Transcript Fundamentals of High

High Tech Marketing
Fundamentals: Process and Product
Complexity of Technology
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Phaedrus
 What does the story teach technology marketers?
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Unintended Consequences
 South American Fire Ant
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Technological Paradoxes
 Freedom-Enslavement
 Control-Chaos
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Technological Backlash
 Luddites
 GMF
 Others?
The business enterprise has two —and only
two—basic functions: marketing and
innovation.
Marketing and innovation produce results; all
the rest are costs…
-- Peter Drucker
Innovation without Marketing…
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Radio (1900-20)
Television (1930s)
AT&T Picturephone
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Wrong “App” targeted
Missing business model
Ahead of time (1960)
Technology is ubiquitous
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Examples of traditional “high-tech” industries:
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Computers and information technology
Biotechnology
Telecommunications
Internet
Examples of some industries where technological
innovation is creating radical changes:
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Agriculture
Waste Management (GM organisms)
Automotive
Consumer Products (GMF, irradiated chicken)
A Supply Chain Perspective on
Technology
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Often, technological innovations occur at
upstream (i.e., supplier) levels in the supply
chain…
…affecting the manufacturing process or
the inner workings of a product, but…
…end-user behavior may not be
significantly affected
Examples: cars, food, computing, hair
styling, Internet, phone
The Where of Technology
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Process technology
Product technology
Definition of Technology:
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Technology is people using knowledge, tools,
and systems to control processes and the
environment.
Definition of High-Technology:
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No single preferred method for identifying
high technology industries.
High technology industries have a great
dependence on science and technology
innovation that leads to new or improved
products and services.
Definitions of Technology: Government
Perspective
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Classify industries based on objective,
measurable indicators:
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the number of technical employees
$ spent on R&D
# of patents filed in industry
Why is it so difficult to
succeed in High-Tech
settings?
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Complexity of Context
(Hyper)competition
Dynamic/Fickle/Ultra-demanding consumers
Incomplete Information/Partial Knowledge
Timing/Synchronization problems
Organization/Culture problems
Money problems
Marketing Strategy in High-Tech Markets I
Characteristics Common to High-Tech
Markets: Supply Side
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“Unit-one” costs: when the cost of producing the
first unit is very high relative to the costs of
reproduction
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Ex: development vs. reproduction of software
Demand-side increasing returns:
When the value
of the product increases as more people adopt it
 Also called network externalities and bandwagon effects
 Ex: telephone, fax, MS Word
 Implications: may give away products for free (IM)
Characteristics Common to High-Tech
Markets: Supply Side
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Tradeability problems arise because it is difficult to value
the know-how which forms the basis of the underlying
technology
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Ex: How much to charge for licensing the rights to a waste-eating
microbe?
Knowledge spillover:
Another type of externality that
arises from the fact that technological developments in one
domain spur new developments and innovations in other areas.
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Ex: Human Genome Project
Common, Underlying Characteristics of HighTech Markets: Demand Side Perspective
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Market Uncertainty
Technological
Uncertainty
Competitive Volatility
Market
Uncertainty
Technological
Uncertainty
Marketing of
High-Technology
Products &
Innovations
Competitive
Volatility
Market Uncertainty:
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Consumer fear, uncertainty and doubt (FUD)
Customer needs (sometimes rather tastes) change
rapidly and unpredictably (recorded books, ebooks?)
Customer anxiety over the lack of standards and
dominant design (Laserdisc, DVD, DivX)
Uncertainty over the pace of adoption
Uncertainty over/inability to forecast market size
Technology Uncertainty:
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Will the new innovation function as promised?
What is the timetable for new product development?
Will the supplier be able to fix customer problems
with the technology?
What are unanticipated/unintended consequences?
(When) Will our technology be obsolete?
Competitive Uncertainty:
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Who will be future competitors?
What will be “the rules of the game” (i.e., competitive
strategies and tactics)?
What will “product form” competition be like?
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competition between product classes vs. between different
brands of the same product
Implication: Creative destruction?
Effects of Uncertainty?
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Adoption rate!
There are five variables that have been cited as responsible for
speed of technology adoption:
 Relative Advantage: the degree to which an innovation is
perceived as better than the idea it supersedes
 Compatibility: the degree to which an innovation is perceived as
consistent with existing values, past experiences, and needs of
potential users
 Complexity: the degree to which an innovation is perceived as
relatively difficult to use and understand
 Trialability: the degree to which an innovation may be
experimented with on a limited basis
 Observability: the degree to which the results of an innovation are
visible to others (Wow-factor).
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Rogers, “Diffusion of Innovation.”
Think Telephone
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Introduced in 1877, people had to be
convinced that it was useful.
Despite its simple design and seemingly
obvious value, it took 75 years for the
telephone to reach 50 million users
It wasn't until the 1960s that users saw a
residential phone as a necessity.
Diffusion Rates
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The printing press (~1440):
 400 years (1833, NY Sun).
The automobile (1885):
 75 years (market saturation in US around 1960)
The telephone (1876):
 85 years (full saturation in the 1960s)
The fax machine (around 1843):
 140 years (late 1980s)
The Internet (1968)
 35 years (mid-2000 an estimated 130 million Americans had
access to the Internet, 330 million globally)
Value: Perceived Need-Perceived Price
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Variables essential to the successful uptake
of technology:
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Providing an infrastructure
Providing a function
Providing the right price point
Providing a compelling need to buy (make it a
necessity).
Telegraph! Faster than Phone…Why?
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Morse presented prototype of the electric
telegraph to the US Congress in 1838
by 1873 Western Union had carried more
than twelve million messages
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creation of the infrastructure which supported it.
cheap and predictable rates.
a shared language (global communication).
What is a disruptive technology?
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Disruptive technologies typically have worse performance, at
least in the near term.
But: They have features that a few fringe and generally new
customers value and which represent a key source of
competitive value in the future.
Products based on them are typically cheaper, simpler, smaller
and frequently more convenient to use - often representing a new
product architecture, design, and even market (category).
They often bring a new and different value proposition.
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See Christensen: “The Innovator's Dilemma”
Examples:
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Muskets
Steam ships
Automobiles
PCs
Hard disk
Digital photography
Sony Walkman
Continuum of Innovations
Incremental
•Extension of existing
product or process
•Product characteristics
well-defined
•Competitive advantage
on low cost production
•Often developed in
response to specific
market need
•"Demand-side" market
Radical
•New technology creates new
market
•R&D invention in the lab
•Superior functional performance
over "old" technology
•Specific market opportunity or
need of only secondary concern
•"Supply-side" market
Supplier vs. Customer Perceptions of
Nature of Innovation
Mismatch:
Delusion
Breakthrough
Incremental
Mismatch:
Shadow
Contingency Theory
Marketing Strategy
New Product Success
Type of Innovation
-Breakthrough
-Incremental
Type of marketing strategy is contingent
upon the nature of the innovation.
Examples of Implications of
Contingency Theory:
R&D/Marketing
Interaction
Type of Marketing
Research
Role of Advertising
Pricing
Breakthrough
Incremental
“technology push”
“customer pull”
Lead users;
developers
Surveys; focus
groups
Primary demand;
customer
education
Selective
demand; build
image
May be premium More competitive
Virden
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What should Jim Merrick do about VM 2.0?
What do you think of Merrick’s crew?
What should be the role of marketing in hightechnology firms?