3.9: Waves of Innovation Fueled by Substitutes and Complements

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Innovation comes in waves. It is driven by consumers in the form of demand for better products and services: “I need a smaller product with more features and capabilities at a lower price.”

Substitute and complementary products are part of the engine that drives innovation. For example, transportation has spurred the development of substitute energy sources such as steam, electric, fuel cells, and solar energy. The emergence of the automobile was the driving force behind the development of better roads, fueling stations, and diners. Demand for clearer and faster communication has been the key driver for many modern-day substitute products as illustrated in Figure 3.8 "Innovation Driven by Substitutes and Complements". This has in turn driven the development of a wide range of products to support the communication process.