Transcript (I) Federico Munari University of Bologna

Commercializing innovative
technologies and products (I)
Federico Munari
University of Bologna
Federico Munari – University of Bologna
-1-
Objectives
The seminar presents tools and methodologies that
allow analyzing and forecasting the market for
innovative new technologies and products
The seminar addresses the following questions:
 how to identify the market potential of a new idea/technology
 how to identify the degree of disruptiveness of a new technology
 how to forecast the rate of diffusion into the market of a new
technology
 how to design a successful marketing strategy for a new
technology
Federico Munari – University of Bologna
-2-
Speaker
Federico Munari,
University of Bologna
Scientific Director of the Master in Management of Intellectual Property, University of
Bologna
(www.almaweb.unibo.it/iphome)
Director of the EVPAT research project (Economic Valuation of Patents), financed by
the European Investment Bank
(www.evpat.net)
Contact:
Department of Management, University of Bologna
Via Capo di Lucca 24, Bologna - Italy
[email protected]
Ph: +30 051 2090208
Federico Munari – University of Bologna
-3-
Topics
Morning
Introduction
Essentials of marketing analysis
for innovative products
Market segmentation
Target market selection
Product positioning
Identifying disruptive
innovations
Federico Munari – University of Bologna
Afternoon
Forecasting the demand for a
new technology: an overview
The diffusion of innovations:
conceptual models
Classes of adopters
Risk factors in the diffusion of a
new technology
Early vs. mainstream markets
Case discussion: digital appliances
-4-
Innovation management: key questions
Which are the evolutionary
dynamics of the new
technology?
Markets
In which technologies
How to create value?
should we invest?
First mover or follower?
Technology
How to protect
innovation?
To patent or not
to patent?
How to exploit
proprietary
technologies?
Federico Munari – University of Bologna
How to
capture
value?
Is there a market for
the innovation?
Who are the “early
adopters”?
What kind of
marketing mix?
How to organize R&D
and new product
How to deliver
development?
value?
How to favor
innovation within the
company?
Internal or external
development?
-5-
Entering into new markets with new technolgies
Iphone -> Apple entry into the cell phone market
Margherita Dialogic ->Indesit Company launches the first model of
“smart” digital dishwasher
Kindle -> Amazon introduces the new e-book
Tesla -> Tesla Motors introduces a new model of electric car
Etc…
Will these new products be successful? Is there a market for
them?
For an organization with a proactive new product development
process, the initial steps deal with the selection and definition of
markets to be entered
Federico Munari – University of Bologna
-6-
The marketing process
Information
Market
Product positioning
Placement
Market Selection
Price
Market Segmentation
Product
Market Definition
Promotion
Marketing
Mix
Marketing
Strategy
Results
Federico Munari – University of Bologna
-7-
Market definition for entry strategy:
the steps in the opportunity identification phase
1. Identification of the markets that offer the best
opportunities
2. Detailed definition of these markets through
segmentation analysis
3. Target market selection
4. Positioning
Source: Urban and Hauser
Federico Munari – University of Bologna
-8-
1. Identification of the market that
offers the best opportunities
Desirable
characteristics of
markets
Potential
Penetration
Scale
Measures
Size of market
Growth rate
Vulnerability of competitors
Input
Share of market
Cumulative sales volume
Investments in dollars and technology
Reward
Profits
Risk
Stability
Probability of losses
Federico Munari – University of Bologna
-9-
1. Some factors to be considered in market
profile analysis
Market characteristics
Potential
Size of market
Growth rate
 Length of life cycle
Penetration
Vulnerability of competitors
Cost of entry
Time to become established
Scale
 Potential for market share
Cumulative sales volume
Likelihood of competitive entry
Input
Investments in dollars and technology
Technological advancement necessary
Reward
Margin size
 COmpetitiveness on pricing structure
Risk
Stability of demand
Rate of technological change
Possibility of adverse regulation
Federico Munari – University of Bologna
Match to Organization’s
Capabilities and Product line
Have financial resources required
Match to physical distribution system
Match to marketing capabilities
Utilize existing sale force
Can handle technology, R&D experience and
know-how
Probability of technical completion
Ability to service product
Compatibility with other produict
Management skills and experience for this
market
Past work done in this market
Overlap with current supply chain channels
-10-
1. What is a market?
A set of actual or potential customers
for a given set of products or services
who have a common set of needs or wants
I.e. car market: subcompact, compact, midsize, fullsize
and luxury cars
Market definition should depend on how consumers
themselves view the market (product substitability)
