marketing of high-technology products and innovations chapter 2: strategy and corporate culture in...

Marketing of High-Technology Products and

Innovations

Chapter 2: Strategy and Corporate

Culture in High-Tech Firms

© Mohr, Sengupta, Slater

2005

Questions to consider What is the strategic marketing

planning process in high-tech firms? What constitutes competitive advantage

in a high-tech firm? What characterizes an innovative

culture in high-tech companies? What are the unique challenges faced

by small high-tech start-ups?


2005

Internal (within the firm) Considerations in

High-Tech Marketing

Effective Cross-Functional

Marketing /R&D Collaboration

Being Market-Orientated

Acquire Disseminate Use Information

Relationship Marketing

Partnering with Important Stakeholders

Small Company Challenges

Funding Other Resources Navigating Complex Environments

Culture and Climate in Innovative Companies

Obstacles to being innovative Facilitators of innovativeness

Creating Competitive Advantage

Resources and Competencies Tests of Superiority and Sustainability

Strategic Market Planning and Key Strategy Decisions

ENHANCED ODDS OF SUCCESS


2005

The Strategy Process

MarketPlanning

MarketStrategy

CompetitiveAdvantage

Evaluation& Control


2005

Strategic Market Planning Process in High-Tech Markets

Define goalsand mission

Choosearena

Implementstrategy

Understandprofit model

Completethe strategy

Identifyopportunities

Make toughchoices

Plan keyrelationships

Planning Process

(from

Ryan

s, et a

l.)


2005

Define Mission and Goals Mission

Why does the business exist? Who are our customers? What needs are we trying to solve? How will we solve them?

Goals Profit Growth New product acceptance Customer satisfaction


2005

Select the Business Arena Potential customer segments that could be

served; Potential applications or functionality that

could be provided to these customers; Possible technologies and capabilities that

could be used to create the applications or functionality; and

Possible role for the organization in providing the value to the customer versus the roles of others in the market chain.


2005

Identify Attractive Opportunities

Scan and understand the market environment Carefully segment the market Evaluate “fit” of company capabilities and

resources to market needs Identify current, potential, and indirect

competitors Determine competitors’ strengths and likely

strategies Assess profitability of serving each segment


2005

Make Tough Strategic Choices

Decide whether opportunity should be pursued What will it be worth to win? Is the market opportunity attractive

enough? Is the strategy powerful enough to

generate a sufficient level of profitability? If not, are there compelling reasons to

proceed?


2005

Make Tough Strategic Choices (Cont.)

Select/develop best strategy to take advantage of opportunity Achieve leadership position in the

opportunity? Do synergies exist within the portfolio of

opportunities being considered Leverage a common technology Leverage a common market chain

Are the strategies for the various opportunities reasonably consistent?


2005

Plan Critical Relationships With other firms in the market

chain With organizations outside the

market chain Company with a complementary

product or service


2005

Complete the Winning Strategy Positioning Product Development and

Management Pricing Distribution path/channeling Marketing promotion

Political relationship Meeting 4C

(customer/cost/convenience/communication)


2005

Understand the Profit Dynamic

Develop a detailed financial model for each opportunity More refined profitability analysis based

on detailed understanding of complete marketing strategy and associated costs

Look for modifications to enhance opportunity’s overall profitability. Beyond expectation

•retaliation from competitors •market/technology uncertainty


2005

Implement the Strategy Make sure people who will implement

are involved in the strategy formulation process

Design the effective organization: Leadership Structure and relationships Systems Culture and values


2005

Key Strategy Decisions Who are our target customers? What mix of products and services should

we offer? When should we enter a market?

The timing decision The requisite guts

How can we execute our strategy efficiently and effectively? Championship


2005

Who are Target Customers? “ Served” market

Potential pitfall: Tyranny of the served market

The marketing myopia Bi-focal vision

Search for new market space Independent unit & spin-off corporate


2005

Product/Service Mix Provide value for customers

Man/machine interface The usage analysis

Functionality, performance, price, post-sale maintenance, disposal


2005

Timing of Market Entry: Be a Market Pioneer?

