Marketing of High-Technology Products and Innovations Chapter 2: Strategy and Corporate Culture in...
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Transcript of Marketing of High-Technology Products and Innovations Chapter 2: Strategy and Corporate Culture in...
Marketing of High-Technology Products and
Innovations
Chapter 2: Strategy and Corporate
Culture in High-Tech Firms
© Mohr, Sengupta, Slater
2005
Questions to consider 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
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
ENHANCED ODDS OF SUCCESS
© Mohr, Sengupta, Slater
2005
The Strategy Process
MarketPlanning
MarketStrategy
CompetitiveAdvantage
Evaluation& Control
© Mohr, Sengupta, Slater
2005
Strategic Market Planning Process in High-Tech Markets
Define goalsand mission
Choosearena
Implementstrategy
Understandprofit model
Completethe strategy
Identifyopportunities
Make toughchoices
Plan keyrelationships
Planning Process
(from
Ryan
s, et a
l.)
© Mohr, Sengupta, Slater
2005
Define Mission and Goals Mission
Why does the business exist? Who are our customers? What needs are we trying to solve? How will we solve them?
Goals Profit Growth New product acceptance Customer satisfaction
© Mohr, Sengupta, Slater
2005
Select the Business Arena 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
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
Decide whether opportunity should be pursued 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? If not, are there compelling reasons to
proceed?
© Mohr, Sengupta, Slater
2005
Make Tough Strategic Choices (Cont.)
Select/develop best strategy to take advantage of opportunity Achieve leadership position in the
opportunity? Do synergies exist within the portfolio of
opportunities being considered 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 With other firms in the market
chain With organizations outside the
market chain Company with a complementary
product or service
© Mohr, Sengupta, Slater
2005
Complete the Winning Strategy Positioning Product Development and
Management Pricing Distribution path/channeling Marketing promotion
Political relationship Meeting 4C
(customer/cost/convenience/communication)
© Mohr, Sengupta, Slater
2005
Understand the Profit Dynamic
Develop a detailed financial model for each opportunity 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 Make sure people who will implement
are involved in the strategy formulation process
Design the effective organization: Leadership Structure and relationships Systems Culture and values
© Mohr, Sengupta, Slater
2005
Key Strategy Decisions Who are our target customers? What mix of products and services should
we offer? When should we enter a market?
The timing decision The requisite guts
How can we execute our strategy efficiently and effectively? Championship
© Mohr, Sengupta, Slater
2005
Who are Target Customers? “ Served” market
Potential pitfall: Tyranny of the served market
The marketing myopia Bi-focal vision
Search for new market space Independent unit & spin-off corporate
© Mohr, Sengupta, Slater
2005
Product/Service Mix Provide value for customers
Man/machine interface The usage analysis
Functionality, performance, price, post-sale maintenance, disposal
© Mohr, Sengupta, Slater
2005
Timing of Market Entry: Be a Market Pioneer?
First mover advantage creates entry barriers Economies of scale Experience effects Reputational effects Technological leadership Buyer switching costs Higher profits and higher
share Define product exemplar Higher consumer
awareness
Large development costs
Market uncertainty
PROSCONS
© Mohr, Sengupta, Slater
2005
Pioneers (“First Movers”) (Cont.) Successful Pioneers
Have technological foresight Understand the market Have marketing acumen Understand competitors’ strengths
and weaknesses A bit of luck
© Mohr, Sengupta, Slater
2005
When do “late” movers succeed? 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 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
Tangible assets: Products Facilities Financial Resources
Intangible assets: Brands/reputation Know-how Culture
Competencies: Routines Processes
© Mohr, Sengupta, Slater
2005
Three Characteristics of Core Competencies Difficult for competitors to imitate Significantly related to benefits
end-user 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
SNOWBLOWERS
Branches/canopy represents the widely different
product markets to which the core competency has provided access
MOTORCYCLES
SMALL CARS
LAWN MOWERS
SUPERIOR R&D
SM
AL
L
EN
GIN
ES
CORPORATE CULTURE
SUPERIOR MANUFACTURING
SUPERIOR MARKETING & KNOWLEDGE OF CUSTOMERS
Roots are underlying skills and capabilities that represent core competencies.
Trunk is the core product, or the physical embodiment of the core competencies.
The core product must be significantly related to benefits end-user receives.
Aircraft engine
© Mohr, Sengupta, Slater
2005
Implications of Core Competencies in Strategic Planning
Resource allocations may defy conventional logic Violate ROI criterion
•Developmentlearning AccumulationTransferringExploitation
© Mohr, Sengupta, Slater
2005
An Illustration of Sources of Competitive Advantage for Dell
Product
Reputation
Supply Chain Management
Convenience
Confidence
Price/Cost
Tangible
Intangible
Competency
© Mohr, Sengupta, Slater
2005
Requirements for Competitive Advantage
Valuableto Buyers
No
Yes
Yes
Yes
Superior toCompetitors
No
No
Yes
Yes
Difficult to Imitate
No
No
No
Yes
CompetitiveAdvantage
Disadvantage
Parity
Temporary
Sustainable
Profitable
No
Average
Superior
ConsistentlySuperior
Is the resource/competency:
Rarity is a variation on superiority.Transparency, replicability, and transferabilityare variations on imitability.
