the diffusion patterns for a particular technology in a given time frame. In this article, I am going to focus on Fisher-Pry model and use Kinect to develop a model.
Fisher Pry model is used for predicting diffusion of new technologies, and applies specifically to those technologies which do not require major behavioral changes. When there is a major behavioral change, it is preferable to use Gompertz model. Fisher Pry equation is given by:
Where f(t) = Percentage of market served by the technology at a given time t
b = rate of adoption of technology in a given market,
t_50 = time taken to reach 50 percent of the total target market
Let’s try to see how this model works for technology like Kinect. This is how Wikipedia describes Kinect:
“Kinect, originally known by the code name Project Natal, is a motion sensing input device by Microsoft for the Xbox 360 video game console. Based around a webcam-style add-on peripheral for the Xbox 360 console, it enables users to control and interact with the Xbox 360 without the need to touch a game controller, through a natural user interface using gestures and spoken commands”
Launched in November 2010, Kinect has already sold 18 million units, with a record of being the “fastest selling consumer electronics device”, selling 8 million units in first 2 months of launch. Predicting for devices like these can be fun, especially when you know every upgrade in these technologies will drive similar levels of sales.
Fisher Pry Model framework essentially has 3 steps:
- Identify the total market – 66 million units
- Estimate maximum potential market
Step 2 Inputs:
- Time for 50% replacement
- Rate of migration (b)
- Migration Curve
- Apply adjustment factors, if necessary
Now, Let’s analyze the Fisher-Pry variables and understand how their values are defined.
In Fisher-Pry model, “b” is the variable which determines this fluctuation. In past for the time periods ranging from 1922-1998, “b” value has ranged from 0.18 to 0.32, but in 21st century this value has grown, primarily because of awareness brought by internet and globalization, and heavy spending on Marketing by companies.
The nature of technology, its uses and accessibility to its collaborators play a major role in setting of “b”. For my study, I considered following points relevant to adoption of “Kinect”:
- A new and exciting way of indulging gamers
- Motion sensing technology
- Voice recognition technology
- Content available for the technology, network of collaborators
- Sold with a successful Xbox 360, and possibility of Xbox720 to be launched soon
- 66 million units of Xbox360 sold till date. This defines the total market of Kinect.
- Possible use of Kinect for uses other than gaming has not been considered for this study
- Affordability of the technology.
- Possibility of Kinect incorporation in Xbox console itself.
There are many other factors, and having considered these, I have taken a safe value of “0.7” for “b”. Note that “b” value defines the shape of the S-Curve.
Now, let’s focus on t_5o, which describes the time taken to reach 50% of the target market. Considering this value for different industries, I have taken this value to be 3.5 years, which is close to the actual time taken by Xbox(4 years) to reach 50% of its current market.
Next, I created an excel model and plugged these values. Please be careful when creating the excel model. “b” value is time frame dependent, i.e. if you are considering doing monthly analysis, divide b value by 12, if doing quarterly divide it by 4. Beyond this, like any consultant/analyst, I did sensitivity analysis, I got following results:
Based on the above results, we can safely deduce that in next 10 years, Kinect will cover 98-99 percent of overall Xbox market. Looking at the current market trend this number looks feasible, and with the launch of JDK toolkit for developers, multiple avenues are seen for Kinect specially in Healthcare, Robotics, Aeronautics and of course in Business World. Previously unforeseen uses, now pose the perfect platform for Kinect to be diffused may be sooner than what this study reveals.
Anyways, I hope the article benefits you, and should you have any questions, feel free to drop a comment.
Note that this article is my personal study, and by no means contains data/numbers from any official source.
Happy Forecasting!! 😀