First mover advantage creates entry barriers Economies of scale Experience effects Reputational effects Technological leadership Buyer switching costs Higher profits and higher

share Define product exemplar Higher consumer

awareness

Large development costs

Market uncertainty

PROSCONS


2005

Pioneers (“First Movers”) (Cont.) Successful Pioneers

Have technological foresight Understand the market Have marketing acumen Understand competitors’ strengths

and weaknesses A bit of luck


2005

An Advantage of Being A Follower


2005

When do “late” movers succeed? Identify overlooked product position Undercut pioneer on price Out-advertise or out-distribute the

pioneer Innovate superior product Innovate superior

business/marketing strategy Reshape the category


2005

Drivers of Strategy Innovation Bring new voices into the dialogue Foster new connections inside and

outside of the company Look at the “business” from a new

perspective Exude passion for discovery and

novelty Experiment and learn!


2005

Sources of Competitive Advantage

Tangible assets: Products Facilities Financial Resources

Intangible assets: Brands/reputation Know-how Culture

Competencies: Routines Processes


2005

Three Characteristics of Core Competencies Difficult for competitors to imitate Significantly related to benefits

end-user receives—valuable assets Allow access to a wide variety of

disparate product-markets—high potential


2005

Tree Analogy to Core Competencies—a case of Honda Motor

SNOWBLOWERS

Branches/canopy represents the widely different

product markets to which the core competency has provided access

MOTORCYCLES

SMALL CARS

LAWN MOWERS

SUPERIOR R&D

SM

AL

L

EN

GIN

ES

CORPORATE CULTURE

SUPERIOR MANUFACTURING

SUPERIOR MARKETING & KNOWLEDGE OF CUSTOMERS

Roots are underlying skills and capabilities that represent core competencies.

Trunk is the core product, or the physical embodiment of the core competencies.

The core product must be significantly related to benefits end-user receives.

Aircraft engine


2005

Implications of Core Competencies in Strategic Planning

Resource allocations may defy conventional logic Violate ROI criterion

•Developmentlearning AccumulationTransferringExploitation


2005

An Illustration of Sources of Competitive Advantage for Dell

Product

Reputation

Supply Chain Management

Convenience

Confidence

Price/Cost

Tangible

Intangible

Competency


2005

Requirements for Competitive Advantage

Valuableto Buyers

No

Yes

Yes

Yes

Superior toCompetitors

No

No

Yes

Yes

Difficult to Imitate

No

No

No

Yes

CompetitiveAdvantage

Disadvantage

Parity

Temporary

Sustainable

Profitable

No

Average

Superior

ConsistentlySuperior

Is the resource/competency:

Rarity is a variation on superiority.Transparency, replicability, and transferabilityare variations on imitability.


2005

Culture and Climate in High-Tech Firms

Obstacles to Innovativeness Core Rigidities Innovator’s Dilemma Liability of Bigness

Facilitators of Innovativeness Creative Destruction Firm Dominance Unlearning Corporate Imagination Expeditionary Marketing

Indulgence in the past successes

Laggard response to challenges

Self-cannibalization

Reshape the business mind-set


2005

When Core Competencies Become Core Rigidities Core rigidities: ingrained routines,

knowledge, and skills become strait-jackets that inhibit a firm’s ability to develop new products built around unfamiliar skills, routines, and new knowledge.

Ex: cultural norms, over-reliance on existing technologies


2005

The Innovator’s Dilemma"The innovator's dilemma is that many of the very same good management practices that help a company succeed, in the end cause it to fail. For example, listening to your best customers and incorporating their needs into the stream of new products you develop is absolutely essential to becoming a successful company. But the dilemma is that this can be very misleading when certain innovations - which I call 'disruptive technologies' - emerge in the market. Very often, mainstream customers in existing markets can't use new technologies when they first emerge; they can only be used by different customers in different applications."

