Performance oversupply of technologies

I was reading the book The Innovator's dilemma by Clayton M
Christensen, and came across some very interesting insights.

Technologists, in their zeal to attain the vertical limit,
successfully bring out goodies that are brilliant in nature and
acceptable by the market, but perhaps with features that the market
does not need at that point of time. That is the time when the market
evaluates the product from a different paradigm. And this new angle
can be quite devastating for the company.

Taking an example, when we came across Pentium IIs in 1997, they were
quite a rage. 400MHz was the speed many were looking for, and it
seemed that people would have more of it. And they did, with the
subsequent generations of Pentium IIIs and IVs, touching the current
max speed of 3.2GHz. There was a time when a two year old PC was
supposed to be outdated, for they were too slow for the current
applications. Internet demanded more memory and processing capacity,
and so the market was bullish on performance.

Today, I think my two-year old PC with Pentium IV 2.4GHz and 256 MB
RAM runs just fine as it did before. That's because my requirements
haven't changed. I still surf the net, the broadband has increased the
duration online, but the hardware needs are still the same. This is
the time when a 3.5 GHz, or 4 GHz processors will have a tepid
response in the PC market.

My job has required me to migrate from a PC to a thinkpad. I find this
Celeron notebook with just 1.5GHz CPU just fine for my work. Of course
they don't expect (or want) me to play games on this notebook. So if
you were to offer me a higher performance processor, will I be ready
to pay a premium for it? I don't think so.

At the moment, I would be looking at processors that don't heat up
much and consume less power. So my basis of evaluation has changed.

The book mentions about the product evaluation model by a needs
hierarchy. I found it really interesting, for I can relate to the
strategic ideas.

The market views a product in this order: functionality, reliability,
convenience and price.
When a new product is launched, the market will look at the features,
or its functionalities. I could take the example of mobile phones. Its
ability to keep one connected while on the move resulted in focus on
the functionality.
Reliability comes into picture when you have got the functionality you
were looking for, and you want something that does not conk off at
unexpected points.
Mobile handsets, having gotten over the functionality and reliability,
were being looked at for convenience (smaller, lighter, more battery
talktime and the like).
Finally, it all comes down to price. When the market has enough of the
above three, price remains the sole criterion. This is the time when
the product is said to have been commoditized. And commoditization
implies lower gross and profit margins for the company.

The success of a company comes from its ability to make profits. So
instead of looking solely at the functionality point of view, it makes
sense for the company to watch for the changing paradigms of the
market.