Transcript Marketing of High-Technology Products and Innovations Jakki J. Mohr

Marketing of High-Technology
Products and Innovations
Chapter 2:
Strategy and Corporate Culture in
High-Tech Firms
Questions to consider
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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?
© Mohr, Sengupta, Slater 2005
Internal (within the firm)
Considerations in
High-Tech Marketing
ENHANCED
ODDS OF
SUCCESS
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
© Mohr, Sengupta, Slater 2005
The Strategy Process
Market
Planning
Market
Strategy
Evaluation
& Control
© Mohr, Sengupta, Slater 2005
Competitive
Advantage
Strategic Market Planning
Process in High-Tech Markets
Define goals
and mission
Choose
arena
Understand
profit model
Planning Process
Identify
opportunities
Complete
the strategy
Plan key
relationships
Make tough
choices
© Mohr, Sengupta, Slater 2005
(from Ryans, et al.)
Implement
strategy
Define Mission and Goals
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Mission
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Why does the business exist?
Who are our customers?
What needs are we trying to solve?
How will we solve them?
Goals
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Profit
Growth
New product acceptance
Customer satisfaction
© Mohr, Sengupta, Slater 2005
Select the Business Arena
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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.
© Mohr, Sengupta, Slater 2005
Identify Attractive Opportunities
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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
© Mohr, Sengupta, Slater 2005
Make Tough Strategic Choices
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Decide whether opportunity should be
pursued
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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?
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If not, are there compelling reasons to proceed?
© Mohr, Sengupta, Slater 2005
Make Tough Strategic Choices
(Cont.)
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Select/develop best strategy to take
advantage of opportunity
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Do synergies exist within the portfolio of
opportunities being considered
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Achieve leadership position in the opportunity?
Leverage a common technology
Leverage a common market chain
Are the strategies for the various
opportunities reasonably consistent?
© Mohr, Sengupta, Slater 2005
Plan Critical Relationships
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With other firms in the market chain
With organizations outside the market
chain
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Company with a complementary product or
service
© Mohr, Sengupta, Slater 2005
Complete the Winning Strategy
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Positioning
Product Development and Management
Pricing
Distribution path/channeling
Marketing promotion
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Political relationship
Meeting 4C
(customer/cost/convenience/communication)
© Mohr, Sengupta, Slater 2005
Understand the Profit Dynamic
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Develop a detailed financial model for
each opportunity
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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
© Mohr, Sengupta, Slater 2005
Implement the Strategy
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Make sure people who will implement are
involved in the strategy formulation
process
Design the effective organization:
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Leadership
Structure and relationships
Systems
Culture and values
© Mohr, Sengupta, Slater 2005
Key Strategy Decisions
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Who are our target customers?
What mix of products and services should we
offer?
When should we enter a market?
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The timing decision
The requisite guts
How can we execute our strategy efficiently
and effectively?
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Championship
© Mohr, Sengupta, Slater 2005
Who are Target Customers?
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“Served” market
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Potential pitfall: Tyranny of the served
market
The marketing myopia
Bi-focal vision
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Search for new market space
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Independent unit & spin-off corporate
© Mohr, Sengupta, Slater 2005
Product/Service Mix
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Provide value for customers
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Man/machine interface
The usage analysis
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Functionality, performance, price, post-sale
maintenance, disposal
© Mohr, Sengupta, Slater 2005
Timing of Market Entry:
Be a Market Pioneer?
PROS
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First mover advantage
CONS
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Large development costs
Market uncertainty
creates entry barriers
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 Economies of scale
 Experience effects
 Reputational effects
 Technological leadership
 Buyer switching costs
 Higher profits and higher
share
 Define product exemplar
 Higher consumer
© Mohr, Sengupta, Slater 2005
awareness
Pioneers
(“First Movers”) (Cont.)
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Successful Pioneers
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Have technological foresight
Understand the market
Have marketing acumen
Understand competitors’ strengths and
weaknesses
A bit of luck
© Mohr, Sengupta, Slater 2005
An Advantage of Being
A Follower
© Mohr, Sengupta, Slater 2005
When do “late” movers
succeed?
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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
© Mohr, Sengupta, Slater 2005
Drivers of Strategy Innovation
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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!
© Mohr, Sengupta, Slater 2005
Sources of Competitive Advantage
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Tangible assets:
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Intangible assets:
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Products
Facilities
Financial Resources
Brands/reputation
Know-how
Culture
Competencies:
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Routines
Processes
© Mohr, Sengupta, Slater 2005
Three Characteristics of
Core Competencies
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Difficult for competitors to imitate
Significantly related to benefits enduser receives—valuable assets
Allow access to a wide variety of
disparate product-markets—high
potential
© Mohr, Sengupta, Slater 2005
Tree Analogy to Core Competencies—a
case of Honda Motor
Branches/canopy
represents the widely different
product markets to which
the core competency has provided access
MOTORCYCLES
SNOWBLOWERS
Aircraft engine
LAWN
MOWERS
Trunk is the core
product, or the physical
embodiment of the
core competencies.