Clayton Christensen


2005

“ Liability of Bigness” Traits of large firms can inhibit their

ability to develop radical innovations: Bureaucratic Focused on economies of scale Core competencies become core

rigidities Fear of cannibalization Incumbent’s dilemma


2005

Facilitators of Innovativeness

Creative Destruction (see next slide) Proactively develop next-generation

technology that may obsolete current technology

Ex: Develop Web-sites that undermine current distribution channels


2005

Creative DestructionA term coined in 1942 by Joseph Schumpeter in his work, Capitalism, Socialism and Democracy, to denote a "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."

In other words, creative destruction occurs when something new kills an old thing. A great example of this is personal computers. The industry, led by Microsoft and Intel, destroyed many mainframe computer companies--but in doing so, entrepreneurs created one of the most important inventions of this century.

Creative destruction may be the antidote to the Innovator’sDilemma if it can overcome internal rigidity.


2005

Leveraging Firm Dominance Effectively

Sources of dominance: Investments in the existing product

generation Market share Wealth

The first two factors can inhibit innovation; the latter facilitates the development of innovation


2005

Leveraging Firm Dominance (cont.)

Manager’s fears of obsolescence: Positively related to innovation

(the willingness to cannibalize)


2005

Final thoughts on Leveraging Firm Dominance

Dominant firms reap greater rewards from introducing radical innovations if they quick follow the industrial dynamics

Smaller firms can overcome their disadvantage by: Marketing support (e.g., sales effort) Technology support (e.g., R&D

spending, patent protection, etc.)

from some key complements


2005

“ Unlearning” Innovation is facilitated by

unlearning practices that worked in the past but are not useful, or even detrimental, to future success.


2005

Technology Life Cycles

Per

form

ance

Time

Limit of Particular Technology


2005

Some Implications of Technology Life Cycles

New technologies often come from companies not selling current generation of technology

Incumbents often invest in both improving existing technology and developing new

Incumbents often underestimate viability of new developments

Therefore, new technologies can catch/attack established firms by surprise


2005

Corporate Imagination(by Hamel & Prahalad)

Overturn price/performance assumptions (see next slide)

Escape the “tyranny of the served market”

Use new sources of ideas for innovation Get out in front of customers


2005

4 Elements of Corporate Imagination

(1) Willingness to overturn price/performance assumptions Incremental improvements to existing

technologies, which move along the same price/performance curve, vs.

Radical innovations that allow greatly-improved performance at roughly comparable prices as existing technology

Technology life cycles Ex: Moore’s Law


2005

4 Elements of Corporate Imagination (Cont.) (2) Escape the “tyranny of the

served market” Excessive focus on current customers Obscures the fact that customer needs

may change over time and may be solved in radically new ways

Therefore, look for market opportunities outside of existing product/markets.


2005

4 Elements of Corporate Imagination (Cont.) (3) Use new sources of ideas for

innovation Rather than using standard marketing

research tools, use lead users

Who are the browser’s lead users? and ethnographic observation

(empathic design) (Discussed fully in Chapter 5)


2005

4 Elements of Corporate Imagination (Cont.)

(4) Get out in front of customers. Lead them where they want to go

before they themselves know it. Requires being “close to the

customer” AND not being blinded by existing rules and procedures.


2005

The Learning Organization

“Learning may be the only source of sustainable competitive advantage”

Ray StataCEO, Analog Devices

“In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage ‘is knowledge’”

Ikujiro NonakaThe Knowledge Creating Company

“A unique characteristic of knowledge is that it is one of the few assets that grows most - usually exponentially - when shared”

James Brian QuinnIntelligent Enterprise


2005

Learning Opportunities Market-focused Learning (users’ expectation)

Competitive Benchmarking (competitors’ excellence) ( 師夷之長技以制夷 )

Learning from Alliances, Joint Ventures, Partnerships, and Acquisitions (approaches)

