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Marketing of High-Technology

Products and InnovationsJakki J. Mohr

Chapter 2:

Strategy and Corporate Culture inHigh-Tech Firms


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Jakki Mohr 2001

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

Access to Resources

Funding Management Expertise

Maintaining Innovativeness

Creative Destruction Corporate Imagination Expeditionary Marketing Culture of Innovation

ENHANCED

ODDS OF

SUCCESS


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Strategic Market Planning

Process in High-Tech Markets

Understand theCompetitiveChallenge

IdentifyAttractive

Opportunities

Define the

Business Arena

Understand theMarket

Environment

Make ToughStrategicChoices

Implement

Understand theProfit Dynamic

Assess Resourcesand

Competencies

Complete theWinning Strategy

Plan CriticalRelationships


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1. Define the Business Arena Potential customer segments that could be

served;

Potential applications or functionality that couldbe provided to these customers;

Possible technologies and capabilities that couldbe used to create the applications or

functionality; and Possible role for the organization in providing

the value to the customer versus the roles ofothers in the market chain.


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2. Identify Attractive

Opportunities Thoroughly segment the market

Assess profitability of serving eachsegment


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3. Understand the Market

Environment Depict market flows/supply chain

Understand buyer behavior


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4. Assess Resources and

Competencies Financial resources

Technology platforms

Intellectual capital

Manufacturing capacity

Brand equity Capabilities (including skills and

knowledge)



5. Understand the

Competitive Challenge Identify the actual, potential and indirect

competitors

Determine: How each competitor competes

Their current and likely future performances

What drivers underlie their business strategies

Consider likely competitive responses toopportunity What are this competitors areas of weakness or

vulnerability that the firm could exploit?



6. 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?




Choices (Cont.) Select/develop best strategy to take

advantage of opportunity

Achieve leadership position in theopportunity?




Choices (Cont.) 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?



7. Plan Critical Relationships With other firms in the market chain

With organizations outside the marketchain

Company with a complementary product orservice



8. Complete the Winning

Strategy Pricing

Marketing Communications


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9. Understand the Profit

Dynamic Develop a detailed financial model for

each opportunity

More refined profitability analysis based ondetailed understanding of completemarketing strategy and associated costs

Look for modifications to enhanceopportunitys overall profitability.


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10. Implement the Strategy Make sure people who will implement

are involved in the strategy formulation

process Commitment


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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


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Three Characteristics of

Core Competencies Difficult for competitors to imitate

Significantly related to benefits end-

user receives

Allow access to a wide variety ofdisparate product-markets.


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Tree Analogy to Core Competencies

SNOWBLOWERS

Branches/canopy

represents the wi dely dif ferent

product markets to whi chthe core competency has provided access

MOTORCYCLES

SMALL

CARS

LAWN

MOWERS

SUPERIOR R&D

SMALL

ENGINES

CORPORATE

CULTURESUPERIOR

MANUFACTURINGSUPERIOR MARKETING &

KNOWLEDGE OF CUSTOMERS

Roots are underlying ski l l s and capabil i ti es that represent core competencies.

Trunk is the core

product, or the physi cal

embodiment of the

core competenci es.

The core

product must be

signifi cantl y related to benefi t

end-user receives.

Implications of Co e


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Implications of CoreCompetencies in Strategic

Planning Resource allocations may defy

conventional logic

Violate ROI criterion


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When Core Competencies

Become Core Rigidities Core rigidities: ingrained routines,

knowledge, and skills become strait-

jackets that inhibit a firms ability todevelop new products built aroundunfamiliar skills, routines, and new

knowledge. Ex: cultural norms, over-reliance on

existing technologies


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How to Avoid Core Rigidities

Creative Destruction

Proactively develop next-generation technology

that may obsolete current technology Ex: Develop Web-sites that undermine current

distribution channels

Corporate Imagination Expeditionary Marketing

Culture of Innovation


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4 Elements of

Corporate Imagination (1) Willingness to overturn

price/performance assumptions

Incremental improvements to existingtechnologies (which move along the sameprice/performance curve) vs.

Radical innovations which allow greatly-

improved performance at roughly comparableprices as existing technology

Technology life cycles (see next slide)

Ex: Moores Law


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Technology Life Cycles

Performance

Time

Limit of Particular Technology


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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 ofnew developments

Therefore, new technologies can catchestablished firms by surprise


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4 Elements of

Corporate Imagination (Cont.) (2) Escape the tyranny of the served

market

Excessive focus on current customers

Obscures the fact that customer needsmay change over time and may be solved

in radically new ways Therefore, look for market opportunities

outside of existing product/markets.


