Transcript General

Arto Rajala, Prof.
Helsinki School of Economics
Outline
What is High Technology?
High Technology in Finland
What’s the Difference between High and Low
Technology?
What are the Marketing Implications of High
Technology?
Identifying & crossing the chasm
Building marketing offerings
Conclusions
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Defining Marketing
Marketing is a business (management) discipline or
orientation
”...performance of business activities that direct goods and
services from produces to consumer or user (AMA)”
Understanding actual and potential customer needs, by
developing/modifying products, facilitating customer access to
its offerings, attracting and influencing the market, creating
differential advantages (brand)
Establishing and maintaining customer relationships
Managing 4P’s (Product, Price, Place, Promotion)
STP-model (Segmenting – Targeting – Positioning)
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Defining Technology (1/2)
Machinery, equipment, tools, artifacts, etc.
(tangible)
Techniques – specific ways of proceeding or
completing instrumental acts and specific
arrangements of persons, materials, and tasks
(intangible)
The science of knowledge to practical purpose
(to obtain something useful)
Knowledge and skills – not only to develop but
how to use  making benefit from technology
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Defining High Technology (2/2)
Novelty – advanced compared to the-state-of-the-art
Knowledge intensity – based on radical innovation
Dependence on R&D and highly educated people
R&D investments > 4% of turnover (OECD)
usually btw 10% - 20%
Intensive development cooperation btw universities
and research institutes
Long R&D phase – short market existence
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Categorisation of Technology
Product Technology
embedded in the product itself
Process Technology
a part of production or delivery system
Information Technology
a platform that enables communication
Management Technology
know-how and expertise to run the business
tacit vs. explicit knowledge
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High-Tech Characteristics...
New technology
Makes the existing technology obsolete very
rapidly
New products or even new industries emerge
Leading-edge technology
The-state-of-the-art in the field and not widespread
acceptance by those working in the field
Technology-base is new
Cross-industry characteristics
Ability to create/modify new applications
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… High-Tech Characteristics
Developer’s vs. user’s view on technology
Technology adapters = CUSTOMERS
Technology providers = SUPPLIERS
Customer perceived value
Added value to customer
Knowledge intensity
Different technology settings
Technology life cycle
From product to process technologies
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A Definition of High-Tech …
… from Marketing Point of View
“High-tech is that of the leading-edge technology
involving a high level of knowledge intensity, which
enhances the value of the product or process to
the customer in the sense that it provides better
quality, lower costs, or it makes the use of the
object easier compared to the old technology”
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High Technology in Finland...
http://tilastokeskus.fi/tk/yr/ttt_huippu.html & http://www.research.fi/
Turnover of high-tech companies 16 billion euro (1999)
Share of high-tech in manufacturing output 27 % [USA 32 %]
Average growth of production per year 31 % btw 1995-1999
Employed 42 000 people (1999) [30 500 (-95, + 8 % /year]
Number of R&D stuff 68 000 (2000) [47,000 (-91)]
1 203 doctoral dissertations (2001) [524 (-91)]
20,9 % of total export (2001) 10,0 billion euro [6,0 % in 1991]
17,8 % of total import (2001) 6,4 billion euro [12,1 % in 1991]
R&D investments (2002) 3,47 % of BNP (4.9 billion euro of which
companies accounted for 70,7 %)
3 083 patent applications (-99), 4.6 dom. pat./10 000
Large externalities (other industrial sectors)
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Source: www.research.fi
R&D
Expenditures
Tuotekehitysmenot
in Finland
Universities
Public sector
Companies
Companies
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Major High-Tech Sectors in Finland
Electronics
Telecommunication
Data and Office Equipment
Scientific Instruments
Biotechnology
ICT- Information &
Telecommunication
Cluster
High technology is a problem from industry
classification point of view - no explicit statistic
available!