Continuous Improvement through Experience (feedback control, adaptation & adjustment)

Market or Operational Experiments (uncertainty & expectation management)

Utilization of Outside Experts or Consultants (objectivity of bystander’s standpoint)

Organizational Memory (the possibility of core rigidity)


2005

Do We Know Anything for Sure?Life is pretty simple: you do some stuff. Most fails.Some works. You do more of what works. If it worksbig, others quickly copy it. Then you do something else. The trick is in the doing something else. Youmust take pot shots at today’s star before you aremimicked. Today’s radiantly blooming flowers aretomorrow’s mulch. Don’t forget that for a moment.But don’t think about it too long either.

Tom Peters


2005

Expeditionary Marketing Frequent fast-paced market incursions (see

next slide) More accurate learning of customer needs Time between market learning and product

launch is shortened Maximizes odds that product delivered matches

customer’s needs as needs are less likely to change in the short-term

Implication: Issue is less being right the first time, but being able to accumulate market experience, and quickly adapt market offerings

the try-out

strategy

Beta testing


2005

Expeditionary Marketing

Model 1

Model 2

Model 3

Time

Development Overall Revenue Incr. Revenue New Models

Expeditionary Marketing: Many fast-paced incursions into the market Relationship between Entries in the Market and Quality

Successive times at batMany small bets


2005

Nurturing a Culture of Innovation

Characteristics of a firm that fosters innovation— Disciplined rather than unfettered creativity Continued R&D efforts, even in cyclical

downturns Broaden the absorptive capability

Enlightened experimentation An useful and economical way of R&D—

simulation and prototype before great bets


2005

Characteristics of Firms that Nurture a Culture of Innovation (cont.) Identifies market needs that are divergent

from (rather than congruent with) existing strategies

Roles and responsibilities of key players may not be clearly defined in early stages

Compensation for taking risk and challenges Screening for new product ideas not based

on formal criteria, but done informally based on technical/market merit

Unexpected success or failure!


2005

Characteristics of Organizations Who Foster Innovation (Cont.)

Role of product champion is key Tireless crusaders for idea Innovative firms have reward system

and culture to promote influence of product champions

Personnel given time and incentives to be innovative

Tolerate risk and “mistakes”

Only paranoid survives!


2005

Skunk Works Isolate new venture groups outside

the normal organizational hierarchy

Pros:

- Allows for more creativity, unfettered by existing corporate protocols.

Cons:

- Signals a corporate culture that has impediments to innovation

(Creativity doesn’t happen within normal operating procedures)

- Isolates the creative process


2005

Applying Lessons of Innovativeness to Businesses’ Internet Experiences

New business models came from industry outsiders Competitive Volatility

Core rigidities and the tyranny of the served market: Existing companies bound by existing rules

of the game and existing customers Underestimation of new competitors Need for creative destruction


2005

Applying Lessons of Innovativeness to Businesses’ Internet Experiences (Cont.)

Expeditionary Marketing: Shorter learning cycles Quicker opportunity to adapt

strategies Understand core competencies Reliance on skunk works Pioneering advantages


2005

“ The Liability of Smallness:”Challenges for High-Tech Start-ups

Sources of Funding Other Resources (complements) Navigating Complex Environments


2005

Sources of Funding

Friends and Family Bootstrapping Reliance on venture capital

Informal “angels” Formal companies/banks


2005

Considerations of Venture Capitalists

What Venture Capitalists Look For: Management Team Marketing Plan Technology/Product ROI


2005

Other Resources for Start-Ups Technology incubators Partners (Ch. 3)


2005

Navigating a Complex Environment

Key Success Factors for Small High-Tech Firms Speed to market positioning Flexibility to respond changes Time Orientation to anticipate and

disseminate insights and coordinate the young management team

marketing of high-technology products and innovations chapter 2: strategy and corporate culture in...

Documents

hightech marketing slide

segment slide

service slide

market needs

market environment

market chain company

common market chain

market opportunity attractive