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4 Phases of Risk & Reward for Emerging Tech

To be effective - and effectively leverage technology - change leaders need to understand (and leverage) how "New & Unfamiliar" tech becomes "Accepted & Familiar" tech over time. This is a foundational aspect of the emerging tech literacy that change leaders need in order to be effective.

New technologies (and new things in general) tend to emerge in a 4 phase pattern.

As this pattern unfolds the new technology becomes more understood and accepted over time. This pattern reflects the diverse ways humans respond to new technologies - we don't all jump in all at once.

The risks and opportunities of emerging technologies become more apparent to more people over a timeline that can be divided into 4 phases:

  1. Experimentation > 2. Stabilization > 3. Adoption > 4. Absorption

Understanding these four phases isn’t just useful; it’s essential. It will help you anticipate the kinds of concerns that your stakeholders will raise when you propose a bold idea.

Different categories of investors and stakeholders have different levels of tolerance for different phases. Some with high risk tolerance will prefer to be involved as early as possible. Others will prefer to get on board later. We will examine why this is, and how you can use this understanding to increase your ability to influence and drive change.

This simple 4 phase pattern gives change leaders a helpful framework for anticipating, empathizing with and addressing the concerns of stakeholders. It will help you manage your communication and messaging to gain buy-in effectively. This framework is a game-changer for anyone serious about driving intentional, lasting innovation while preserving relationships and achieving buy-in. For those who aspire to lead change at scale, mastery of these phases is not optional—it’s the foundation of success.

How to leverage this pattern for better success

Keep this pattern in mind when crafting enterprise roadmaps that include the exploration or adoption of emerging technologies, or when thinking about the level of risks facing a new set of capabilities - say web3 - and the timing of risks and opportunities in that emergence.

2 Key points:

  1. The types of risks and the levels of risk are NOT static across these 4 phrases: they change (for investors and other participants) as this pattern unfolds from one phase to the next.
  2. Likewise the rewards also change as the phases progress.

You can use this knowledge to build empathy, improve your mobilization and persuasion track record: it will help you know who is ready to come along with your new idea or initiative, and who may not be.

Key: Understand how the risks and rewards change as you move from one phase to the next

The following sections break out each phase and describe the specific risk and reward combinations in each. Understanding this will help you think about

  • what kind of participant or investor you want to be, and
  • how and when you want to get involved.

It can also be used to help a group of organizational stakeholders or venture partners decide how/when they want to approach a specific set of opportunities or risks related to emerging tech.

Phase I: Experimentation

The new thing is not well understood, even by its most diehard practitioners.

  • Risk is high and its magnitude and implications are very unclear.
  • Reward is low, over-stated, or unclear.

Players with the ability to accept risk have a slight chance of gaining significant rewards. This is the domain of pioneers who are intrinsically motivated to blaze new trails regardless of risk. As an example, this Phase for cryptocurrency (and the emerging financial ecosystem it is spawning), in my estimation, was something like 2009-2022. A relatively small cohort reaped outsized gains, but this was the exception.

Phase 2: Stabilization

The new thing is becoming more understood by those who focus on it, and they understand it well enough to sometimes eek out good results for themselves or for a narrow group of stakeholders, but its broader impacts to other stakeholders or the broader community is still not fully understood.

  • Risk is significant, and its implications (what could go wrong, how bad it would be) are still not fully understood.
  • Rewards are becoming clearer, and may be significantly better than what is available in the status quo.

Players with the ability to accept higher risk have a reasonable chance at gaining significant rewards. This is the domain of the risk seeking investor and early adopters. For cryptocurrency this Phase may have been 2017-2023, and yes, maybe phases overlap.

Phase 3: Adoption

In this phase the new thing is becoming more commonly understood and accessible, easier to use.

  • Risks are tapering to be more in line with risks present in the existing status quo. By this time, stable laws and regulations have emerged, which give more conservative participants confidence that they understand the rules of the road, and how they can succeed.
  • Rewards are commonly recognized as significantly better than what is available from the status quo, and there is enough of a track record to give consumers and regulators confidence on this point. Companies and consultants begin to formulate strategies for harnessing the new tech for competitive advantage. Adoption accelerates as companies or individuals fear they will be marginalized or left out of the "big new thing."

This is the domain of the mainstream adopters. They may not have the resources and risk appetite of the earlier adopters and investors, but they will participate if they perceive that the risks inherent in the new financial ecosystem are becoming similar in magnitude to the risks presents in the existing financial ecosystem.

As an example, as of early 2024 crypto appeared to be in the early stages of the adoption phase, given the 2024 ETF approvals, and developments like Fidelity's offerings and investor education material.

Phase 4: Absorption

The new thing is no longer new. It has been fully absorbed by the market, and now has become the new status quo. Ironically, its adherents will likely be resistant to whatever new things are now emerging.

  • Rewards are no longer significantly better than what is available in the status quo.
  • Risks are not significantly different/worse than what is available in the status quo.

This can become the domain of laggards, the inertia class, those who are comfortable, basking in the receding glow of past successes.

What You Just Learned:

You’ve explored the 4-phase process by which emerging technologies move from "New & Unfamiliar" to "Accepted & Familiar." This framework—Experimentation, Stabilization, Adoption, and Absorption—highlights how risks and rewards shift as technologies mature. This in turn should influence how you communicate with stakeholders, and how and when you choose to engage them.

Understanding these phases equips change leaders to craft more effective roadmaps, have empathy for different stakeholders, and improve their ability to mobilize teams and resources. By recognizing how risks and rewards evolve, you can better navigate opportunities, anticipate challenges, and align your proposals and communication to match the readiness levels of your audience or organization.

Reflection Questions:

  1. Which phase of the adoption process do you find yourself most comfortable in? Can you think of advantages that you might gain if you stretch beyond that comfort zone?
  2. How can you apply your understanding these four phases to help you approach the adoption of a new technology in your organization or community?
  3. What strategies can you use to build empathy and mobilize stakeholders who are hesitant to embrace emerging technologies?

Click here to go to the next learning segment: Implementation paths and the evolution of governance 

Governance (the way nations and industries implement and enforce policies) is evolving. This evolution gives change leaders new options.