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Source: www.research.fi
High-technology share
of export and import
in Finland
Export
Import
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Source: Statistics Finland
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Source: Statistics Finland
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Factors behind the Finnish Success
Strong technology-base (Forest & Metal/Engineering
Industries)
High level of R&D investments (public vs. private)
Focusing on core capabilities - outsourcing others
(Nokia)
Technological co-operation between companies,
research co-operation between companies and
universities - Networking (Technology Villages)
Educated labour force (75% of 25-35 years old have a
university or vocational training)
Rapid globalisation - ‘born global’ companies
Access to venture capital funding
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Source: Statistics Finland
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Innovations – core of high techonology
http://tilastokeskus.fi/tk/yr/ttinno1.html
Innovation ~ a totally new, or a remarkable enhanced, product, service
or production system/process
EU innovation research 2000
Posted in Finland to 3 462 companies – 50% answered
Highest level of innovation activities in telecom (73 %),
electrotechnical industry (67 %) and chemical industry (63 %)
Innovation expenditures (2000) was estimated 4.9 billion €
Innovation activities had the highest impact on expanding product or
service offering, enhancing quality, market expansion or increase in
market share
The most important source of innovation was the company itself
(90%)
About 2/3 of companies involved in innovation activities were
confronted with difficulties to implement them
Economical factors such as too high a risk, increasing costs, and the
lack of suitable source of funding and competence personnel were
the worst bottlenecks for innovation activities
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Technology Life-Cycle
Era of Ferment
 Design Competition
 Substitution
Era of Incremental
Change
 Elaboration of
Dominant Design
Time
Technological
Discontinuity 1
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Dominant
Design 1
Technological
Discontinuity 2
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Nature of High Tech Markets
Why are high-tech markets different ?
•
HIGH-TECH  high uncertainty about
technology and market
Market uncertainty
•
Ambiguity about the type and extent of customer
needs that can be satisfied by the technology
Technological uncertainty
•
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Not knowing whether the technology - or the
company providing it - can deliver on its promise
to meet needs , once they have been articulated
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Sources of Uncertainties
Will the market
adapt industry
standard?
How fast will
the innovation
spread?
How large is
the potential
market?
How will needs
change in the
future?
Market
Uncertainty
What needs can
be met by new
technology?
Will the new
product function
as promised?
High-Tech
Marketing
Technology
Uncertainty
Will new
high-tech make
ours obsolete?
Will there be
side effects of
technology ?
Will delivery
timetables
be met?
Will the vendor
give highquality service?
Based on: Moriarty & Kosnik (1989)
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Taxonomy of Marketing Situations
Market Uncertainty
Low
High
Better
Mousetrap
Marketing
High Tech
Marketing
Low Tech
Marketing
High
Fashion
Marketing
Technological
Uncertainty
Low
High
Based on: Moriarty & Kosnik (1989)
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Challenges for Marketing
New designs must win market share
Role of distribution channel
Customer perceptions
Competition
From higher performance to lower costs
and differentiation through minor design
variations and strategic positioning tactics
•
incremental changes take place
Segmenting - Targeting - Positioning
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Commercialising
High-Tech Products (1/2)
Identifying and Crossing the Chasm
Key Issues
Why so many excellent products fail?
90-95 % of new product ideas newer reach market
30-50 % of introduced products seem to fail on the
market
Are there differences between high-tech and
low-tech product concerning the
commercialisation process?
Critical issue: Time-to-Market
Using the ‘Market Development Model’
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Technology Adoption Life-Cycle
Pragmatists:
Stick with the herd!
Conservatives:
Hold on!
Visionaries:
Get ahead of the herd!
Techies:
Try it!
2,5%
Innovators
Skeptics:
No way!
33%
33%
16,5%
14%
Early
Early Majority
Adopters
Late Majority
Laggards
Pragmatists create the dynamics of high-tech market development.
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Source: Moore (1998)
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Innovators - Technology Enthusiasts
Primary Motivation:
Learn about new technologies for their own sake
Key Characteristics:
Strong aptitude for technical information
Like to alpha test new products
Can ignore the missing elements
Do whatever they can to help
Challenges:
Want unrestricted access to top technical people
Want no-profit pricing (preferably free)
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Early Adopters - The Visionaries
Primary Motivation:
Gain dramatic competitive advantage via
revolutionary breakthrough
Key Characteristics:
Great imaginations for strategic applications
Attracted by high-risk, high-reward propositions
Will commit to supply the missing elements
Perceive order-of-magnitude gains — so not pricesensitive
Challenges:
Want rapid time-to-market
Demand high degree of customization and support
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Early Majority - Pragmatists
Primary Motivation:
Gain productivity improvements via evolutionary
change
Key Characteristics:
Astute managers of mission-critical applications
Understand real-world issues and tradeoffs
Focus on proven applications
Like to go with the market leader
Challenges:
Insist on good references from trusted colleagues
Want to see the solution in production at the
reference site
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Late Majority - Conservatives
Primary Motivation:
Just stay even with the competition.
Key Characteristics:
Better with people than technology
Risk averse
Price-sensitive
Highly reliant on a single, trusted advisor
Challenges:
Need completely pre-assembled solutions
Would benefit from value-added services but do not
want to pay for them
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Laggards - Skeptics
Primary Motivation:
Maintain status quo.