Federico Munari – University of Bologna
-11-
1. What is a market?
- Mercato potenziale totale
- Mercato qualificato
- Mercato disponibile
- Mercato servito
- Mercato acquisito
Federico Munari – University of Bologna
-12-
1. What is a market?
Mercato potenziale
• insieme di consumatori (unità di consumo) interessati ad una certa offerta e con una capacità di spesa
adeguata
Mercato qualificato
• insieme di consumatori con interesse, capacità di spesa, e adeguati requisiti soggettivi o oggettivi
Mercato disponibile
• insieme di consumatori con interesse, capacità di spesa, eventuale qualifica e accesso ad una specifica
offerta
Mercato target (m.obiettivo o m.servito)
• parte del mercato disponibile che rappresenta l’obiettivo dell’impresa e dei concorrenti diretti
Mercato acquisito
• da tutte le imprese che si rivolgono allo stesso mercato (permette di calcolare il tasso di penetrazione
della categoria di prodotto)
• dalla singola impresa considerata (permette di calcolare il tasso di penetrazione della specifica marca)
Federico Munari – University of Bologna
-13-
1. What is a market?
Mercato potenziale
Popolazione
totale
Mercato qualificato
Mercato disponibile
Mercato servito
Mercato acquisito da
Mercato
potenziale
tutti i concorrenti attuali
Mercato acquisito dall’
impresa X
Mercato totale
Federico Munari – University of Bologna
Mercato potenziale
-14-
2. Market segmentation: objectives
Age
Age
Sex
Personal
Income
Federico Munari – University of Bologna
Purchase choice
Total market
Age and sex
Market segmentation consists of dividing the market into groups of
(potential) customers – called market segments – with distinct
characteristics, behaviors, or needs.
Type of use
-15-
2. Market segmentation: types
Segmentation based on benefits sought by customers
(i.e. for nonprescription drugs treating pain or fever: effectiveness
vs. gentleness)
Segmentation based on observable characteristics of
customers
(i.e. for nonprescription drugs treating pain or fever: older vs.
younger consumers)
Federico Munari – University of Bologna
-16-
2. Market segmentation: benefit segmentation
in the fruit drink market
Benefit sought
Products favoured
•Extra energy
•Vitamins
•Natural
•Low calories
•Low cost
•Robinson’s Barley water
•RIbena
•Pure orange juice
•Diet squash
•Supermarket own label
Source: Jobber D. (2000)
Federico Munari – University of Bologna
-17-
2. Market segmentation: variables for
consumer segmentation
Federico Munari – University of Bologna
-18-
2. Market segmentation: variables for
consumer segmentation
Descriptions of individuals
Demographics and socio-economics (age, income, sex, education, …)
Attitudes (personality, lifestyle, product perceptions)
Purchasing approaches, expenditures.
Descriptions of environments
Geography (world region, country, city, metro size, density, climate),
Occasions (weddings, camping trips, vacations),
Culture
Descriptions of behavior
Marketplace: loyalty status, usage rate, price sensitivity.
In the context of everyday life/work: concerns and interests.
Federico Munari – University of Bologna
-19-
2. Market segmentation: variables for
organizational segmentation
Federico Munari – University of Bologna
-20-
2. Market segmentation: variables for
organizational segmentation
Macrosegmentation
Organizational size (large, medium, small)
Industry (automotive, banking, textile,…)
Geography location (local, national, European, global)
Microsegmentation
Choice criteria (value in use, delivery, price, status,…),
Decision-making unit structure (complex, simple),
Organizational innovativeness (innovator, follower, laggard)
…
Federico Munari – University of Bologna
-21-
2. Market segmentation: steps
1. Understand the benefits that customer wants
2. Segment the market and develop prototypical
customer profiles based on the customer benefits
3. Find the observable variables (such as demographic
characteristics) most likely to discriminate among the
benefit segments to identify membership in specific
segments
Federico Munari – University of Bologna
-22-
Case-study: a new washing machine
Imagine to be in charge of the development of a
new washing machine for a company operating in
the home appliance industry
 Identify key variables in order to segment the market
(based on expected benefits for the consumer)
 Draw a perceptual map to position your product in the
market
 Define the key components of the marketing mix to
commercialize your product
Federico Munari – University of Bologna
-23-
Case-study: a new washing machine
What do I search for? Performance vs. Free time/space
How do I use it? Control vs. innovation/liberation
Liberation
Non conventional
New adopters
Delegation
Innovation
Pragmatists
Control
Housewives
Performance
Federico Munari – University of Bologna
-24-
3. Target market selection: attractiveness
evaluation
Within each segment, specify and assess:
 Size and growth potential
 State of wants satisfaction
 Competition
Availability of substitute brands, power of buyers and
sellers, competitor intents and strategies.