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4 Elements of

Corporate Imagination (Cont.) (3) Use new sources of ideas for

innovation

Rather than using standard marketingresearch tools, use lead users andethnographic observation (empathicdesign) (Discussed fully in Ch. 5)


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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 customerAND not being blinded by existing rulesand procedures.

B B kth h i


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Box: Breakthroughs inCorporate Strategy

Dont be constrained by existing industryboundaries

Competitors can be found in many places: Direct competitors, suppliers, partners

Product form competition

competition between product classes vs. betweendifferent brands of the same product

Firm may not control all critical assets


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Box: Breakthroughs in

Corporate Strategy (Cont.) Bring new voices into the strategy

formulation dialogue.

Create new connections acrosstechnologies, hierarchical levels,geographical and business units

Come from a new vantage point Have passion for discovery and novelty

Be willing to experiment (vs. focus on efficiency)


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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 consumerawareness

Large development costs

Market uncertainty

PROS CONS


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Pioneers

(First Movers) (Cont.) Successful Pioneers

Have technological foresight

Understand the market

Have marketing acumen

Understand competitors strengths and

weaknessesA bit oluck


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When do late movers

succeed? Identify overlooked product position

Undercut pioneer on price

Out-advertise or out-distribute thepioneer

Innovate superior product

Innovate superior business/marketingstrategy

Reshape the category


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Two ways to improve

new product success rates Improve the odds on each individual product

introductionthe hit rate. Gather as much information as possible, tailor the

product Drawbacks: time consuming, market needs may change

before launch. Ready, Aim, Aim, Aim.

Increase the number of forays into the market

the times at batExpeditionary Marketing Many quick incursions into the market increases learning

about the market

Low-cost, fast-paced incursions allow quick re-calibration

Combination of speed and learning enhances success


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Expeditionary Marketing

Model 1

Model 2

Model 3

Time

Development

Overall Revenue

Incr. Revenue

New Models

Expeditionary Marketing: Many fast-paced incursions in to the market

Relationship between Entr ies in the Market and Qual ity


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Expeditionary Marketing:

Advantages More accurate learning of customer needs

Time between market learning and product launch

is shortened Maximizes odds that product delivered matches

customers needs

Customer needs 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


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Insights in the Ability to Learn

from the Market Competitive advantage derives less

from havinginformation, and more

from the superior ability to useinformation.

Interpersonal and organizational trust

enhances the use of information.


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Insights in the Ability to Learn

from the Market (Cont.) Caveats in using information Merely using some information is insufficient to generate

superior performance. Using knowledge held bymarketing managers contributes to superior performance.

Relying too excessively on organizational memory caninhibit innovativeness.

It is the marriage of marketing knowledge withtechnological knowledge that leads to effective product

innovation. Improvising with respect to product strategy may

be effectivebut only when a high degree ofinformation is shared both within and across the

organizations boundaries.


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Nurturing a

Culture of Innovation Characteristics of a firm that fosters

innovation

Identifies market needs that are divergentfrom (rather than congruent with) existingstrategies

Roles and responsibilities of key players may

not be clearly defined in early stages Screening for new product ideas not based on

formal criteria, but done informally based on

technical/market merit


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Characteristics of Organizations

Who Foster Innovation (Cont.) Role of product champion is key

Tireless crusaders for idea

Innovative firms have reward system andculture to promote influence of productchampions

Personnel given time and incentives tobe innovative

Tolerate risk and mistakes


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Skunk Works Isolate new venture groups outside the

normal organizational hierarchy

Pros:

- Allows for morecreativity, unfettered by

existing corporateprotocols.

Cons:

- Signals a corporate culture thathas impediments to innovation

(Creativity doesnt happenwithin normal operatingprocedures)

- Isolates the creative process


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Applying Lessons of Innovativenessto Businesses Internet Experiences

New business models came from industryoutsiders

Competitive Volatility Core rigidities and the tyranny of the served

market:

Existing companies bound by existing rules of thegame and existing customers

Underestimation of new competitors

Need for creative destruction

Applying Lessons of Innovativeness


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Applying Lessons of Innovativenessto Businesses Internet Experiences

(Cont.) Expeditionary Marketing:

Shorter learning cycles

Quicker opportunity to adapt strategies

Understand core competencies

Reliance on skunk works

Pioneering advantages


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The Liability of Smallness

Financial Resources

Reliance on venture capital

Formal companies/banks Informal angels

What Venture Capitalists Look For:

Management Team Marketing Plan

Technology/Product

ROI


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Other Resources for Start-Ups Technology incubators

Partners (Ch. 3)

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