© Mohr, Sengupta, Slater
2005
Culture and Climate in High-Tech Firms
Obstacles to Innovativeness Core Rigidities Innovator’s Dilemma Liability of Bigness
Facilitators of Innovativeness Creative Destruction Firm Dominance Unlearning Corporate Imagination Expeditionary Marketing
Indulgence in the past successes
Laggard response to challenges
Self-cannibalization
Reshape the business mind-set
© Mohr, Sengupta, Slater
2005
When Core Competencies Become Core Rigidities Core rigidities: ingrained routines,
knowledge, and skills become strait-jackets 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” Traits of large firms can inhibit their
ability to develop radical innovations: Bureaucratic Focused on economies of scale Core competencies become core
rigidities Fear of cannibalization Incumbent’s dilemma
© Mohr, Sengupta, Slater
2005
Facilitators of Innovativeness
Creative Destruction (see next slide) Proactively develop next-generation
technology that may obsolete current technology
Ex: Develop Web-sites that undermine current distribution channels
© Mohr, Sengupta, Slater
2005
Creative DestructionA 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’sDilemma if it can overcome internal rigidity.
© Mohr, Sengupta, Slater
2005
Leveraging Firm Dominance Effectively
Sources of dominance: 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.)
Manager’s fears of obsolescence: Positively related to innovation
(the willingness to cannibalize)
© Mohr, Sengupta, Slater
2005
Final thoughts on Leveraging Firm Dominance
Dominant firms reap greater rewards from introducing radical innovations if they quick follow the industrial dynamics
Smaller firms can overcome their disadvantage by: Marketing support (e.g., sales effort) Technology support (e.g., R&D
spending, patent protection, etc.)
from some key complements
© Mohr, Sengupta, Slater
2005
“ Unlearning” 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
Per
form
ance
Time
Limit of Particular Technology
© Mohr, Sengupta, Slater
2005
Some Implications of Technology Life Cycles
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)
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
(1) Willingness to overturn price/performance assumptions 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 Ex: Moore’s Law
© Mohr, Sengupta, Slater
2005
4 Elements of Corporate Imagination (Cont.) (2) Escape the “tyranny of the
served market” 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.) (3) Use new sources of ideas for
innovation Rather than using standard marketing
research tools, use lead users
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.)
(4) Get out in front of customers. 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
“Learning may be the only source of sustainable competitive advantage”
Ray StataCEO, Analog Devices
“In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage ‘is knowledge’”
Ikujiro NonakaThe 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 QuinnIntelligent Enterprise
© Mohr, Sengupta, Slater
2005
Learning Opportunities Market-focused Learning (users’ expectation)
Competitive Benchmarking (competitors’ excellence) ( 師夷之長技以制夷 )
Learning from Alliances, Joint Ventures, Partnerships, and Acquisitions (approaches)
Continuous Improvement through Experience (feedback control, adaptation & adjustment)
Market or Operational Experiments (uncertainty & expectation management)
Utilization of Outside Experts or Consultants (objectivity of bystander’s standpoint)
Organizational Memory (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 worksbig, others quickly copy it. Then you do something else. The trick is in the doing something else. Youmust take pot shots at today’s star before you aremimicked. Today’s radiantly blooming flowers aretomorrow’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 Frequent fast-paced market incursions (see
next slide) 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
the try-out
strategy
Beta testing
© Mohr, Sengupta, Slater
2005
Expeditionary Marketing
Model 1
Model 2
Model 3
Time
Development Overall Revenue Incr. Revenue New Models
Expeditionary Marketing: Many fast-paced incursions into the market Relationship between Entries in the Market and Quality
Successive times at batMany small bets
© Mohr, Sengupta, Slater
2005
Nurturing a Culture of Innovation
Characteristics of a firm that fosters innovation— Disciplined rather than unfettered creativity Continued R&D efforts, even in cyclical
downturns Broaden the absorptive capability
Enlightened experimentation 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.) 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
Compensation for taking risk and challenges Screening for new product ideas not based
on formal criteria, but done informally based on technical/market merit
Unexpected success or failure!
© Mohr, Sengupta, Slater
2005
Characteristics of Organizations Who Foster Innovation (Cont.)
Role of product champion is key Tireless crusaders for idea 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”
Only paranoid survives!
© Mohr, Sengupta, Slater
2005
Skunk Works Isolate new venture groups outside
the normal organizational hierarchy
Pros:
- Allows for more creativity, unfettered by existing corporate protocols.
Cons:
- Signals a corporate culture that has impediments to innovation
(Creativity doesn’t happen within normal operating procedures)
- Isolates the creative process
© Mohr, Sengupta, Slater
2005
Applying Lessons of Innovativeness to Businesses’ Internet Experiences
New business models came from industry outsiders Competitive Volatility
Core rigidities and the tyranny of the served market: 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.)
Expeditionary Marketing: 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
Sources of Funding Other Resources (complements) Navigating Complex Environments
© Mohr, Sengupta, Slater
2005
Sources of Funding
Friends and Family Bootstrapping Reliance on venture capital
Informal “angels” Formal companies/banks
© Mohr, Sengupta, Slater
2005
Considerations of Venture Capitalists
What Venture Capitalists Look For: Management Team Marketing Plan Technology/Product ROI