SMALL
ENGINES
SMALL
CARS
The core
product must be
significantly related to benefits
end-user receives.
CORPORATE
CULTURE
SUPERIOR R&D
SUPERIOR
MANUFACTURING
SUPERIOR MARKETING &
KNOWLEDGE OF CUSTOMERS
Roots are underlying skills and capabilities that represent core competencies.
© Mohr, Sengupta, Slater 2005
Implications of Core Competencies
in Strategic Planning
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Resource allocations may defy
conventional logic
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Violate ROI criterion
•Development
learning
Accumulation
Transferring
Exploitation
© Mohr, Sengupta, Slater 2005
An Illustration of Sources of
Competitive Advantage for Dell
Tangible
Product
Convenience
Intangible
Reputation
Confidence
Supply Chain
Management
Price/Cost
Competency
© Mohr, Sengupta, Slater 2005
Requirements for
Competitive Advantage
Is the resource/competency:
Valuable Superior to Difficult
to Buyers Competitors to Imitate
Competitive
Advantage
Profitable
No
No
No
Disadvantage
No
Yes
No
No
Parity
Average
Yes
Yes
No
Temporary
Superior
Yes
Yes
Yes
Sustainable
Consistently
Superior
Rarity is a variation on superiority.
Transparency, replicability, and transferability
are variations on imitability.
© Mohr, Sengupta, Slater 2005
Culture and Climate in High-Tech Firms
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Obstacles to Innovativeness
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Core Rigidities
Innovator’s Dilemma
Liability of Bigness
Indulgence in the past successes
Laggard response to challenges
Facilitators of Innovativeness
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Creative Destruction
Self-cannibalization
Firm Dominance
Reshape the business mind-set
Unlearning
Corporate Imagination
Expeditionary Marketing
© Mohr, Sengupta, Slater 2005
When Core Competencies
Become Core Rigidities
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Core rigidities: ingrained routines,
knowledge, and skills become straitjackets 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
© Mohr, Sengupta, Slater 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
© Mohr, Sengupta, Slater 2005
“Liability of Bigness”
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Traits of large firms can inhibit their
ability to develop radical innovations:
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Bureaucratic
Focused on economies of scale
Core competencies become core rigidities
Fear of cannibalization
Incumbent’s dilemma
© Mohr, Sengupta, Slater 2005
Facilitators of Innovativeness
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Creative Destruction (see next slide)
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Proactively develop next-generation technology
that may obsolete current technology
Ex: Develop Web-sites that undermine current
distribution channels
© Mohr, Sengupta, Slater 2005
Creative Destruction
A 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’s
Dilemma if it can overcome internal rigidity.
© Mohr, Sengupta, Slater 2005
Leveraging Firm Dominance
Effectively
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Sources of dominance:
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Investments in the existing product
generation
Market share
Wealth
The first two factors can inhibit innovation; the
latter facilitates the development of innovation
© Mohr, Sengupta, Slater 2005
Leveraging Firm Dominance
(cont.)
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Manager’s fears of obsolescence:
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Positively related to innovation
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(the willingness to cannibalize)
© Mohr, Sengupta, Slater 2005
Final thoughts on Leveraging
Firm Dominance
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Dominant firms reap greater rewards
from introducing radical innovations if
they quick follow the industrial dynamics
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Smaller firms can overcome their
disadvantage by: from some key complements
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Marketing support (e.g., sales effort)
Technology support (e.g., R&D spending,
patent protection, etc.)
© Mohr, Sengupta, Slater 2005
“Unlearning”
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Innovation is facilitated by unlearning
practices that worked in the past but
are not useful, or even detrimental, to
future success.
© Mohr, Sengupta, Slater 2005
Technology Life Cycles
Performance
Limit of Particular Technology
Time
© Mohr, Sengupta, Slater 2005
Some Implications of
Technology Life Cycles
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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
© Mohr, Sengupta, Slater 2005
Corporate Imagination
(by Hamel & Prahalad)
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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
© Mohr, Sengupta, Slater 2005
4 Elements of
Corporate Imagination
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(1) Willingness to overturn
price/performance assumptions
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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
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Ex: Moore’s Law
© Mohr, Sengupta, Slater 2005
4 Elements of
Corporate Imagination (Cont.)
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(2) Escape the “tyranny of the served
market”
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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.
© Mohr, Sengupta, Slater 2005
4 Elements of
Corporate Imagination (Cont.)
