Technological Competence Not Sufficient For Success In The Digital Gaming Machine Industry

In his thesis, Creating Player Appeal, Mirko Ernkvist, a researcher in the School of Business, Economics and Law at the University of Gothenburg, studies the U.S. gaming machine industry during the period 1965-2005 in order to analyse how the industry has managed technological change.

The gaming machine industry is characterised by complex products with a large number of factors influencing design and functionality. Significant uncertainty surrounds the reception of new machines in the market, and it is hard to know beforehand whether a new product is going to be successful or not.

"The dominant company in the U.S. gaming machine industry until the 1980s was Bally, after which they lost almost their entire market share to IGT," says Mirko Ernkvist.

During the 1980s a technological shift took place from electromechanical to digital technology, encompassing a large number of new technological innovations. The lifespan of the gaming machines more than halved and it became possible to explore completely new design concepts. The new conditions placed new demands on companies to adapt to the market's preferences. Despite having a vast amount of technical know-how, Bally lacked knowledge of the market.

In his dissertation Mirko Ernkvist concludes that it is cognitive problems that can constitute one of the major causes of companies not keeping up with technological change. Even though companies may understand the new technological opportunities, they do not have a similar grasp of the market.

Development of new products based on new technology is often based on existing products and successes. But the demand in the market has changed, and new conditions apply for satisfying customers.

"If you have a highly complex, and highly uncertain, product it is important to be aware of the cognitive problems," says Mirko Ernkvist. "There is a tendency in companies that are established in an industry to view and evaluate new technology on the basis of performance factors that have been applied in the past, and therein lies the risk of missing out on new opportunities."

The thesis, "Creating Player Appeal. Management of Technological Innovation and Changing Pattern of Industrial Leadership in the U.S. Gaming Machine Manufacturing Industry, 1965-2005," was presented on February 3, 2009.