Thursday, January 20, 2005

Technology Substitution

Technology substitition is an important topic for business. One possible example is the relationship between telecoms and physical transport.

Proposition One: Telecoms is a possible substitute for transport. People switch from using aeroplanes to using teleconferencing according to a bundle of factors including price, quality, convenience.

Proposition Two: Telecoms often stimulates air travel. We encounter people and initiate activity through telecoms, which then leads to increased demand for face-to-face meetings. Telecoms and physical transport are therefore not substitutes but complementary.

The Telepocalypse weblog contains a useful discussion about these two propositions. Note how the discussion ranges across several domains.

Economic Factors

Elasticity. Absolute changes in the price of a commodity, changes in the price of one commodity relative to another commodity, changes in the price of a commodity relative to disposable income.

Note that air travel is getting cheaper. Is this partly a response to the increasing availability/popularity of teleconferencing?

It is possible that the rate at which these prices change over time might also be important - because short-term price movements may affect people's perceptions that something is cheap or expensive, as well as expectations of future prices.

Social Factors

Discussion of the social context for transport or telecoms - being there, a sense of presence. Some social contexts in which telecoms provide an acceptable substitute, and some contexts where they don't. Dividing the demand for telecoms/transport into different use categories.

Systems Thinking

Cause and effect. Delayed effects - hysteresis.

Complexity. Lots of contradictory economic effects working simultaneously - very difficult to separate them out.

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