 Existence of entry and mobility barriers
 Organization skills & resources need to succeed
Federico Munari – University of Bologna
-25-
3. Target market selection: attractiveness
evaluation
In order to evaluate the attractiveness and potential
profitability, it is possible to apply Michael Porter’s “five
competive forces” model at the segment level:
Suppliers
New
entrants
Competitors
Subsitutes
Buyers
Federico Munari – University of Bologna
-26-
3. Target market selection: criteria to assess
the different segments
Measurable
Size and profiles of segments can be measured.
Accessible
Segments can be effectively reached and served.
Substantial
Segments are large or profitable enough to serve.
Differential
Segments must respond differently to different marketing
mix elements and programs.
Federico Munari – University of Bologna
-27-
4. Positioning: objectives
It represents the marketer’s effort to identify a
unique selling proposition for the product/service
A good positioning answer three questions:
Who are the customers?
What is the sets of needs that the product fulfills?
Why is the product the best option to satisfy those
needs?
Federico Munari – University of Bologna
-28-
4. Positioning: perceptual map for motorbikes
Performance
Lifestyle
Function
Comfort
Federico Munari – University of Bologna
-29-
Case-study: Indesit Company
a new washing machine
Aqualtis -> Easy to fill/empty, Save energy, Silent
Moon -> Easy to use, Small, Unique Design
Liberation
Indesit Moon
Delegation
Innovation
Control
Performance
Federico Munari – University of Bologna
Ariston Aqualtis
-30-
Target marketing strategies
Undifferentiated marketing
Marketing mix
Whole market
Differentiated marketing
Marketing mix 1
Focused marketing
Segment 1
Marketing mix 2
Segment 2
Marketing mix 3
Segment 3
Federico Munari – University of Bologna
Marketing mix
-31-
New technologies, new clients, new
needs
Performance
Who buys a new
technology when it
is introduced into
the market?
The demand of a new technology
is often related to:
- New clients
- With new needs
- Sometimes with lower margins
Time
Federico Munari – University of Bologna
-32-
What is a disruptive technology?
Sustaining technologies foster improved product
performance
Disruptive technologies:
 initially underperform existing technologies in
mainstream market
 They possess new features that bring higher value
for a different class of customers
 Their performance progresses faster than market
demand
Source: Christensen C.
Federico Munari – University of Bologna
-33-
Disruptive vs. sustaining innovation
Performance
Progress due to
sustaining technology
Performance required
at the high end of the market
Progress due to
disruptive technology
Performance required
at the low end of the market
“The innovator’s dilemma “
Time
Clayton Christensen
Federico Munari – University of Bologna
-34-
Disruptive vs. sustaining innovation:
rigid disk drives
5.25 inch drive technology
Performance
(HD capacity
in Mbytes)
Performance required
in desktop pc market
3.5 inch drive technology
Performance required
In portables market
“The innovator’s dilemma “
Time
Clayton Christensen
Federico Munari – University of Bologna
-35-
How to identify a disruptive technology?
Graph the trajectories of performance improvement
demanded in the market versus the performance
improvement supplied by the technology
A disruptive technology:
Can’t be used in the beginning in the mainstream market
It offers a set of attributes which are orthogonal to those
that command attention in the mainstream market
The technology is moving ahead at a faster pace than the
market’s trajectory of need
Source: Christensen C.
Federico Munari – University of Bologna
-36-
The risks of incumbents’ failure in facing
disruptive technologies
1) Disruptive products are generally simpler and
cheaper, and have lower margins
2) Disruptive products are generally commercialized
in secondary or insignificant markets
3) Leading customers of the firm do not want
products based on disruptive technologies
Federico Munari – University of Bologna
-37-
PDA vs PC:
a disruptive technology?
Power
Memory
Speed
?
