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Appendix A: Market Research

Dominant Design Examples

Four examples of the emergence of dominant design will be described. In each case, once the dominant design is decided, product sales growth rates accelerated and prices declined.

Case 1. Dominant design decided by technology competition: local area networks vs. Data PBXs

Between the years 1982-1986, existing data communication companies responded to first, the terminal interconnection, then, computer interconnection buying demand with Data PBXs. Startups emerged to sell and innovate local area networks. By 1986, the competition was over. Local area networks had won.

Data PBX vs. LAN Revenues ($ M)

Product Category 1982 1983 1984 1985 1986 1987 1988 CAGR
Data PBX 45 77 119 143 86 82 80 10.10%
LAN 63 152 326 593 913 1675 2820 88.40%

Source of data: Dataquest

Case 2. Dominant design decided by marketing and sales competition: PC modem vs. dial-up modems

In 1978, Hayes Microcomputer Products introduced a low speed dial-up modem designed for use with a personal computer to be sold through computer retail stores. Even though the opportunity was open to all existing manufacturers, Hayes acted first, establishing its name as a brand name synonymous with personal computer modems. All subsequent entrants had to conform to the modem commands and software innovated by Hayes. By 1986, Hayes had become the fourth largest modem manufacturer with sales of $120 million, and a 43% market share in the fastest growing modem market.

Data Modem vs. PC Modem Revenues ($ M)

Product Category 1982 1983 1984 1985 1986 1987 1988 CAGR
Data Modems 675 791 866 934 962 993 873 4.40%
PC Modems 96 127 182 233 281 307 389 26.30%

Source of data: Dataquest

Case 3. Dominant design decided by a standards body: V.32 vs. proprietary modems

After the success of the V.22 and v.22bis CCITT modem standards, existing vendors were motivated to adopt a 9600 baud dial-up modem standard to jointly solve remaining difficult technical problems and to accelerate market acceptance.

Although the CCITT V.32 standard was approved in 1985, it wasn’t until 1987-1988 that competitive v.32 modems entered the market to compete with proprietary modems then capable of communicating at speeds twice that of V.32. By 1990, V.32 was forcing proprietary products out of the market.

V.32 vs. Proprietary Modem Modulation Revenues 1987-1990 ($ M)

Product Category 1987 1988 1989 1990 CAGR
V.32 30 67 110 211 92%
Proprietary 49 65 62 88 22%

Source of data: Dataquest

Case 4. Dominant design decided by vendor selection: token ring by IBM.

From the beginning of the effort to establish first one, and then three, local area networking standards, IBM was a reluctant, yet powerful, participant. When they finally introduced their token ring network in 1986, token ring quickly gained market share.

Local Area Networking Technology Market share and Units Shipped Growth Rates: 1986-1988

LAN Technology 1986 1987 1988 CAGR
Ethernet 59 59.8 59.3 85%
Token Ring 4.5 11.3 15.5 242%
Other 36.5 28.9 25.1 52%
Total 100% 100% 100% 84%

Source of data: Dataquest