Too Little, Too Early: Introduction Timing and New Product Performance in the Personal Digital Assistant Industry

Abstract

The authors address the following key questions: (1) When should a firm introduce a new product? (2) What should its performance level be? and (3) How do the decisions of a competing firm affect a firm's timing and product performance decisions? The authors present a detailed case study of the initial competitors in the personal digital assistant (PDA) industry on the basis of which they construct a stylized game-theoretic model of entry timing and product performance level decisions in a duopoly. Situations in which the duopolists are symmetric as well as asymmetric in terms of their estimates of market size and product development capabilities are considered. When firms are symmetric, the authors show that an equilibrium exists when the firms enter at different times with different performance levels. In the asymmetric cases, the firm that has a higher estimate of market size enters first, as does the firm with a superior development process. The performance level decisions, however, depend on the sensitivity of demand to this variable. The results provide one explanation for empirical observations that market pioneers maintain their leadership in some cases, and later entrants eventually dominate in other cases. The authors then relate the model results to actual decisions in the PDA market, finding that Apple's Newton was “too little, too early.”