Transcript Journal of Marketing

Innovation Management
Kevin O’Brien
Firm Capabilities & Market
Opportunities
Learning Objectives




Appreciate how competitive success is
achieved by aligning firm capabilities with
market opportunities
Identify the role of technological and
marketing capabilities
Understand the concept of technology
trajectories and the impact of disruptive
technologies
Understand the concept of market orientation
and how this impacts on innovation and new
product performance
Marketing and Innovation
‘There is only one valid definition of
business purpose: to create a customer …..
It is the customer who determines what the
business is ….. Because it is its purpose to
create a customer, any business enterprise
has two – and only these two – basic
functions: marketing and innovation’
Peter F. Drucker, The Practice of Management
Markets and Technology
New
technology
Assets
&
capabilities
New
market
opportunities
New products
Lower cost
Improved attributes
New attributes
Resource-based Marketing
Market needs
& conditions
Strategy adapted to the
needs and requirements
of the market
Organisational resources
suited to the markets in
which it operates
Marketing
strategy
Organisational
resources
Organisational resources
needed for implementation of
the strategy
(Hooley et al., 1998)
Technology Trajectories
100,000,000
Millions of
transistors per
microprocessor
10,000,000
Pentium 4 processor
Pentium III processor
(log scale)
Pentium II processor
Pentium processor
486 DX Processor
1,000,000
386 processor
286 Processor
100,000
8086 processor
10,000
8080 processor
8008 processor
4004 processor
1,000
1970
1975
1980
1985
1990
1995
2000
2005
Source: Reproduced from Intel website http://www.intel.com/research/silicon/mooreslaw.htm
Impact of Technological Change

Changing product life cycles



Changing market segments








Less segment stability
Increased segment fragmentation
Importance of market sensitivity/target marketing
New industries/new competitors


Changing product technology = shorter life cycles
Increased risk in high volume/low cost strategies
Shifts in product-market boundaries
Importance of competitive intelligence
Fights over ‘standards’
Deregulation of markets
Globalisation of markets
Changing organisation
(Adapted from Capon & Glazer, 1987)
Core Competencies
Core Competencies at Canon
Precision
Mechanics
Fine Optics
Micro-electronics
Basic camera


Compact camera


Autofocus camera



Video still camera



Laser beam printer



Colour video printer


Bubble jet printer


Basic fax


Laser fax



Calculator
Plain paper copier



Colour copier



Laser copier



Still video system



(Prahalad & Hamel, 1990)
Core Rigidities

Core competencies
can become obstacles
to innovation





Cultural norms
Preferences for
existing technology
Established routines
and procedures
Status hierarchies
Economics
(Leonard-Barton, 1992)
Relative difficulty of change
High
Low
Values
Skills/
knowledge
Managerial
systems
Physical
systems
Innovations

Sustaining innovations



Maintain current rate of performance improvement
Give customers something more/better in currently
valued attributes
Disruptive innovations




Different attributes from those valued by
mainstream customers
Often poor performance in mainstream
market/applications
Used/valued in new markets or applications
Often create new markets
Disruptive Innovations

Established companies:

Develop & commercialise new technologies
(incremental & radical) to meet needs of current
customers


Market research, technology trends, cost structure, profit
assessment, resource allocation
Entrant companies:




Low cost structures
Secure a foothold in emerging market
Improve technology performance
Attack mainstream market
Performance
Disruptive Innovations
Performance
improvement required by
mainstream market
Expected trajectory of
performance improvement
Current performance of potentially
disruptive technology
Time
(Bower & Christensen, 1995)
Market Orientation
Understanding
customers & how to
create value for them
Identifying
competitors
and being
aware of their
capabilities
Customer
orientation
Competitor
orientation
Market-led
organisational
culture
Focus on the
long term
Long-term shareholder
value as the main
business objective
Inter-functional
co-ordination
Using all
organisational
resources to
create value for
customers
Kohli & Jaworski (1990), Narver & Slater (1990)
Market Orientation & New Products

Strong association between marketorientation, innovative capability, and
new product success





When intensity of market competition and
industry hostility are high
During the early stages of life-cycle
More for incremental than radical changes
Marketing capability has most positive
effect in firms with strong technical skills
Small and large firms
(Atuahene-Gima, 1995)
Impact on Business Performance
Environmental Conditions
Market
Orientation
Market
turbulence
Technological
turbulence
Organizational Innovation
Customer
orientation
Technical
innovation
Competitor
orientation
Interfunctional
Coordination
Organizational
performance
Administrative
innovation
(Han et al., 1998)
Marketing Processes

Value-defining processes

Understanding the environment




Understanding resources & capabilities
Assess ‘value created’
Value-developing processes

Value proposition for customer


Market research, buyer behaviour, segmentation, product
use etc.
Procurement, NPD, distribution, strategic alliances,
pricing etc.
Value-delivering processes

Product/service delivery, customer relationships,
communications, customer service etc.
(Webster, 1997)
Marketing Capabilities
Internal Emphasis
External Emphasis
Outside-in
processes
Inside-out
processes
Spanning processes
Market sensing
Customer linking
Channel bonding
Technology monitoring
(Day, 1994)
Customer order fulfilment
Pricing
Purchasing
Customer service delivery
New product development
Strategy development
Financial management
Cost control
Technology development
Integrated logistics
Manufacturing processes
HRM
Environment, H&S
Marketing Capabilities

Market sensing



Customer linking



Systematic gathering, interpretation & use of
market information
Sensing customer & market changes ahead of
competitors
Creating & managing close customer relationships
Purposeful cooperation
Channel bonding

Relationships with suppliers, wholesalers, retailers
etc.
(Day, 1994)
References
Atuahene-Gima, K. (1995) An exploratory analysis of the impact of market
orientation on new product performance, J. Prod. Innov. Manag., 12,
275-293.
Bower, J.L. & Christensen, C.M. (1995) Disruptive technologies: catching
the wave, Harvard Business Review, 73(Jan-Feb), 43-53.
Capon, N. & Glazer, R. (1987) Marketing and technology: a strategic
coalignment, Journal of Marketing, 51(July), 1-14.
Day, G.S. (1994) The capabilities of market-driven organizations, Journal
of Marketing, 58(Oct), 37-52.
Han, J.K., Kim, M. and Srivastava, R.K. (1998) Market orientation and
organizational performance: is innovation the missing link? Journal of
Marketing, 62(October), 30-45.
Hooley, G., Broderick, A. & Moller, K. (1998) Competitive positioning and
the resource-based view of the firm, Journal of Strategic Marketing, 6,
97-115.
Kohli, A.K. and Jaworski, B.J. (1990) Market orientation: the construct,
research propositions, and managerial implications, Journal of
Marketing, 54(April), 1-18.
References
Leonard-Barton, D. (1992) Core capabilities and core rigidities: a
paradox of managing new product development, Strategic
Management Journal, 13, 111-125.
Narver, J.C. and Slater, S.F. (1990) The effect of market orientation
on business profitability, Journal of Marketing, 54(October), 2035.
Prahalad, C.K. & Hamel, G. (1990) The core competence of the
corporation, Harvard Business Review, 68, (May-June), 79-91.
Webster, F.E. (1997) The future role of marketing in the
organization, in D.R. Lehmann and K.E. Jocz (eds) Reflections
on the Futures of Marketing, Cambridge MA: Marketing Science
Institute.