Key Characteristics:
Good at debunking marketing hype
Disbelieve productivity-improvement arguments
Believe in the law of unintended consequences
Seek to block purchases of new technology
Challenges:
Not a customer
Can be formidable opposition to early adoption
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The Logic of Commercialising HighTech Products
Seeding new products to Techis
Techis help and educate Visionaries
Visionaries serve good references for
the Pragmatists
Becoming the market leader by serving
Pragmatists and setting standards
Leverage success - generate sufficient
volume & experience -- reliable
products which are also cheap enough
to Conservatives
Leaving Sceptics to their on devices
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Discovering the Chasm
Chasm
Early Market
Mainstream Market
High-tech products are warmly welcome in an early market
(techies & visionaries) but then will fall into a chasm (sales will
falter and often plummet)
Visionaries don’t see enough of a head start
Pragmatists see no reason to start yet
Crossing the chasm gaining the acceptance within a mainstream
market - becomes and organisational imperative … but very few
high-tech products cross these chasms
Source: Moore (1998)
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Crossing the Chasm
Product vendor’s problem
80% of many solutions—100% of none
Pragmatists won't buy 80% solutions
Most common vendor mistake:
Committing to the most common enhancement requests
Never finishing any one customer's wish-list
Solution
Focus on a single beachhead
Accelerate formation of that segment's whole product
Source: Moore (1998)
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Successful Crossing
Considering the difference between visionaries and
pragmatists
the former is willing to bet ‘on the come’
the latter want to see the solutions in production (i.e. see the
whole product before they by it)’
Many high-tech companies are not willing to commit to
develop any ‘whole product’
they focus on four to five likely candidate segments
risk for having everything for nobody
Putting all eggs in one basket is the only safe way to
cross the chasm - Why? (Focus & Globalisation)
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Commercialising
High-Tech Products (2/2)
On the Mainstream Market
Market Development Model
Main Street
Tornado
Total
Assimilation
Early
Market
Chasm
Bowling
Alley
Mainstream Market
Source: Moore (1998)
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Beyond the Chasm
- Assessing Mass Market
The Bowling Alley
a period of niche-based adoption in advance of the
general marketplace, driven by compelling customer
needs and the willingness of vendors to craft nichespecific whole products
The Tornado
a period of mass-market adoption, when the general
marketplace switches over to the new infrastructure
paradigm
Main Street
a period of aftermarket development, when the base
infrastructure has been deployed and the goal now is
to flesh out its potential
End of Life
wholly new paradigms (technology) come to market
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Technology vs. Category Life Cycles
Market share
is captured here
Market share is converted into
served installed base here
Product Category
Life Cycle
(Ongoing sales)
Technology Adoption Life Cycle
(First time adopters)
Source: Moore (1998)
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Four Marketing Frameworks
1 on 1
Marketing
Mass
Marketing
Deal
Driven
Niche
Marketing
Source: Moore (1998)
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Product Mix Offerings
Application
Systems
Core
Products
Aftermarket
Products
• Photography
• Cameras
• Film, lenses
• Color printing
• Inkjet printers
• Cartridges, paper trays
• Wireless telephony
• Cell phones
• Batteries, modems
• Word processing
• Word processors
• Suite upgrades
• Internetworking
• Routers, switches
• Performance tools
• Worldwide Web
• Browsers/servers
• Plug-ins
Source: Moore (1998)
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Service Mix Offerings
Distribution
Services
Transaction
Services
Professional
Services
• Competitive selling
• Order processing
• Consultative selling
• System configuration
• Maintenance
• Implementation
support
• Facilities management
• Business process
reengineering
• Train-the-trainers
• Customer service
• Technical support
• Warranty
• Outsourcing
• Upgrade management
• Broadcast data feeds
• Proprietary database
access privileges
• Systems integration
• Project management
• Custom training
• System conversion
• Contract management
Source: Moore (1998)
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Managing Marketing Offerings
in High-Tech Firms
Are the 4 P’s still relevant?
Product Platform
Product platform is a collection of common elements,
particularly the underlying technology elements,
implemented across a range of products.
It is primarily a definition for planning, decision making, and
strategic thinking.
Especially important in high-tech firms in which multiple
products are related by common technology.
Platform defines the cost structure, capabilities, and
differentiation of the resulting products.
Separating product platform strategy from product line
and individual product strategy, a company can
concentrate on its most important strategic issues.
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Product Platform
Segment III
Product 3
Segment II
Product 1
Segment I
Product 1b
Product 1a
Product 4
Unique
product
elements
Product 2
Element C
Element B
Common
platform
elements
Element A
Source: McGrath (2000, 55)
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Main Characteristics
Product platform is NOT a product!