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(3) Use new sources of ideas for
innovation
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Rather than using standard marketing
research tools,
use lead users
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Who are the browser’s lead users?
and ethnographic observation (empathic
design) (Discussed fully in Chapter 5)
© Mohr, Sengupta, Slater 2005
4 Elements of
Corporate Imagination (Cont.)
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(4) Get out in front of customers.
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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.
© Mohr, Sengupta, Slater 2005
The Learning Organization
“In an economy where the only certainty is uncertainty, the one
sure source of lasting competitive advantage ‘is knowledge’”
Ikujiro Nonaka
The 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 Quinn
Intelligent Enterprise
“Learning may be the only source of sustainable competitive advantage”
Ray Stata
CEO, Analog Devices
© Mohr, Sengupta, Slater 2005
Learning Opportunities
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Market-focused Learning (users’ expectation)
Competitive Benchmarking (competitors’ excellence) (師夷
之長技以制夷)
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Learning from Alliances, Joint Ventures,
Partnerships, and Acquisitions (approaches)
Continuous Improvement through Experience
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Market or Operational Experiments
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Utilization of Outside Experts or Consultants
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Organizational Memory
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(feedback control, adaptation & adjustment)
expectation management)
(uncertainty &
(objectivity of bystander’s standpoint)
(the possibility of core rigidity)
© Mohr, Sengupta, Slater 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 works
big, others quickly copy it. Then you do something
else. The trick is in the doing something else. You
must take pot shots at today’s star before you are
mimicked. Today’s radiantly blooming flowers are
tomorrow’s mulch. Don’t forget that for a moment.
But don’t think about it too long either.
Tom Peters
© Mohr, Sengupta, Slater 2005
Expeditionary Marketing
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Frequent fast-paced market incursions (see next
slide)
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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
© Mohr, Sengupta, Slater 2005
Expeditionary Marketing
Expeditionary Marketing: Many fast-paced incursions into the market
Relationship between Entries in the Market and Quality
Model 3
Successive times at bat
Many small bets
Model 2
Model 1
Development
Overall Revenue
Incr. Revenue
New Models
Time
© Mohr, Sengupta, Slater 2005
Nurturing a
Culture of Innovation
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Characteristics of a firm that fosters
innovation—
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Disciplined rather than unfettered creativity
Continued R&D efforts, even in cyclical
downturns
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Broaden the absorptive capability
Enlightened experimentation
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An useful and economical way of R&D—simulation
and prototype before great bets
© Mohr, Sengupta, Slater 2005
Characteristics of Firms that Nurture
a Culture of Innovation (cont.)
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Unexpected
success or
failure!
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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
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Compensation for taking risk and challenges
Screening for new product ideas not based on
formal criteria, but done informally based on
technical/market merit
© Mohr, Sengupta, Slater 2005
Characteristics of Organizations
Who Foster Innovation (Cont.)
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Role of product champion is key
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Tireless crusaders for idea Only paranoid survives!
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”
© Mohr, Sengupta, Slater 2005
Skunk Works
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Pros:
Isolate new venture groups outside the
normal organizational hierarchy
Cons:
- Allows for more
- Signals a corporate culture that
creativity, unfettered byhas impediments to innovation
existing corporate
(Creativity doesn’t happen
protocols.
within normal operating
procedures)
- Isolates the creative process
© Mohr, Sengupta, Slater 2005
Applying Lessons of Innovativeness
to Businesses’ Internet Experiences
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New business models came from industry
outsiders
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Core rigidities and the tyranny of the served
market:
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Competitive Volatility
Existing companies bound by existing rules of the
game and existing customers
Underestimation of new competitors
Need for creative destruction
© Mohr, Sengupta, Slater 2005
Applying Lessons of Innovativeness
to Businesses’ Internet Experiences
(Cont.)
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Expeditionary Marketing:
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Shorter learning cycles
Quicker opportunity to adapt strategies
Understand core competencies
Reliance on skunk works
Pioneering advantages
© Mohr, Sengupta, Slater 2005
“The Liability of Smallness:”
Challenges for High-Tech Start-ups
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Sources of Funding
Other Resources (complements)
Navigating Complex Environments
© Mohr, Sengupta, Slater 2005
Sources of Funding
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Friends and Family
Bootstrapping
Reliance on venture capital
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Informal “angels”
Formal companies/banks
© Mohr, Sengupta, Slater 2005
Considerations of Venture
Capitalists
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What Venture Capitalists Look For:
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Management Team
Marketing Plan
Technology/Product
ROI
© Mohr, Sengupta, Slater 2005
Other Resources for Start-Ups
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Technology incubators
Partners (Ch. 3)
© Mohr, Sengupta, Slater 2005
Navigating a Complex
Environment
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Key Success Factors for Small High-Tech
Firms
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Speed to market positioning
Flexibility to respond changes
Time Orientation to anticipate and disseminate
insights and coordinate the young management team
© Mohr, Sengupta, Slater 2005