PC
PDA
Weight/Cost
Federico Munari – University of Bologna
-38-
Commercializing innovative
technologies and products (II)
Federico Munari
University of Bologna
Federico Munari – University of Bologna
-39-
Topics
Morning
Introduction
Essentials of marketing analysis
for innovative products
Market segmentation
Target market selection
Product positioning
Identifying disruptive
innovations
Federico Munari – University of Bologna
Afternoon
Forecasting the demand for a
new technology: an overview
The diffusion of innovations:
conceptual models
Classes of adopters
Risk factors in the diffusion of a
new technology
Early vs. mainstream markets
Case discussion: digital appliances
-40-
The diffusion of innovation:
key curves
Penetration rate
(Cumulated adoptions)
Number of adopters/period
Time
(“S” curve)
Federico Munari – University of Bologna
Time
(“Bell” curve)
-41-
Diffusion curves of selected innovation
(% of households with)
Federico Munari – University of Bologna
Source: Federal Reserve, 1996
-42-
The diffusion of the quartz watch:
export of mechanical vs electric/electronic watch
movements in Switzerland
Federico Munari – University of Bologna
-43-
Substitution analysis:
digital cameras
70
60
50
40
35 mm
Altri
%
APS
30
Digitali
20
10
0
1997
Federico Munari – University of Bologna
1998
Anno
2000
-44-
Factors affecting the diffusion of
innovation
 Innovation characteristics
 Individual characteristics
 Social network characteristics
 Marketing strategies employed
 Institutional structures (e.g., government)
Federico Munari – University of Bologna
-45-
Innovation characteristics
• Observability
– The degree to which the results of an innovation are visible
to potential adopters
• Relative Advantage
– The degree to which the innovation is perceived to be
superior to current practice
• Compatibility
– The degree to which the innovation is perceived to be
consistent with socio-cultural values, previous ideas, and/or
perceived needs
• Trialability
– The degree to which the innovation can be experienced on a
limited basis
• Complexity
– The degree to which an innovation is difficult to use or
understand.
Federico Munari – University of Bologna
-46-
Individual characteristics
Innovativeness
 Originally defined by Rogers (1995): the degree to which an
individual is relatively earlier in adopting an innovation than
other members of his social system
When are you going to buy an electric car?
- “As soon as they are commercialized…”
- “When I have seen them proving themselves reliable
and when there are enough service stations on the
road”
- “Not until it becomes really unconvenient driving a
gasoline car”
- No way!
Federico Munari – University of Bologna
-47-
Adopters categories
Bell curve with time by number of adopters
 innovators (2.5%, i.e, 2 standard deviations)
 early adopters (13.5%, 1 SD) who tend to include the
opinion leaders
 early majority (34%)
 late majority (34%)
 laggards (16%).
Federico Munari – University of Bologna
-48-
The diffusion of innovation (Rogers)
Early Majority
Late Majority
Number of
adopters
Early
adopters
Innovator
Laggards
Time
Federico Munari – University of Bologna
-49-
The heterogeneity of users
People or organizations are generally heterogeneous
in their propensity to adopt a new technology, due to
the value recognized in the innovation, perceived risk,
involvement.

 User classes significantly differ by age, education,
status income, psichological characteristics,
communication patterns.
 The transition from “early adopters” to “early
majority” often requires the development and use of
different capabilities, for instance in terms of service
levels, assistance, training and support.
Federico Munari – University of Bologna
-50-
User categories (Rogers)
Innovators
Early adopters
Early majority
Late majority
Laggards
Federico Munari – University of Bologna
Venturesome and like to be different,
Tend to be better educated, more confident and
more financially affluent.
They have high reputation among their peers.
Deeply rooted in their social environment. They
act as opinion leader
They are usually deliberate and cautious in their
adoption choice.
Sceptical. They are willing to adopt only after the
majority has tried the product. Social pressure
driving force for adoption
Tradition-bound. The innovation needs to be
perceived as a traditional product. They are
generally the older and less-well educated part of
the population
-51-
Crossing the chasm (Geoffrey Moore)
Early Market
Mainstream Market
Pragmatists
Stick With The Herd
In
no
v
The
Chasm
Visionaries
Get Ahead
Techies
Try It
at
or
Ea
r
s
ly
Conservatives
Hold On
Skeptics
No Way
Ea
r
Ad
Federico Munari – University of Bologna
op
to
r
s
ly
M
La
te
aj
or
ity
La
M
aj
or
ity
gg
ar
ds
-52-
Crossing the chasm: key lessons
The basis for sale from early adopters to early majority
is very different: an agent for change vs. productivity
improvement for existing operations.

 Focus your marketing effort on an initial niche market
to do the transition to the mainstream market (beachhead
segment).
 Remember that pragmatists evaluate and buy whole
products (already comprising whatever they need in order
to achieve their reason to buy)
Federico Munari – University of Bologna
-53-
The whole product model (Moore G.)
Standard
and
procedures
Training
and
support
Additional hw
and sw
Generic
product
Cables
System
Integration
Installation
and debugging
Federico Munari – University of Bologna
-54-
Degree of substitution
between new and old technolgy
 Examples of incomplete substitution dynamics
 Es. Quartz vs mechanical watches, mainframe vs pc, stent vs by-pass…
 It depends on the degree of market heterogeneity
 In such cases, incumbent firms have different strategic
options as to switch or not to the new technology
 Value the degree of substitution of new/old technology and
resources/competences of the company
Federico Munari – University of Bologna
-55-