... but the lowest common determinator of relevant
technology in a set of products or product line
Product failures in high-tech firms often caused by
incomplete product platform strategy
Nature of product platforms varies across industries
e.g. in PC it consists of the microprocessor
combined with its operating system, packaging,
power supply, memory, disk drives, monitors, and
interfaces
e.g. it can be a chemical compound combined with
with the manufacturing process
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Market Platform Plan (MPP)
MPP integrates knowledge about the market and
knowledge about the product and its defining
technology
Core strategic vision
Core strategic vision
•Where are we going?
•How will we get there?
•Why will we be successful?
Product platform strategy
Product line strategy
New product development
Market platform plans
•Defining technology
•Platform architecture
•Product line plans
•Platform management
Source: McGrath (2000)
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The Market Platform Plan Framework
Enables companies to translate platform
strategy into a practicable ’attack plan’ for a
target market
Characterize & prioritize customer segments
Define the basis of customer value &
differentiation
Define the offerings to the customers
Define monitoring plan to sense environment
Establish economic metrics for measuring success
in the market
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Managing High-Tech Products…
Distinctive nature of high-tech products
create certain challenges for product
managers
dependence on R&D
risky business
global nature of markets
long development cycle - but short economic life
cycle
What is the role of pricing decisions
Implications of Product Life Cycle Model
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What is a product?
Core product
Installation
Actual product
Packaging
Brand Core
Features
name benefit or
After
Delivery
service
sales
and credit
Styling services
Quality
Augmented product
Potential product
Warranty
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… Managing High-Tech Products
Are prices and costs really related?
… yes, but not so directly as we usually think
keep in mind PLC when making pricing decisions
 most high-tech products evolve into commodities
emphasising the role of internal costs
• risk of overlooking what happens in the market -- what
price customers are willing to pay
Surprisingly ... small differences in costs and
margin objectives can have dramatic effects
on the price a company must command in the
market place
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Evolution of the Whole Product
Mostly
custom
work
Plug & play
Fully
Mass
some
integrated customized
customization
Source: Moore (1998)
Different whole product priorities at different stages of the life cycle.
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Conclusions
What have we learned?
‘Current Wisdom’ on High-Tech Marketing
Interaction between marketing and R&D
Coping with the high levels of technological and market uncertainty
Marketing capabilities & business competencies
Product development processes
Rapid changes in technology and market settings
Shortening the ‘breakthrough-time’
Market offering and product platform approaches
Increasing importance of services
Emphasise technical support and after sales service
Differentiating from competitors
Building strong relationships with suppliers, channels and customers
Analysing value systems  Networks, strategic alliances, partnerships
Rely on qualitative rather than quantitative approaches for market
research
What the customers really value?
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What does this mean?
The ‘High-Tech’ label is not ‘once and for all’, so today’s
hot new technologies becomes tomorrow’s basic
technology
Surprisingly, high-tech marketing is not so different from
that of low-tech as often claimed …
… but there is a special need for more marketing focus
in high-tech context because ...
Customer’s view is easily overlooked
• To avoid developing a product which are ‘engineer's dilemma but
marketer’s nightmare’
Knowing competitors well enough
Global view of high-tech business
Cross-industry effects and convergence of different
technologies
Focusing more and more on services
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Lähteitä
High Technology in Finland 2001 (also 1999, 1997, 1995, 1993, 1991),
Finnish Academies of Technology.
McGrath, Michel E. (2001), Product Strategy for High-Technology
Companies: Accelerateing Your Business to Web Speed. N.Y: McGrew Hill.
Mohr, J. J. (2001), Marketing of High-Technology Products and Innovations.
Upper Saddle River, N.J: Prentice Hall.
Moore, G. (1995), Crossing the Chasm: Marketing and Selling High-Tech
Products to Mainstream Customers. New York: HarperCollins Publishers.
Moore, G. (1998), Inside the Tornado: Marketing Strategies from Silicon
Valley’s Cutting Edge.
Moore, J. F. (1997), The Death of Competition: Leadership & Strategy in the
Age of Business Ecosystems. N.Y.: HarperCollins Publisher.
Paija, L. (2001), Finnish ICT Cluster in the Digital Economy, Helsinki:
Taloustieto Oy.
Simon, H. (1996), Hidden Champions: Lessons for 500 of the World’s Best
Unknown Companies. Boston, Mass: Harvard Business School Press.
Tapscott, D. (1999), Creating Value in the Network Economy. A Harvard
Business Review Book.
Tidd, Joe, John Bessant and Keith Pavitt (1997), Managing Innovation:
Integrating Technological, Market and Organizational Change. Chichester,
UK: John Wiley & Sons
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